(12 years, 2 months ago)
Commons ChamberMy hon. Friend missed out on the opportunity that I and the hon. Member for Nottingham East (Chris Leslie) had of serving on the Financial Services Bill Committee. We spent a considerable amount of time developing the details of jurisdiction in the UK, through giving powers to the Financial Services Authority. There are areas where rules are made at a European level, but, equally, there are areas where rules are made in the UK, and it is not appropriate to say, “There’s only European law.” There is a whole raft of UK law on these matters.
To date, the UK has used the flexibility of the minimum harmonisation EU directive to create a stronger standard, applying the regime to more venues and having stronger rules. Now we have the opportunity to have a better framework applied across the whole of the EU, and that is in our interests.
It is clear that market abuse can take place beyond our borders and yet still affect securities traded within our borders. For that reason, the Government support the Commission’s objective to revise the EU market abuse framework. Improving the strength and consistency of the framework is vital to investor confidence.
There are challenges and opportunities in shifting to a regulation. There are challenges if the UK’s own practices are compromised. There are opportunities from having a more consistent and stronger EU regime and potentially reducing the cost and complexity of compliance for market actors.
Clearly, our prime objective is to ensure that the powers currently available to competent authorities are not weakened, which would damage the UK and the creditable work of the FSA. Secondly, we wish to deliver a robust framework for tackling market abuse within Europe.
Interest in changes to the market abuse framework extends beyond this House. In March, the European Central Bank published its opinion of the market abuse proposals. Its commentary focused largely on the new provision in the regulation for competent authorities to be able to delay the publication of inside information with systemic consequences. The Government echo the ECB’s support for seeking the legal framework to be improved in this respect. This is a key provision for the Bank of England and the FSA following the financial crisis and the difficulties experienced surrounding the disclosure of emergency lending assistance.
I want to outline briefly the EU market abuse package proposed by the Commission. In October 2011, the Commission published a regulation and an accompanying directive on criminal sanctions for market abuse. Those proposals together update the framework formerly established by the market abuse directive 2003, including proposing EU harmonisation of criminal law for market abuse for the first time. The legal basis for the criminal directive is article 83(2) of the treaty on the functioning of the European Union. This is the first use of the relevant provision since the Lisbon treaty was agreed. It means that the directive is subject to a justice and home affairs opt-in. The UK and Ireland have discretion on whether it should apply to them. Denmark is automatically opted out. In light of the fact that this was the first use of the article, it was important that the Government carefully contemplated the issues and came to the appropriate decision.
The European Scrutiny Committee also considered the use of the opt-in. In its 52nd report of the last Session, the Committee noted that the full potential impact for the UK of the draft directive will become certain only once negotiations are concluded. The European Affairs Committee concurred with that opinion, but we are, of course, bound by the regulation.
The Government’s decision not to opt in at this time is a reflection of the sequencing of the directive compared with related legislative proposals. The proposed directive is entirely dependent on the outcome of the market abuse regulation, and the markets in financial instruments directive, which are both in relatively early stages of negotiation. The Government believe that it is very challenging to assess the implications, scope and way in which the criminal directive may develop, given the broader uncertainty of the market abuse framework, which itself is simultaneously subject to a major review.
The key issue here is ensuring that the interaction between the criminal and administrative regimes is clear and workable for all member states. Above all, we need to address the flexibility of when to apply a criminal penalty and when an administrative penalty needs to be retained within member states’ national systems. That must be determined on a case-by-case basis, in the light of the evidence of an individual case. In addition, there was uncertainty about whether the powers of competent authorities would be weakened in respect of accessing telephone records in the regulation and, potentially, the accompanying criminal directive.
It is essential that competent authorities have the flexibility to determine the appropriate type of penalty—whether it is criminal or administrative—and the powers available to them to investigate suspected cases of market abuse. The Council has itself recognised the difficulties involved in trying to complete negotiations on the criminal directive, with linked proposals being negotiated simultaneously. Therefore, the presidency decided to pause progress on the directive, in order to wait for policy progress to be made in the market abuse regulation.
However, I note that although the Government have decided not to opt in at this stage, we have continued to participate fully in negotiations. It is important that we use our expertise in combating market abuse, including the fact that the UK already covers market abuse in its criminal law today. If we are able to do that, and further progress the related proposals in the market abuse regulation and the markets in financial instruments directive in a manner that meets our objectives, we may consider opting in to the criminal directive. We can assess this only when the trio of proposals are properly progressed.
The Minister is giving a lucid and paced description of Government policy. Let me cut to the chase. It is important that he has the opportunity to hear my question. Are we as a nation—are the Government—opting in to the criminal sanctions market abuse directive, or is he proposing to opt out of it? Which is it?
At the moment, let me clarify the position by saying that we have not opted in. As I was saying, we need to see how discussions on three linked legislative proposals work through before deciding whether or not to opt in, but our priority is to ensure that we have a proper market abuse regime in place—one that maintains the highest standards and ensures that the Financial Services Authority, which is responsible for this area of policy, is enabled to use its powers fully to ensure that there is confidence in the integrity of markets.
So I can reassure the House that this Government will not allow legislation on market abuse to be insufficient, and we would not opt into a directive that would undermine the FSA’s current powers in this area. I welcome the opportunity to debate this issue tonight, including the opt-in decision. This is an important issue, and it is right that hon. Members have an opportunity to debate it.
This is indeed an important debate. Market abuse, insider dealing and market manipulation are issues that do not get the airtime that they deserve. It is important that white collar crime and abuses of what we might call white collar financial services activities are properly attended to. We know that in recent years the regulators, or the relevant authorities, have sometimes struggled properly to prosecute or pursue issues where allegations have been made and there are difficulties in pinning down the right level of evidence. This is an important opportunity to see how, when the European Union proposes new regulations to tighten up some of the rules, the UK Government approaches such questions. I was interested to see in the Financial Services Authority’s recent annual report the quite shocking statistics on potential market manipulation that still takes place and often goes uncaptured.
The statistic that leapt out at me concerned something called APPM monitoring—I know that hon. Members enjoy their acronyms—or abnormal pre-announcement price movement monitoring. Apparently, such movements are still at a level of more than 20% in respect of announcements of mergers or acquisitions. If we look back at share transactions and other dealings, we can see that there are palpably instances when information has leaked out and people have taken advantage of information asymmetry. Such market abuses are notoriously difficult to pin down and prosecute, but they are unfortunately still a feature of many of our markets and financial services and we need to do a great deal to bear down on them.
The original market abuse directive was adopted back in 2003, but the new set of regulations proposes to try to tighten up the arrangements in a number of areas. There are gaps in the new markets that have emerged, for example, particularly in commodities trading and derivatives trading. I shall talk about those in a moment. There are problems with regulatory enforcement, where outdated arrangements are in place. There is a lack of legal certainty, particularly when issues cross nation state boundaries, and a risk of regulatory arbitrage. I was not surprised, therefore, that that was one area in which the Commission made proposals.
I am grateful to the hon. Gentleman for showing that sanity is sometimes tested in these debates. I should also pay tribute to his work and to that of the European Scrutiny Committee, without which many of these important debates would never materialise on the Floor of the House—even if this debate is in the middle of the football, possibly with less exposure and fewer viewers watching on BBC Parliament than might normally do so. I am sure that there will be a rerun of these proceedings and people will be able to watch them at their leisure.
What is different about the market abuse regulations? We know that a parallel criminal sanctions directive is being discussed, although the Government’s position is far from clear. They are almost saying that they will not opt in at this stage, but might change their mind later depending on a number of rather strange factors. There are important reasons why we need to tighten up the criminal offences regime for market manipulation and for insider dealing, and those important steps must be taken. I agree with some of the proposals in the market abuse regulations that will broaden the definition of insider information to cover information that is not generally available for reasons of transaction opacity.
I am particularly keen to see improvements in the market abuse regulations in areas such as commodities and derivatives trading, which were not as large and significant as they are now. About 15 years ago, some £300 million of commodities trading took place in the UK, whereas that has now increased by almost 1,000%. Billions and billions of pounds are now moving from investment-based activity to speculation-based activity. These issues are serious. One might think about speculation in metals and gold and wonder where the harm is, as that is the nature of the world we are in today. However, speculation in wheat, cocoa and other basic food and commodity substances that can have a bearing on the nutrition of many millions of people in developing countries is an issue that matters in the real world.
If there is market abuse and manipulation, it can have a serious impact on real lives. That is why it is important that when we see so many giant corporations with very deep pockets so often being accused of distorting markets and purchasing whole monthly future contracts, potentially hurting consumers in poorer countries, we should take the opportunity to ask whether we have the right market abuse arrangements in place and whether we could make changes. If companies were cornering the market in equities or listed shares it would trigger regulatory action, but when large corporations corner the market in commodities it does not. That is a bizarre anomaly and we need to modernise the arrangements.
We need to see other important changes in the market abuse regulations. How do we identify insider dealing and market manipulation? What are the rules about information being delayed before public announcements? After the financial crisis, there were serious lessons to be learned about revealing information about abuses that might have a bearing on systemically important transactions and organisations. There are some proposals in the arrangements to deal with these issues. These are very serious questions that need to be addressed.
There is a parallel proposal for a criminal sanctions directive that defines the two offences of insider dealing and market manipulation, which should be regarded by member states as criminal offences if committed intentionally. The intention is to introduce a minimum level of harmonisation for criminal sanctions and, in particular, to provide that the competent authority should have the power to impose administrative pecuniary sanctions of up to twice the amount of profit gained or lost.
There is virtue in the criminal sanctions directive and the market abuse regulations, but we are now in this rather byzantine legislative Committee treacle trying to move these issues forward. The Minister may well be personally involved in these areas—I do not know to what extent—but if hon. Members care to take the time to look at the voluminous documentation associated with this debate they will find some interesting correspondence between the Minister and the European Scrutiny Committee. The Minister will have to forgive me if I paraphrase him incorrectly, but in that correspondence he says that the Council discussions have been somewhat fractured—I think that was the word he used—as a result of the fact that the criminal sanctions directive is taken through the Justice and Home Affairs Council whereas the market abuse regulations are taken through ECOFIN.
We then have the added little twist that the Cypriot presidency is taking over on 1 July an issue that has not been resolved and is still in abeyance. The Justice Secretary attended the Justice and Home Affairs Council at the end of April, which kept open—this is where we get into Eurospeak—the “horizontal articles” for a “partial general approach”. I know that is something that Members will be familiar with. In other words, those involved were saying, “Nothing is really going to change on this particular issue. We are just going to tread water for quite some time.”
Then we have the crazy situation in which the market abuse regulation grinds slowly forward while in a parallel universe the criminal sanctions directive enters an entirely different Council Committee. One almost, but not quite, feels sorry for the Minister trying to balance or juggle this particularly tricky set of negotiations, but rather than waiting, reacting and observing the process, he needs to grip this issue by the scruff of the neck and move it forward.
Ultimately, this is the main question I want to ask him: what is he doing to move matters forward? Can he give a proper explanation of where he stands on the substantive elements of the market abuse regulations and of the criminal sanctions directive in particular? He says that it is difficult to assess the scope and implications so far because it depends on the review of the markets in financial instruments directive and various other factors. Difficult or not, he needs to set out the Government’s position on the substantive policy issues. That is what I expected him to do this evening. The issues are not rocket science. He should set out his position. Even if it is a negotiating position, I would like to know the Government’s starting point in this set of discussions. This is a poor way of making decisions.
Clear leadership is not being shown in sorting out the matter and getting a grip of the question. It is necessary to improve and modernise the regulations on market abuse because modern-day financial markets have left behind the old regime. I understand the Commission’s attempts to get some coherence and harmony on market abuse issues and to deal with the regulatory arbitrage issues that arise from time to time, but the Government must answer a number of questions. Why do they feel that they are still unable to set out their position on the substantive policy issues? When does the Minister expect some resolution of the issues? In particular, who does he think should be moving matters forward? Is he just a bystander, waiting for others to do that—the Cypriot presidency or someone else? When will he, as a Minister, show a lead, tackling market abuse, dealing with insider trading arrangements and ironing out some of these important questions? He is too relaxed and a little complacent on these questions. He needs to take charge and grasp the issue.
(12 years, 3 months ago)
Commons ChamberI beg to move amendment 75, page 43, line 16, at end insert—
‘(3) Within a year of Royal Assent to the Financial Services Act 2012, the Treasury shall publish a report on measures to improve the stewardship of institutional investments, which may require amendment under subsection (1).’.
With this it will be convenient to discuss the following: Amendment 45, in clause 14, page 64, line 8, at end insert—
‘(3A) In section 73, subsection (1), insert at end:
“(g) to foster ethical corporate behaviour, including respect for internationally-recognised human rights.”.’.
Amendment 38, in clause 22, page 82, line 10, at end insert—
‘(c) provide for a requirement that an employee representative should be a member of the remuneration committee of a relevant body corporate, and
(d) provide for a requirement that the remuneration consultants advising on remuneration policy shall be appointed by the shareholders of a relevant body corporate.’.
Government amendments 5 to 8.
Amendment 73, in clause 40, page 127, line 38, at end insert—
‘Complaints by small businesses
234I Small businesses—complaints and proceedings
‘(1) The Treasury and Secretary of State shall bring forward proposals within three months of Royal Assent to the Financial Services Act 2012 in the following areas—
(a) to introduce provision for collective proceedings before the court in respect of financial services claims made on an opt-out basis by small and medium sized enterprises; and
(b) to introduce provision for complaints by small and medium sized enterprises to the FCA that a feature, or combination of features, of a market in the United Kingdom for financial services is, or appears to be, significantly damaging the interests of small business.’.
Government amendment 9.
Amendment 74, in schedule 5, page 204, line 37, at end insert—
‘(2) In subsection (1) after “approved persons”, insert “and the standards of stewardship expected of approved persons who are institutional investors.”’.
Government amendments 13 to 17.
This important Bill took a considerable amount of time in Committee, but it was still insufficient to cover many of the amendments that will be necessary to ensure that it is fit for purpose and able to fulfil the job for which it was designed. The Opposition believe that the Bill can still be improved, so many of the proposals we did not reach in Committee or that were not addressed on day 1 on Report are in today’s amendment paper.
This long group of amendments under the generic title, “Stewardship, etc.” covers a few issues, so I would be grateful, Madam Deputy Speaker, if you would bear with me while I touch on the details. Although amendments 75 and 74 relate to stewardship, other amendments are on different topics, which I should also like to address under this group.
On amendments 75 and 74, it is important to take the opportunity to ensure that the Bill properly improves institutional investors’ stewardship of pension funds or other savings or investments. Such funds are looked after by others on our behalf. In an ideal world, those who have pensions or other savings would spend time considering where they are invested, and whether they are invested ethically or in sustainable organisations and so forth. For reasons of practicality, however, that is often impossible, and investments are often grouped together in a basket of different products, so following the detail of where funds are invested is incredibly difficult.
That is why many people choose to use institutional investors—to ensure their best interests are being served. That means ensuring a good and strong rate of return, but many people care about where their money is invested. Most of British industry is partly owned by the collective pension funds of our constituents. They have voting rights through the shares and equity they hold, but they are often exercised without reference to our constituents and delegated to institutional investors to make decisions on their behalf.
The previous Administration and this one have therefore sought to address the quality of stewardship by institutional investors. Amendment 75 is on the threshold tests in the Bill and the Financial Services and Markets Act 2000 on whether people are suitable or fit and proper, whether they have adequate resources to fulfil their responsibilities, whether they have close links with others in the sector, and so on. The Opposition felt it would be a good idea to ask Ministers to consider whether the array of reforms that should be made to corporate stewardship should be reconsidered in the light of those threshold tests.
Amendment 74 also looks to the 2000 Act and the general rules of conduct of approved persons and seeks to amend the Bill so that it addresses key aspects of the good stewardship agenda. We argued in Committee and earlier that the Bill is a missed opportunity radically to improve the stewardship of some of the key players in corporate Britain, especially those large firms—banks and institutional investors—that have such a direct impact on society at large.
The stewardship code was brought into force in 2010. We have had reasonable progress, with around 230 asset managers, asset owners and service providers signing up in the first 18 months, but sadly, the Bill does not reference the Financial Reporting Council, which is the UK’s independent regulator responsible for promoting, among other things, high-quality corporate governance. We want the Bill to do more to give regulators a proper and clear mandate to strengthen the stewardship code where appropriate and give them sufficient teeth to ensure that significant culture changes can happen. These things do matter. We have to build a framework that roots out bad habits and addresses what some people have called the principal agent dynamic—the fact that shareholders are often very fragmented and, when faced with unified managers, are often unable to make any headway. Senior executives can sometimes respond only if there is a 50% plus one coalition of shareholders.
We need to rekindle that dynamic. Some have said that it is time for a shareholder spring or awakening, and there have been some suggestions recently that certain company shareholders, at the annual general meetings and elsewhere, have begun to ask fundamental questions of the senior executives. It is the mismatch between the power that senior executives can have and the lack of power of—paradoxically—the owners of some of these large companies that needs addressing. In legislative terms, we often have debates about firm rules and fixed ways of doing business. Obviously, it would be preferable if the dynamic between owners and managers were able to ensure that we had a healthier, more open and transparent way of doing business.
I commend those institutional investors who show an active interest in how they use the voting rights of their investors and use that leverage to try and influence positive corporate behaviour by the relevant companies. It must be tempting for many institutional investors, when faced with a company perhaps with a management dysfunction or some behavioural failing, to sell up and walk away from that company. That is too often the history of such shareholding. It would often be far better if shareholders, as owners, could stay and try to fix the culture of the organisations that they own. It is that sort of change that we need to find a way of addressing. Yes, some shareholders will not want to say publicly that they disagree with senior executives, because that could affect the share price and they would therefore be affecting their own financial interests in some ways, but there are several ways in which institutional investors need to have the ability, directly or indirectly, to influence what is going on.
Protests in recent months have, in some cases, seen the rejection of some of the larger pay deals in big companies—for instance, the executive remuneration packages at Trinity Mirror, Pendragon and Aviva. The banking sector has also seen some significant shareholder disquiet, including at Citigroup with the rejection of the chief executive’s pay package. Nearly a third of Barclays shareholders voted against the pay policies in that particular company.
So there have been some signs that shareholders are becoming interested in that more active role. This is perhaps to commend the work of the Association of British Insurers, which has done good work recently in encouraging its members to take a more active role. Those members account for some 15% of the stock market, and they recently wrote an unprecedented letter to the chief executives of some of the major banks in particular, saying that they were not happy and would no longer tolerate a “business as usual” approach when it came to remuneration, especially for executive directors.
Those moves are very positive, but we should not feel that the balance between shareholders and executives is sufficient. The persistent imbalance needs addressing in a number of specific ways. For a start, a shadow is often cast across the Atlantic as many institutional investors feel that what are known as the “acting in concert” rules affect them here. To what extent can institutional investors come together and discuss with each other their ability to voice common concerns about the behaviour of managers? I have sometimes heard concerns expressed that this may somehow be in conflict with anti-trust regulations. If the Government could clarify the “acting in concert” rules, it would help to send a clear signal to institutional investors that it is possible to have those discussions, to come together to form a significant majority and to express a view about corporate behaviour.
Is the hon. Gentleman concerned that, if the amendment is passed, financial institutions might stop providing the hedge products against interest rate changes or forex changes that SMEs might need and from which they might benefit? Is there not a slight risk of those products no longer being available, adding to the risk for SMEs over a period of time during which interest rates and foreign exchange rates might change?
I am grateful to the hon. Gentleman, but no, I do not think that is a risk. Amendment 73 does not propose to outlaw interest rate swap products; indeed, it is not specifically related to those particular products. It is really about the powers of small firms to complain and to take proceedings if they feel that they have been mis-sold a particular product.
On the particular issue in the news about interest-rate swap products, there are some serious questions that the Financial Services Authority and the Minister need to answer. Were those interest-rate hedge products a requirement of loan agreements, or were they optional? Were the minimum and maximum parameters fair and balanced, or was the downside risk always likely to hit the consumer more than the banks? How frequently was there a mismatch between the term of the loan agreement and the term of the hedge product obligation? Sometimes the term of the hedge product obligation continued even though the loan term had concluded. Were there asymmetrical rights to cancel? In other words, could the banks cancel the arrangement for a particular product, with which the consumer or small firm had to continue? Those are some of the key questions.
The hon. Gentleman is right to raise this serious issue. What I do not understand in his amendment, however, is what additional powers it would effectively give to a small business, given that the Financial Services Authority can already investigate all these things. Am I missing something?
When it comes to complaints procedures, particularly about market failure, which the Financial Conduct Authority can look at, there is a trigger that small firms could have, but it is not available in the Bill. Just as the Minister has given super-complaint powers to a certain number of consumer bodies, so a case can be made for doing a similar thing for representative bodies of small firms. I am not claiming that the amendment is drafted to the perfection that the Minister’s officials might want, but I hope he gets the gist—that there is a gap here. Small firms might have written to him, expressing the fact that they feel that they have no power. I have certainly had some of them writing to me to say that they feel intimidated about complaining—to the regulator or to their bank—because of the sheer power that the bank has to withdraw lines of credit if it feels that the boat is being rocked.
There is an important underlying issue here, which the business community wants addressed. To what extent were small firms told to seek independent advice before signing up to the swap contracts? How widespread was the take-up of these particular agreements? I know that the Financial Services Authority is beginning to look at these questions, but I want to see more action and a swifter response from both the Government and the regulator.
Many of us want to see more action, but what I do not understand is the extent to which the hon. Gentleman believes that the FSA does not have the powers to investigate mis-selling of this type. If mis-selling has occurred—the hon. Gentleman provided some good examples of unfair and asymmetric contracts—surely the FSA is already able to investigate it.
Indeed it can, but it is the way of triggering an FSA investigation that is the case in point. The FSA can choose not to listen to the voices of dozens or hundreds of small businesses, not necessarily in regard to this product but in regard to other products in the future. It is a question of giving some power to small firms, as consumers, to trigger an investigation by the regulator. This is not just a pro-consumer amendment; it is a pro-business amendment, as I hope can be agreed on all sides.
I have spoken about the amendments tabled in my name; there are others on the list. I shall be interested to hear what the Minister has to say.
Let me begin by referring Members to my entry in the Register of Members’ Financial Interests. I think that I should declare registrable holdings in RBS and Lloyds as regulated entities. I have just checked my entry in the register, and note that I have a declarable interest in Highway Capital. It is a stock exchange rather than a parliamentary interest, but I think that it should be declared because it is relevant to the debate. I also founded, and still chair, John Hemming and Company LLP, which supplies software to the financial services sector. Although it is not itself regulated by the FSA, it trades with FSA-regulated entities, so I think that interest should be declared as well.
My hon. Friend the Member for Solihull (Lorely Burt) sadly cannot be here today, although she attended 16 of the Committee’s sittings. She has, however, passed me certain comments that she has received from interested parties, which she wishes me to raise with the Minister.
Payday lending has been a substantial issue throughout the debate. My personal view is that it is not a good thing, because it traps people in many circumstances. The question of what is the best way of dealing with it is a complex one, and I think that the Government are entirely right to ask the University of Bristol to investigate it. However, I have spoken to companies in my constituency and have said that I do not think that it is a very good thing.
In Committee, my hon. Friend the Member for Solihull said that the Bill should explicitly encourage the Financial Conduct Authority to seek to maintain and extend consumers’ access to financial services that meet their needs, and that when making regulatory decisions, it should assess their impact on markets and consumers. It should place value on policy proposals and regulations that increase access to savings, protections and other financial products, and also on financial advice. In the absence of such a requirement, there would be a risk of the FCA always being steered towards a risk-averse regulation. Markets might be restricted to large groups of consumers to avoid any consumer getting sub-optimal products.
The Government seek to encourage the development of simple financial products. If we are to succeed, we must have a regulator working with the grain of the policy rather than acting as an obstacle to it, as appeared at times to be the case with the last Government’s stakeholder products initiative. Does the Minister agree that the FCA now has the “teeth” to engage with the industry and engage in issues such as the maximum number of rollovers that a payday lender should be permitted to allow? Could the FCA set a threshold for market entry? Could it impose on companies real penalties that hurt, rather than the £50,000 limit imposed on the Office of Fair Trading, and make lenders pay compensation to consumers who have suffered detriment?
Let me now turn to the reflections of industry practitioners. The smallest businesses are keen to ensure that the cost of the regulation to them is not disproportionate. Forty per cent. of credit licence holders are sole traders. What cost-benefit analysis has been carried out for the smallest practitioners?
What about the implementation time? The Finance and Leasing Association has observed that the less far-reaching Consumer Credit Act took four years to implement. It estimates that implementation of this legislation would take between five and seven years. I am sure that the Government will work with all the professional bodies in devising a sensible implementation plan, but I should be grateful for any reassurance the Minister can give.
The Association of Independent Financial Advisers is fearful about the lack of a limit on time for complaints, which it says will place a burden on provisions that it will need to make to cover this open-ended provision—
As a consequence of the reforms that we are introducing, we are giving the FSA, and now the FCA, tougher powers to tackle these problems. The FSA has a much-reduced appetite for risk and a more interventionist approach to tackling matters where there appears to be consumer detriment. Some people feel very uncomfortable with this, but it is right for the FSA to act vigorously in defence of consumers and to take the necessary action to ensure that consumers get a fair deal. The Bill takes that one step forward and that is why we have been keen to ensure that we give the FCA more powers, which it has demonstrated the appetite to use.
Amendments 5 and 6 require the FCA and the PRA to publish a statement explaining how they consider making the proposed rules compatible with the principles of regulation set out in new section 3B. Given the important framing role of these principles, I agreed with the suggestion made by the hon. Member for Nottingham East in Committee that the Bill should be explicit about the regulator’s duty in that regard, and I committed to tabling the appropriate amendments when the Bill returned to the House. I am sure that the hon. Gentleman will be keen to support them.
Amendments 13 and 14 are minor and technical and are designed to maintain a position currently provided for in FSMA whereby the FSA is not required to make rules for the FSCS that provide cover over all regulated activities. The amendments ensure consistency with section 214(1)(g), which provides that the scheme may in particular provide for a claim to be entertained only if it is the type of claim specified by the scheme. These are technical changes and I hope that hon. Members will support the Government amendments and reject those tabled by the Opposition.
I am sorry that the Minister has not reacted to the importance of the issues in the amendments that we have tabled today, particularly when it comes to the need for small firms to have a greater capacity to complain or to make collective proceedings when there is lack of clarity about their capability to do so. The issues were raised not only by the Opposition; Government Members also felt it necessary to clarify these issues. The Minister should at the very least have committed to write to hon. Members so that they could pass on to the businesses in their constituencies a clear route map for communicating some of these questions, such as interest rate swap mis-selling. All we sought was that small firms that feel aggrieved should have their concerns taken seriously as consumers of financial products, but hopefully the point has been made in the debate.
I am sorry that the Minister felt it necessary to reject our amendments on stewardship issues. It is not good enough for the Government to rebut such questions. The Prime Minister had plenty of warm words in January when this issue was high on the media agenda, but we have seen precious little action subsequently. The Government are not taking the stewardship issue seriously and it is important that they do so, particularly with regard to the remuneration committees of some of the largest corporations and our banks and the idea that these obscene bonuses and excessive pay packages can continue to roll on. As my hon. Friend the Member for Edmonton (Mr Love) said, the remuneration committees are self-perpetuating. Would it not be a good idea to broaden them out and try to put an employee voice on their panel, and make sure that they appointed consultants in a way that did not conflict with their own management’s vested interests?
After we have voted on amendment 40, which we debated on day one of Report, on the need to regulate some of the excessive high-cost credit arrangements, I will press to a Division amendment 38 on remuneration committees, because it typifies one of those areas on the stewardship agenda where we need to see action most swiftly. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 22
Rules and guidance
Amendment proposed: 40, page 80, line 2, at end insert—
‘(2A) The FCA may make rules or apply a sanction to authorised persons who offer credit on terms that the FCA judge to cause consumer detriment. This may include rules that determine a maximum total cost for consumers of a product and determine the maximum duration of a supply of a product or service to an individual consumer.’.—(Stella Creasy.)
Question put, That the amendment be made.
I beg to move amendment 72, page 130, line 38, at end insert—
‘(g) making provision for the increased diversity of the financial services sector and promotion of mutual societies, including arrangements to measure the number of members of mutual societies, and the market share for mutual societies as a proportion of the UK financial services sector.’.
This simple amendment suggests that within six months of Royal Assent the Treasury should bring forward proposals to foster diversity in financial services and promote mutual societies. For the avoidance of doubt, Mr Deputy Speaker, I should declare that I am not only a Labour Member of Parliament but a Labour and Co-operative party MP. Inasmuch as there are interests involved in that, I am proud to support the Government’s stated intention to promote mutuals. I have before me page 9 of the coalition agreement—I am sure that all hon. Members have it emblazoned on the walls of their offices—where it says:
“We will bring forward detailed proposals to foster diversity in financial services, promote mutuals and create a more competitive banking industry.”
It is perhaps not clear that the Prime Minister, the Chancellor and the Minister remember that they made that commitment. Therefore, in an act of generosity—the Minister will recognise the positive spirit in which we have tabled the amendment—we felt it important to suggest that the Treasury might want to enshrine that coalition pledge in statute and to make arrangements to measure the progress that it is making in promoting the mutual societies model. For example, each year the Treasury could publish the number of members of mutual societies so that we could see whether good progress was being made, and publish the market share of the mutual society sector as a proportion of UK financial services.
The amendment is fairly innocuous, and I hope that it can gain some cross-party support. After all, let us not forget that the mutual sector is all about ensuring that members own and govern their own financial institutions, have a stake in their future, and can set their agenda. That member-owned and member-governed ethos rightly ought to be promoted. Sadly, we have a small mutual sector, but it should be encouraged to grow, and that is the purpose of the amendment.
My hon. Friend is right to say that the Government made that commitment in the coalition agreement. Following their decision not to take seriously the case for Northern Rock to be converted into a mutual, many people, like him, doubt the coalition’s commitment to financial diversity. Is that not a further reason for the Government to take seriously his amendment to put right what they might see as a mistake in the public mind?
I thank my hon. Friend, who is entirely correct. He is an assiduous campaigner for the mutual sector and the mutual model, and he knows more than most about the Government’s failures over the past two years to make headway on this issue, on which they made a promise that remains to be fulfilled. Indeed, he recently wrote an article about how the Queen’s Speech could have been an opportunity to promote the mutual agenda in which he talked about ways in which the sector could be put more at the heart of banking reform. He said that we should consider expanding the credit union and CDFI—community development finance institution—sectors to reconnect banking with its local communities, and that we should look beyond the financial services sector to think about energy co-operatives, employment ownership measures, and co-operative housing tenure.
It is an important time for us to be debating the issue, because, as you will know, Mr Deputy Speaker, this is the international year of the co-operative.
The part of the Bill before us is mainly about transferring powers between the FSA, the FCA and the Prudential Regulatory Authority, and adding new powers, so I am not sure that it sits very well with the hon. Gentleman’s amendment. Will he explain in more detail why legislative measures are required when such objectives can be measured in other ways?
We are trying to ensure that the Government fundamentally address the question. These provisions give the Minister and the Treasury the power to make by order amendments to many of the rules, statutory instruments and suchlike that affect mutual societies. We think that they should have the capability to measure progress on mutuality in order to help to smooth progress towards fulfilling the coalition’s pledge.
Given that we have before us a financial services Bill, our constituents would expect us to be talking about firm and defined measures to make progress on diversifying the financial services sector. Unfortunately, they would be disappointed by the Treasury’s progress on that. The Treasury website has a very scant, short set of paragraphs stating the coalition agreement’s desire to promote mutuals. It says:
“The Treasury is developing policy and delivering legislative changes to…meet this aim.”
That is basically it—a statement but no substance. I want the Minister to tell us what progress is being made in fulfilling that objective. It is not good enough merely to talk about consolidating existing rules or legislation and wrapping that up as though the Law Commission’s recommendations somehow fulfil Government promises. We want to see more action.
Given that there is an appalling sovereign debt crisis in Europe affecting Greece, Spain, and so on, with the possibility of contagion, and given that we learned the lessons about the stability of mutuals following what happened in 2008, does my hon. Friend agree that it is remarkable that the Government are not pressing forward to reduce such risks by increasing diversity and promoting co-operatives?
My hon. Friend is entirely correct. When the Government have an opportunity to return to the market state-owned assets that the Treasury took in the height of the financial crisis, they simply look for a return to the vanilla plc model. They take a business-as-usual approach rather than taking the opportunity to rethink how we might have diversity in the financial service sector and in business operations. Yes, we need some organisations run on a plc model, and we have plenty of those, but why not think about opportunities to promote the non-profit or mutual sector? Northern Rock was a classic case in point. No adequate consideration was given to that option. A member buy-out suggestion would have been entirely feasible, but it was not considered seriously enough.
At this point, I pay tribute to the all-party group on building societies and financial mutuals. It made a series of recommendations a year ago, urging the coalition to adopt
“a comprehensive policy strategy to implement its Coalition Agreement commitment to promote mutuals.”
It stated that the Treasury should be proactive in promoting the interests of financial mutuals within the Government. One of the first conclusions in the summary of its report was:
“HM Treasury appears to have taken a reactive stance to the mutual sector beginning to deal with important issues such as building society capital, but little else of substance.”
I do not want to labour that point, because time is short.
For cross-party purposes, may I say that we will support the hon. Gentleman’s excellent amendment? It is important to push forward credit unions, in particular, as an alternative to high street lenders, which are currently not lending to many people. The Treasury needs to take a more proactive approach to building up existing credit unions as well as creating new ones.
The credit union sector deserves far more support and encouragement than it receives, and previous Governments of all parties have failed to do enough to promote it. The demutualisation agenda of the 1980s and early 1990s significantly reduced the size of the building society sector, and compared with other developed countries mutual providers have a very small market share, particularly in the financial services sector.
We used to hear about the share-owning democracy, but there have been tidal shifts in people’s desire to take risks and own shares. Does my hon. Friend agree that we have a moment in time at which we can change direction and have more diverse ownership among the population and a new culture of business? The Government are missing a trick.
Now is the time to think about the culture change that we want to see in the financial services sector. Yes, there are some good plc structures, but we have an insufficiency of good mutuals, building societies and so on. There should be new entrants of that type, and current ones should grow to provide some proper competition to the big banks.
My hon. Friend is being characteristically generous. One big concern examined in some detail in the all-party group report that he mentioned was about the future of friendly societies. Does he agree that the debate provides the Financial Secretary with a good opportunity to set out how the Treasury is responding to concerns about the effect that a particular interpretation of case law by the Financial Services Authority is having on the future of friendly societies? Their proportion of the insurance market is at risk of going into reverse because of how the FSA has approached the matter, and the amendment may well help to achieve a culture change in the FSA and get its lawyers to adopt a slightly more helpful mindset.
It is important that we have some metrics by which to measure the Financial Secretary’s performance on his coalition promise. After all, it is there in black and white—the Government said they would bring forward not just proposals but detailed proposals for promoting the mutual sector. This is his moment. We want him to explain to us what those measures will be. I am sure he does not believe in putting such promises in an agreement straight after an election and then letting them drift as though they did not need to be attended to. Many people want to see greater diversity in the financial services sector, and it is important that he is held to account.
Looking at the amendment, I wonder whether it illustrates the tensions in the contemporary labour movement. On one hand, this should be a time of celebration for all those who believe in mutuality, co-operatives and voluntary self-help, because Members of all parties are signed up to the idea. There is a Conservative co-operative movement, and many of us are very serious about it. On the other hand, Labour insists on top-down control and state direction. It wants to enshrine in legislation measurement, management and the direction of Ministers’ performance.
Is it not time that, rather than insisting on the production of numbers and pretending that the Financial Secretary can direct people to help one another voluntarily and mutually, we eliminated barriers to entry, accepted spontaneous order and encouraged people to build up the bonds of friendship and mutual co-operation? Ministers cannot direct or legislate for those bonds.
It may well. It behoves the Government to take this kind of amendment very seriously, despite drafting imperfections. It is important to the integrity of our financial system and, above all else, the sense of individual ownership in a mutual context for this movement not merely to be nudged along but to be massively encouraged. The more people have a stake as a result of being in a mutual condition, the better society will be.
I am completely in favour of capitalism—that might disappoint Opposition Members—but each category of activity in financial markets requires its own remedy, and the mutual system is vital to ensuring that there is a proper balance in society and that those who, for one reason or another, cannot get on to the capitalist ladder in the way that some can have the benefit of mutuals and can share in the prosperity that others provide. I regard that as a very important objective.
Even if the amendment is not perfect, the intention behind it is important. Wrapping the whole thing up in jargon—some of us are very familiar with jargon—will not solve the real problem in the way that mutual societies can. I hope, therefore, that the Minister will give careful attention to the objectives and purposes of mutuals, in the context of the amendment, and not simply say that the Opposition are talking nonsense or that the Opposition spokesmen are trying to be troublesome and criticise the coalition agreement. It is time we grew up, actually. By that I mean that instead of constantly talking about the Opposition as if they were simply trouble making and mischievous, we should recognise that in such matters we are trying to achieve something worth having.
The Opposition spokesman says, “Hear, hear”, but I do not want to give him too much encouragement. We need to understand, however, that the objective behind the Opposition’s amendment is important, not because of party politics but because it is about having a stable, good and fair society. That is what we should all be seeking.
The amendment does not compel anything to happen; it merely makes it possible, if the Government wish, to change the law if necessary—which it almost certainly is not—to measure the number of members of credit unions. The Opposition may be right that the figure is not being measured, although that would surprise me, as the industry bodies will almost certainly have total numbers of members. If we contacted the Council of Mortgage Lenders, for instance, and asked how many members the building societies in the council had, it would probably give us the answer. Getting the answer should not be that difficult; however, as the amendment does not compel the Government to do anything, it will have no effect if accepted.
I return to the point that we have to welcome the fact that the issue of mutuals is being kept on the agenda. I would be interested if any Opposition Member wanted to liaise with me over the coming months to see whether we could find the answers that the amendment makes it possible to find—which are probably possible to find anyway, if the Government wish to find them. Indeed, I would have thought that the Government would not be that averse to knowing what the market share was.
This is a very confusing speech. The hon. Gentleman is in an honoured position, speaking on behalf of the Liberal Democrats. They helped to write the coalition agreement, so he has a responsibility to say what progress is being made on the detailed proposals to promote mutuality. Do the Liberal Democrats agree with that objective, and, if so, what are they doing to achieve it?
“Actions speak louder than words”: that is the conclusion that the Minister reached when rebutting this modest amendment. Some Opposition Members said that it was too modest, and not strong enough. You cannot win when you are in opposition. Sometimes Opposition Members propose amendments and are told that they go much too far, but it seems that this amendment did not go far enough.
The aim of the amendment was simply to hold the Government to account in respect of their own promise in the coalition agreement to produce detailed proposals to promote mutuality. The Minister tried his very best. My hon. Friends could probably hear the sound of the barrel being scraped as he listed all the papers, reviews and consultations—half of which, by the way, had their genesis under the last Labour Government, or were thanks to the European Commission.
The Government’s commitment to mutuality is conspicuous by its absence. They have an embarrassing dearth of commitment to the mutual sector. The Minister must do far better than this. As my hon. Friends have said, it is no wonder that the Government do not want to measure the progress that is being made in any modest way. I think it is time that we held them to account.
Members in all parts of the Chamber care about the mutual sector. I greatly respect the work that is being done by the all-party group, and the commitment of others who believe that it is important for us to take the steps that are necessary to support the mutual and co-operative sector. All that we were trying to do was obtain from the Government some sense of how they were doing in relation to the coalition agreement, but the best that we have been able to secure is a scraped-together consolidation Bill that does some administrative tidying up. It is not good enough, and I therefore wish to press amendment 72 to a Division.
Let me start by thanking those of my colleagues who served on the Committee that considered the Bill, as well as the trade bodies, consumer groups and others who made representations about it. In particular, I thank members of the Treasury Committee for the time and attention they gave to trying to improve the legislation. I thank also the members of the pre-legislative scrutiny Committee, who did a phenomenal amount of work in the months ahead of the legislative process, albeit to make a series of recommendations that the Government then promptly ignored. However, we will come to that when the Bill goes to the other place. I pay tribute to my hon. Friend the Member for Foyle (Mark Durkan). His contributions were from a different political party but he made a very constructive contribution to the Committee. I also thank the officials and others who work hard behind the scenes on legislation such as this.
It is a shame that we have had such woefully insufficient time to debate this massive piece of legislation, which consists of more than 300 pages and hundreds of clauses. We tabled more than 200 amendments but the best we could get from the Government, even though they have nothing else going on in the Chamber—they are padding out the legislative process—is one and a half days, with three hours for the second day on Report. We ran out of time to debate some of the key, critical issues concerning how the Governor of the Bank of England and the Chancellor of the Exchequer would manage in a crisis, and we did not even get an opportunity to debate those crisis-management arrangements. However, I am glad that we extracted one major achievement from the Government and No. 10: when it comes to public funds, when there is a direction to the Bank of England from the Treasury, the Government will now require the Bank to report back on its progress on that direction. That is a positive change, which we did not get a chance to debate in discussions on the previous section of the Bill. I am grateful for the change.
When it comes to some of the other problems to do with crisis management, the Government are relying on a non-statutory memorandum of understanding between the Bank of England and the Treasury, which leaves gaping holes in knowing how things would work in a crisis. They say that there will be a temporary standing committee or an ad hoc committee but there is no sense of who will be on it or how it will be constructed. No advance thought is going into that and I worry that if we get into a crisis we might waste hours or even days figuring out how on earth to convene this ad hoc committee.
Similarly, there are serious difficulties to do with whether the heads of the new regulators and bodies that the Bill creates will have a direct line of communication with the Treasury or whether everything will have to be filtered through the Governor of the Bank of England, in whom enormous new powers will be vested under this legislation. There is an irony in that yesterday or the day before the Bank conceded—this was dragged out of it—that it ought perhaps to have minor reviews and partial inquiries into what went on in parts of the financial crisis. We still have not had a fundamental review by the Bank of England about its role in the crisis, and that is a great shame. It should be big enough and have the humility to undertake the review that the Treasury and even the FSA have undertaken. It is time that the Bank also opened up and looked inwardly and seriously at its own capabilities.
There are positive aspects to this legislation. We agree with the concept of prudential regulation and we wait to see the detail. The Minister said that he is going to consult on some of the macro-prudential tools. It is very important that we get right the concept of the greater systemic overview of the system—the eagle-eye view that needs to be taken rather than getting too bogged down in the detail of firm by firm, company by company regulation—but the theory needs to be translated properly into practice. That is where the devil is in the detail. In a number of respects, the Bill falls short and could have done with massive improvement. The Opposition tried their best to make recommendations, including many of those made by the pre-legislative scrutiny Committee and the Treasury Committee. I sometimes see the Minister as—I will not call him an irresistible force—an immovable object resisting time and again attempts to improve the Bill.
We need more transparency and accountability for the regulators that the Minister is creating. The degree to which the new Financial Conduct Authority will publish its minutes is still unclear—we need a firmer commitment from the Government on that—and as I have said, the crisis management memorandum of understanding is still insufficient. There is a severe risk that costs that firms pay in their levies to the new regulators will be duplicated and that there will be inefficiency in the expense of splitting the regulator and having two new regulators. We know that the PRA is already in aggrandising mode, securing beautiful new offices in Moorgate right next door to Threadneedle street because, apparently, Canary Wharf is far too far away. It is about 12 or 13 minutes on the tube, but apparently that is a major problem. So millions more pounds are to be spent on those offices in Moorgate, and the Government have resisted attempts to bring about greater efficiencies by means of the Bill.
The key aspect that is missing is proper attention to the necessary parliamentary scrutiny of those macro-prudential tools. Many of our constituents would baulk at that phrase and ask what on earth it means. It is about the regulator and the Bank of England deciding, for example, that the minimum repayments on their credit card may need to change at a moment’s notice. The Governor of the Bank of England will have the power to say, “I’m sorry, we’ve got a particular issue coming on, so instead of paying back 2% a month, you’ve got to pay back 10% a month on your credit card.” The Governor of the Bank of England will have the power to intervene on business lending, on the terms and duration of loans, and possibly even on the cost of those loans, and will be able to do that at a moment’s notice.
We have a bit of a debate about whether loan-to-value ratios and loan-to-income ratios on mortgages will also be in the hands of the Governor. Interestingly, one of the deputy governors has said, “This is a bit too hot to handle. Maybe this is for the Treasury, which is accountable to do that.” The point is that there are phenomenal powers invested in the Bank of England, and we need that thread of accountability to come back to Parliament at some point. This is why we have suggested that there should be a super-affirmative process, rather than a rubber-stamping statutory instrument Committee which many Members have attended and where they know orders go through on the nod with a formal vote.
I detect some cynicism on the part of the Government Whips, but of course they want to nod these things through. We should give Parliament a proper opportunity to consider the impact of those phenomenal powers on our constituents and on the economy. I hope that in the other place the Government will think again about the need to improve the parliamentary scrutiny of the new powers.
When it comes to consumers, the Bill has not properly addressed what we wanted to see, particularly the powers of the Financial Conduct Authority. There has been no movement on compulsory financial education. The Money Advice Service, which is the body tasked with trying to improve the financial literacy of the population, will not be adequately focused in statute on the most deprived in society and those who are most financially excluded. We saw the Government rebut attempts today to give the FCA a proper mandate on the regulation of high cost credit. The Government refused to give the FCA a proper role to take account of social investment, charity finance and other needs. We know they have a chip on their shoulder about charities and philanthropy generally, but it is a shame that they did not recognise those needs in the Bill.
There are a number of consumer aspects, whether debt management plans, helping customers plan ahead for their mortgage finances, or giving firms a fiduciary duty to have regard to the best interests of consumers, on which the Bill should have been improved. We have spoken separately about how the corporate culture in the financial services sector could have been improved. Today we tried to press the Government on improving the stewardship, the corporate governance arrangements and the actions of remuneration committees in reining in some of the excessive bonuses and pay packets.
It is with particular reference to the impact on the economy that I close my remarks on Third Reading. A powerful new committee is created in the Bill—the Financial Policy Committee, which will make the decisions about macro-prudential tools. It will be under no proactive obligation to have regard to growth and employment in this country. We may well see a mismatch between the obligations under which the Monetary Policy Committee remains: it must have regard to the growth and employment objectives of the Government, but the FPC does not mirror that obligation on the MPC. It is told, “Don’t do anything to harm growth”, but it is not given an obligation to have regard to the Government’s proactive—we hope—strategy on growth. Maybe that is because they do not quite understand what the growth agenda ought to be, or they do not know how to get there. They cannot see why that is important. In addition to that general obligation, it is also important that there should be an assessment of the impact of each of the macro-prudential tools on the economy—on growth and employment—but the Government have neglected to do that. Also, there was not a sufficient duty placed on the Bank of England to take care of public funds. Those are some of our concerns.
The Bill does not properly fit with the European level of supervision for financial services. There is the sense that it was dreamt up on the back of a cigarette packet by the Chancellor in opposition, when he wondered how the previous administration, the FSA, could be blamed for all the ills of the global financial crisis. But he forgot to recognise that most of the financial regulations in this country come from Brussels, the EU and Commissioner Barnier, on that conveyor belt as it throws out all the directives and regulations. The regulators that we are creating in this legislation are merely there to transpose a lot of the decisions taken in Brussels. That is essentially their function. The Bill does not properly recognise how our regulators should fit with the European decisions and those realities. We should be framing legislation not just to influence those European decisions, but to steer those decisions. The Government still have not addressed that point properly.
The hon. Gentleman makes the point that the twin peaks structure that we are implementing here does not fit with the European sectoral structure. Is it the Opposition’s position that we should have had a sectoral rather than a twin peaks Bill?
I am pointing out that there is a fundamental mismatch. We know that the supervisory authorities have gone for a thematic approach and the Government have gone for a twin peaks approach. Then there is this bizarre committee or secretariat in between to try and be an interlocutor. It is a tremendous spaghetti, diluting our influence on those supervisory decisions. We can already see that the Government have had to cave in on a number of ways in which the European Banking Authority can overrule many of the capital requirement arrangements. Perhaps that is the result of a deeper weakness in the Government’s diplomatic stance.
I am not saying that the Bill cannot be salvaged. There are ways in which it falls short, but there is still time for the Government to listen. The Bill is deficient, but it can be improved, and I hope that the noble lords in the other place will take the opportunity to do so. We agree with the concept of prudential regulation. There is virtue in some of the theory in the legislation. But it is because of the way in which the Government are yet again incompetently putting that theory into practice that we have our doubts. We will not oppose Third Reading, but I hope that the other place, perhaps with the more time that they have under the rules, will do a serious job and pick up on some of the issues that the Government, by timetabling the Bill in such a draconian way, failed to give the House of Commons the proper opportunity to do.
(12 years, 4 months ago)
Commons ChamberAgain, my hon. Friend is absolutely right. We have very low interest rates in an environment in which many other European countries have much higher interest rates. That is a reflection of market confidence in the UK’s deficit reduction plan, and of course if we had pursued the path advocated by the Opposition—the same path that led us into this economic mess—we would be paying a higher interest rate, and there would be higher interest rates and families would have higher mortgage bills.
May I very gently and in the friendliest way possible suggest that the Chancellor should not be quite so arrogant about his record on public borrowing? In Washington this weekend, he said that
“we have sorted out our problems.”
That is what the Chancellor told us. We have high unemployment and slow to non-existent growth. When will he realise that public borrowing is £150 billion higher than he predicted in his spending review?
As today’s public finance numbers show, we have hit the deficit reduction target we set out in the autumn statement and in the Budget. I am glad that the hon. Gentleman brings up Washington and the IMF summit. Perhaps we will hear later from the shadow Chancellor, as we did not have a chance to yesterday, what he thinks about the fact that the previous Chancellor of the Exchequer completely disagrees with the position that he has taken on behalf of the Labour party.
(12 years, 4 months ago)
Commons ChamberNo, I will allow the hon. Gentleman to make his own contribution in his distinctive style, and doubtless I will have a chance to wind up and respond to the points made. However, I have gone on for nearly 30 minutes, and other hon. Members want to take part. I will now allow him to do so.
(Nottingham East): My hon. Friend the Member for Vauxhall (Kate Hoey) asked an extremely pertinent question, and I want to come back to it later. First, however, I commend hon. Members from both sides and all parties for spotting that this debate was so relevant. The motion, as framed, does not leap out from the Order Paper, and when hon. Members go to the Vote Office to find these convergence documents, they are met with a little mystification. Let us turn to page minus-2, so to speak, of the Budget Red Book.
Indeed, I was here this time last year making a very similar, uncannily parallel speech, but I will point it out again. Underneath where it talks about Crown copyright, the ISBN number and where it says:
“Printed on paper containing 75% recycled fibre”,
it reads:
“The Budget report, combined with the Office for Budget Responsibility’s…fiscal outlook, constitutes the Government’s assessment under section 5 of the European Communities (Amendment) Act 1993”.
That is relevant to today’s debate. It is written in very small font for those who might have difficulty reading it. It mentions the European Communities (Amendment) Act, which sounds like a very British piece of legislation, but, being eagle-eyed, hon. Members will have spotted that all that Act does is refer to the Maastricht treaty, article 2 of which states:
“The Community shall have as its task…a harmonious and balanced development of economic activities, sustainable and non-inflationary growth”.
Of course, it also relates to article 103, which talks about economic policies being a “matter of common concern” that should be co-ordinated within the Council. These are the sorts of words that some find difficult to stomach, but the article continues:
“For the purpose of this multilateral surveillance, Member States shall forward information to the Commission about important measures taken by them in the field of their economic policy”.
In a sense, the right hon. Member for Wokingham (Mr Redwood) was right to say that this is the homework that has been set by the European Commission, and we are completing our homework today.
We will oppose the Government tonight, but we will do so not because we disagree with the European Union having a look at our Budget—these multilateral surveillance procedures have been going on for the best part of 20 years—but because we disagree with the measures in the Budget.
People will have their different reasons for opposing the motion, and my hon. Friend is right to state his reason for opposing it. My reason for opposing it is that, essentially, it asks the House to approve the Government’s assessment of the economy. That is the nub of the question. We are being asked to approve the Budget Red Book as their assessment of the economy. Sadly, we know that the Government are out of touch not only with the public but with economic reality. Their grip on what one might call the actuality of the real economy leaves a great deal to be desired.
This is an opportunity not only to take stock of the Government’s approach to the economy as a whole but to look at their analysis of what is happening. We know that they are pursuing failing policies on jobs, economic growth and deficit reduction. The Minister proudly defended the cut in the 50p top rate of income tax for the wealthiest 1% in society. The Government are giving a tax cut of about £40,000 to millionaires at the expense of pensioners and working people. Is it any wonder that their popularity is falling precipitously as a result? I am glad to have an opportunity, every time the Minister speaks at the Dispatch Box, to remind those watching these proceedings of the Government’s priorities. Living standards are being squeezed, and the VAT rise is hitting people hard, as are the cuts to tax credits and the cost of living generally. Independent experts say that a typical family will be worse off by £511 this year, but that is the Government’s choice; they want to give millionaires that advantage.
The motion relates to the Government’s assessment of the economy. Such a poor analysis as that presented in their Budget Red Book betrays either extreme wishful thinking on the part of the Treasury or, more likely, a dangerous detachment from the key decisions that Ministers need to confront. Their understanding of what is happening to business, employment and the cost of living is far removed from the experience of the vast majority of the public.
I urge all hon. Members to look at the facts and to examine the way in which the Budget Red Book is so detached from reality. On page 11, the Government claim that growth is
“strengthening over the forecast horizon”.
Growth was minus 0.2% in the last quarter for which we have figures, and the economy has been flatlining for a long time. It has performed very poorly since the spending review, while that of the United States has grown by more than 2%. The Office for Budget Responsibility is predicting growth of just 0.8% in 2012. Last year, in this very debate, we heard that the OBR was forecasting growth of 1.7% in 2012, and that was after several downgrades. There is clear evidence that the Government’s assessment of the economy is entirely out of touch with reality. The OECD is predicting good things for the United States, Germany and Japan, which are all predicted to grow faster than the United Kingdom this year.
What is worse is that on page 15, the Red Book states that we will experience
“positive growth, consistent with experience from past financial crises”.
Last year’s Treasury Red Book said that we were expecting a recovery that was
“in line with previous recoveries”.
I know that my hon. Friends who are students of these matters will be familiar with the charts and analysis produced by the National Institute of Economic and Social Research and others that compare the progress of recessions and recoveries across the decades, from the great depression to the recessions in the 1970s, 1980s and 1990s. When we consider our present position, we see that we are still 4% off the pre-recession peak. We have not yet clambered out of the hole. This is proving to be one of the longest and deepest financial crises, and the Government have failed to make any headway in ensuring our recovery. Their claims that we are in a parallel situation to previous recessions and financial crises prove that they are not in touch with reality.
I note that the shadow Minister is making a principled argument and that he disagrees with the figures. If he did agree with the Budget figures, would he still feel that we had to submit them for scrutiny? We are a sovereign country. Do we really need our homework to be checked by Europe?
That is an interesting question. Obviously, I believe in the rule of law, and there is a legal obligation on Her Majesty’s Government to abide by the treaties. This is where we come back to the question that my hon. Friend the Member for Vauxhall asked earlier. She asked the Minister what the consequences would be if the motion were not passed by the House today. That is the key question that all hon. Members should be pressing the Minister on when he winds up the debate. I will give way to him now if he can answer it. What would be the consequences for us if we did not vote in favour of the motion today? I am happy to give way to him. For the reasons that I have suggested, the Government’s poor assessment of the economy does not inspire me to vote for the motion. I do not see why we would want to support their woeful assessment. The Minister is not giving us a reason for voting for it.
I entirely agree with not submitting the report to the European Union, but is not the growth situation even worse than my hon. Friend suggests? Even as we speak, the eurozone is plunging into a deeper crisis. Because of the weakness of the euro, the pound is unfortunately strengthening against the euro, which is going to make it harder for our manufacturers to export. The Chief Secretary to the Treasury said yesterday that we needed to make even more cuts than those already planned. So far, we have experienced only about a quarter of the planned public expenditure cuts. Is not the situation far worse than my hon. Friend suggests?
We have a blinkered and, in many ways, deluded approach to austerity—or über-austerity, as some might characterise it—which is hurting not only in the eurozone but here as well. What angers many people is that the Government’s approach to helping the eurozone out of its difficulties is to throw money at it. Technically, that money is going to the International Monetary Fund, but everyone knows that it is all about eurozone bail-out funds. We are giving a further £10 billion loan, even though the Americans and the Canadians are all saying that we should stand firm and negotiate with the wealthy eurozone countries, including Germany, and make them dip deeper into their own pockets. If they do not do that, and if Britain, China, America and others provide the money, those eurozone countries will not do the deep, serious thinking that they need to do, and they will not take the consequences of their situation within the single currency. They will not put up a proper firewall, as they ought to do; they will not build what has been characterised as the “big bazooka”.
That is why we have consistently expressed our scepticism about the Chancellor’s decision to cave in and give extra resources—British taxpayers’ money—to the IMF, which we all know is going to be used for that particular purpose. We like the IMF for its work with other countries in the developing world, and of course we want a strong IMF, but we should not be letting those wealthy eurozone countries off the hook. They need to confront those issues.
I apologise for coming in late, but I have just got off the plane from Denmark where I was meeting the chairmen of the scrutiny committees of all the other national Parliaments of the European Union. We have recently witnessed the resignation of the Dutch Government and the consequences of the French elections. Would the House be interested to know that there is deep disquiet behind the scenes throughout the whole of Europe, as I discovered through speaking to those chairmen in the last couple of days?
I am afraid that I am not surprised to hear that that is the case. The hon. Gentleman spends a great deal of time and effort monitoring how these issues progress. Personally, I feel we need to find ways of supporting and stabilising the situation in the eurozone, but I do not think that the Government’s strategy is the right way to do that. However, I digress.
I feel it appropriate to give the shadow Minister some friendly advice. One reason why my party was not credible on the economy until quite a few years after we lost the election was that in many respects we did not face up to the fact of the legacy we left. I remind him that he really should be looking at the wider picture of Europe rather than focusing on the national situation here. The fact is that real-terms public expenditure rose by 53% from £450 billion to £700 billion between 2000 and 2010. His party ran a structural deficit in times of economic growth. That is the situation in which we find ourselves now.
I obviously disagree with the hon. Gentleman’s assessment, but he made an important point earlier about the plight of those who are suffering as a result of the austerity approach being applied in southern European countries in particular. I worry greatly about that; it is a matter of concern. It is also a concern, however, for our constituents here in the UK. We take a different approach on principle about the right ways to repair our economy. We believe that a stronger emphasis on growth is necessary to generate revenues; it is not just about public expenditure cuts, which do not provide the way out of the situation. I also disagree that the motion is a general debate about the state of the European economies. We are debating whether the Red Book provides a right, accurate, fair and good assessment of the state of the British economy such that we can submit it, as we are required to do by the treaties, to the European Commission. I am simply following the strictures placed on us by the Maastricht treaty.
That is the key point. The hon. Gentleman quoted from the 1993 Act—a Tory Act, of course—about the need to submit information to the European Commission, including information on industrial investment. We have seen forecasts of 6.7% business investment growth ending up being a negative 0.8% out-turn. He is thus absolutely right that the Red Book is not credible in terms of the objective set out in the 1993 Act.
It is that lack of credibility that makes me want to oppose the motion. The hon. Gentleman picked up on the point about business investment. I encourage hon. Members to turn to page 16 of the Red Book, which says:
“business investment will pick up and make an increasingly strong contribution to growth in each year of the forecast as confidence builds and credit conditions ease”.
Just yesterday, the trends in lending data came out from the Bank of England. Year on year, net lending to all businesses—small and medium-sized enterprises in particular—has fallen in every single month since the Government took office. That is despite Project Merlin and all the attempts at credit easing, which have still not come into effect and will do nothing to help credit availability. Last year, they said in their document that
“Credit conditions have shown signs of stabilisation.”
That has not come to pass, so I have no confidence that their current propositions will come to pass either.
On borrowing, page 12 of the Red Book claims that we are heading for
“£11 billion lower over the forecast period than was projected at Autumn Statement 2011”,
which is sophistry because we know that in the spending review figures from October 2010, the Government projected a set of borrowing statistics that have had to be ripped up, because we are on a trend that takes us into £150 billion of further borrowing over the lifetime of this Parliament. The new borrowing figures out this morning confirm that particular trend. That is where things are going.
The Chancellor keeps restating that the UK is “a safe haven”, although he slipped a little bit today in saying that it was “a safer haven”. There he was in Washington this weekend, saying that the UK has “solved our problems”. That is our Chancellor’s assessment of our economy. Such dangerous complacency beggars belief, and I think that it is a sign of arrogance.
The hon. Gentleman picks up on our Chancellor’s reference to “a safer haven”. Does he think that could be because the debt figures on the treaty calculation are no longer expected to peak at 87% of gross domestic product as was forecast a year ago, but at 93% of GDP—a catastrophically high figure?
Of course, that is because of the Government’s record of high unemployment, with statistics showing not much improvement, an increase in welfare costs and so forth. All those things are a drag on public expenditure; they are making things no better. That is the result of the Government’s misguided strategy. On the wider issue of employment and unemployment, I challenge hon. Members to find much in the Red Book that provides an assessment of what is going to happen to them. We know that we have the highest unemployment in 17 years, with 2.67 million people on the dole. We know the story that long-term unemployment doubled in the last year and that youth unemployment is at a record high. My hon. Friends do not need me to repeat these figures.
On inflation, the Red Book says that
“inflationary pressures, which the OBR considers to have been the main drag on UK growth over the past 18 months, have started to abate, easing the pressures on household incomes and improving the outlook for consumers.”
Well, consumer prices index inflation rose, I think, in the last month. We are at around 3.25%. We should not forget that the Chancellor’s target for the Governor of the Bank of England is 2% inflation. Indeed, Paul Tucker, the deputy governor of the Bank of England, warned this week that inflation is likely to stay above 3% for much of 2012. Again, even on inflation, the Government’s assessment of the economy is just not correct. There is no mention of consumer confidence in the analysis. Although there is a section on “Investment and confidence” on page 14, it does not mention consumer confidence at all. The consumer confidence indices have been down and are worsening at minus 31%.
My hon. Friend talks about confidence. Did he see the comments of Barney Frank, a leading US congressman, when he talked yesterday about this Government’s obsession with austerity measures, which went right to the heart of the credibility of whether or not they could reduce the deficit? Coming from Washington as he did, he was clear that this Government’s key measure for reducing the deficit in their period of office was counter-productive.
Indeed. All across the globe, developed countries are realising that a strategy focused singularly on austerity alone will not be the solution. We must have a greater focus on growth and job creation as a way of generating revenues.
I have spoken for too long. Labour Members believe that this motion is flawed because the Government’s assessment of the economy is poor. Others will have their own reasons for voting against it. I want to hear the Minister’s justification for the motion and to find out why it would be cataclysmic if it did not go through. The consequences of that are a key point. As I see it, the Government misunderstand the economy, they are misreading the growth prospects of the UK and they are misconstruing what is happening in the employment markets and business investment. I therefore urge the House to reject this mistaken assessment of the prospects for our economy.
(12 years, 4 months ago)
Commons ChamberI am surprised that the Minister has moved the programme motion formally, given that today—day one of what is supposedly two days for Report and the remaining stages of this Bill—we have five hours of debate in which to cover 59 amendments. Even if there are no Divisions in the House, that leaves barely five minutes for each item.
This Bill is an extremely important piece of legislation. It reforms some of the most important financial institutions in this country, including the Bank of England, creating new financial regulators and dealing with consumer finance, business finance and all those key issues. It has 103 clauses and 21 schedules, yet this programme motion gives us a derisory amount of time. We supposedly have two days, but we will in fact have one and a half days on Report. The second day is not a full day, but a half day, with three hours for the remaining proceedings. Do not let us forget that today we have five clauses to cover in the space of five hours, and we will have 97 clauses to consider in three hours on day two, whenever that is scheduled. That is barely even paying lip service to proper scrutiny. When the Bill gets to the other place, their noble Lordships will have to look seriously at whether there has been proper accountability for the provisions that are before us.
We also had insufficient time upstairs in Committee, where 20 clauses went undebated. That is because the Government have consistently allocated insufficient time for this legislation. When the previous Administration took the Financial Services and Markets Act 2000 through the House in 1999-2000, 35 sittings were given in Committee. However, less than half that number were given to scrutinise this Bill in Committee upstairs—we had only 16 sittings in total—so it is no wonder that clauses went undebated.
This is a parody of a programme motion. It leaves massively insufficient time. I do not wish to waste any more of it, but this motion has to be opposed. I hope that my hon. Friends will join me in protesting against this lack of accountability, call on their noble Lords to spend more time scrutinising the Bill properly and vote against this programme motion.
(12 years, 4 months ago)
Commons ChamberPart of the challenge is that such schemes are part of a subset of advance payment schemes that are not necessarily covered by the Bill. These issues are consumer issues and I shall certainly raise with my hon. Friend the Minister with responsibility for consumer affairs where he feels that the best opportunity might be to do that and whether there are some non-statutory alternatives to regulation that will help protect the customers of such schemes.
Before I speak to Government amendment 3, I can let my hon. Friend the Member for Enfield North know when the research will be published. The research project will conclude this summer, and given that the transfer of consumer credit to the FCA will not take place until 2014, that gives us time to act. That is not to say that nothing is happening in the meantime in the regulation of consumer credit: the OFT is doing a great deal of work in that area. I am as keen as he and others are to ensure that the matter is brought to a head as soon as possible, so that the right protections are put in place for our constituents.
Government amendment 3 aims to improve the drafting, following the close and valuable scrutiny in the Public Bill Committee. In Committee, questions were raised about the appropriateness of “supply”, and the amendment clarifies the Money Advice Service financial education function so that it should include the promotion of awareness of the financial advantages and disadvantages relating to issues that may arise over the lifetime of the product, not just to the initial purchase or supply of a particular good and service. The function might include, for example, promoting awareness of the financial advantages and disadvantages of a person exercising the right to receive part of their pension savings as a lump sum, or the financial advantages or disadvantages of the various options open to a person who is having difficulty paying their mortgage.
I am confident that the Bill as it stands already provides for such matters to be covered by the Money Advice Service financial education function, but the amendment helpfully clarifies the scope of the MAS’s specific duty to promote awareness of the advantages and disadvantages of particular goods and services. I am grateful to the Members who raised the matter in the Committee, and I hope that the amendment addresses their concerns.
Amendments 37 and 55 would affect the functions of the MAS. Amendment 55 would require the MAS to support the provision of legal advice in relation to personal debt, with funding received from the Ministry of Justice to support that work. The amendment would reinstate changes to legal aid in the Legal Aid, Sentencing and Punishment of Offenders Bill. For the reasons clearly set out by my right hon. and learned Friend the Justice Secretary, we cannot use the Financial Services Bill to compensate for reforms to legal aid in the other Bill as a roundabout way of maintaining funding for not-for-profit bodies; moreover, effectively reinstating those categories in the scope of legal aid means reinstating legal aid for all legal advice, not just for those in not-for-profit organisations.
Amendment 55 is not required because the Money Advice Service already has sufficient responsibility and funding to assist members of the public with debt management. The MAS and other organisations provide debt advice directly, including by advising people who are facing difficulties with debt on the options available to them and the possible legal ramifications. For example, they provide advice to people who are at risk of losing their home and advice on options to resolve their financial difficulties. Any debt adviser trained to intermediate level can give advice on such matters as a matter of course. In contentious areas of law, such as the impact of insolvency or immigration status, an adviser could seek external advice. Similarly, if a non-debt issue arose, or substantive legal advice was required, an adviser could refer the client to a specialist solicitor. I therefore do not think the amendment is necessary, as the MAS and other organisations, through their debt advice services, already advise people facing difficulties with debt on the impact of the law on their situation.
Amendment 37 would require the MAS to provide
“targeted, proactive and easily accessible advice to those encountering economic disadvantage, financial exclusion or financial exploitation.”
I am sympathetic to the intention behind the amendment: clearly, the service provided by the MAS should encompass such groups of people. However, as I said in Committee, one of the key features of the Money Advice Service is the breadth of consumers it is there to serve. Millions of people can be vulnerable to poor money management at any point in their lives, especially as they experience key life events. Similarly, many people, regardless of their financial circumstances, may not know where to turn for impartial financial advice, or may not know that they need information and advice in the first place. I therefore do not think it appropriate for the legislation to prescribe which groups are in most need of the service. By focusing the Money Advice Service on particular groups, we risk neglecting others who may be equally in need.
It is clear to me, from discussions I have had with the management of the Money Advice Service, that they recognise the need to provide support across a wide range of people. They also recognise the importance of face-to-face debt and money advice and the importance of ensuring the right channels of support are there to help those in need of financial advice—for example, those who need guidance on how to get out of debt or how to protect their families in the long term. I believe the MAS is acutely aware of its broader social obligation.
The group of amendments before us raises important issues that impact on many in our constituencies. The action that we have taken to tighten the consumer credit regime by moving consumer credit from the OFT to the FCA is the right way to proceed. This is a dynamic and changing market, and one of the great advantages that the FCA brings is the opportunity to keep issues such as the cost of credit under review and to make sure that it responds in a timely manner to help protect our constituents in these difficult areas.
I suppose the Minister is right in one respect. This long group of amendments under the catch-all heading “Consumer protection” raises many issues about which our constituents care deeply. It is just a shame that the Minister is resisting and rebutting almost all of them, except the Government amendments. But I do not want to sound too churlish. He has conceded—we have managed to extract—one minor concession from the Government in Government amendment 3. I therefore feel that all those hours and weeks in Committee were productively spent, and for that small measure I am grateful to the hon. Gentleman.
Time is short so I will comment on the series of amendments tabled by the Minister, and then on those in my name and that of my hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson). Government new clause 4 sets out a series of order-making powers for the Treasury in respect of the transfer of regulation of consumer credit matters from the Office of Fair Trading to the Financial Conduct Authority. I am grateful for the clarification of the Government’s intentions. My comments on this and the consequential amendments in the group relate to the time scale for these arrangements. The new clause sets out the paving changes rather than the regulations, saying that the Treasury may well make these orders in due course. It gives a sense of the architecture of those and the fact that most of the powers available to the OFT under the Financial Services and Markets Act 2000 will be available to the FCA and so on, but we do not yet have the time scale for those orders to be made and to take effect.
Many loose ends remain, even after the amendments. How will the local weights and measures authorities dovetail with the new arrangements, the FCA and so forth? What is holding the Government up in making those changes, publishing the new arrangements and making it clear to those who may be slightly concerned that the transition period could create a sense of limbo in which a number of issues fall between the gaps? We do not want consumer credit arrangements to be put on the back burner during the transfer—quite the opposite. We need this time more than ever to help consumers who are under strain on various fronts, as is pointed out in the amendments tabled by my hon. Friend the Member for North Ayrshire and Arran (Katy Clark), the hon. Member for Eastbourne (Stephen Lloyd) and others.
New clause 9 in my name seeks, as the Minister mentioned, to require the Financial Conduct Authority to produce recommendations within a year of the commencement of the Act to phase out the practice of directly charging consumers fees or charges for the provision of debt management plans.
I have a huge amount of sympathy with the hon. Gentleman’s points about some companies that prey on some of the most vulnerable in our society who are in fear of the debt collector knocking on the door. However, would he tar every debt management company with the same brush? I have experience of companies that behave responsibly and extend a great deal of help to people to manage their financial affairs.
That is a fair intervention. No, I would not say that they are all the same. There are companies, even those that may for some reason be using this fee charging process, that want to do the right thing, but my point is that that business model has had its time and needs to go. There is a better way, whether it is a for-profit or a non-profit avenue, for debt management consolidation to take place, and that is to tell the creditor that this is a way for them to get some money back, albeit not necessarily the full amount, from those heavily indebted customers who may owe them something, and in exchange for getting something back they have a duty as a creditor to stump up some of the cost for the administration of that consolidation. It is time to end the business model that has a propensity to cause hardship, not in every single case, but in too many cases, and that is why the Opposition believe that this is a perfectly reasonable new clause to bring forward.
New clause 10 concerns mortgages. People may well ask where the problem is at the time being when mortgage rates are at a low level, partly because the Bank of England is printing so much money that we end up with a low base rate. But the Governor of the Bank of England has been warning in a number of reports that this is an unsustainable situation and that over the medium term he expects interest rates to normalise. From the Bank of England’s point of view, whether the normalised interest rate is 4% or 5% is moot, but it is certainly much higher than the current rate.
My anxiety is that many consumers up and down the country might be under the false impression that this is a normal period, but it is not. If the mark-ups that the retail banks charge on the wholesale cost of borrowing are maintained as base rates or LIBOR rise to a more normal level, the mortgage rates that our constituents pay could end up being significantly higher, at 6%, 7% or 8%. I suspect that the difference between the price the banks pay wholesale for their money and the amount they charge customers upfront has been growing and is too wide. As soon as LIBOR creeps up, if that mark-up is maintained, we could be in serious difficulties, which is why the new clause is essential at this time.
This is a stitch-in-time new clause. We have tabled the proposal because we believe that now is a good time to require all the banks to forewarn their customers about a number of possible scenarios so that home owners with mortgages have the information necessary to prepare for them. Often when those of us with mortgages get information from lenders it is a set of retrospective information, for example on how much we have paid to defray the cost of our mortgage. We believe that it is now essential to forewarn customers about what could come in future, because we have to find a way of ending shocks to consumers, especially when changes to standard variable rates can sometimes be made with as little as two weeks’ notice.
I am trying to follow the hon. Gentleman’s argument, but how on earth could any individual or organisation predict with certainty what will happen in future?
The hon. Gentleman is right that it is impossible to predict with certainty, but this is about scenario planning and preparedness. He will know that the Governor of the Bank of England has been saying what he regards normalised base rates to be, broadly speaking. Does the hon. Gentleman not think that our constituents, especially those on variable interest rates—this might not apply to all customers with mortgages, some of whom might have fixed rates—ought to be able to see when their rates fluctuate because of the fortunes of the base rate or, as is often the case, the standard variable rate determined by their bank, and does he not think that those banks ought to help their customers plan for the future? If we end up yet again with a cycle in which people find that they cannot make their payments and their homes are repossessed, we will all have those constituents in our surgeries.
Let me give the hon. Gentleman an example. A couple of weeks ago Halifax announced that it would increase its standard variable rate by 0.5% from 1 May. RBS NatWest has done similarly, as have Clydesdale bank, Yorkshire bank and Bank of Ireland. In my view, all those increases are the result not of base rate changes, but of the fact that those banks are looking to repair their balance sheets not by squeezing remuneration and bearing down on the senior executive management costs that we all know they have, but by trying gradually to take a little more money from consumers. That is why we need a warning for customers in these circumstances.
I fail to understand the logic of the hon. Gentleman’s argument. If someone’s financial position at the time they take out a mortgage is relatively precarious, they probably should not have the mortgage. Furthermore, to take the logic to the next step, surely a fixed rate product would be better for those people and they should not have been on the variable rate product in the first place, so why on earth are we asking banks through additional regulation to make such predictions when it is meaningless in the reality of life?
We are doing this because the hon. Gentleman and I are here to represent our constituents, some of whom will be on variable rate mortgages in these circumstances. All we are saying is that we want all the banks to warn of the potential impact of rate changes across a range of scenarios. It is about helping customers anticipate what might be around the corner. It is as simple as that. The banks will give all sorts of reasons for increasing their standard variable rates. For example, they claim that costs make it difficult and often cite the special liquidity scheme, which is now beginning to taper off so the taxpayer safety net is beginning to come away, but taking more and more from consumers is in many ways unfair. I think that Lloyds bank recently borrowed many billions from the European Central Bank as part of its long-term refinancing option, so there is cheap money available wholesale for the banks. We have to keep an eye out for the way they sometimes seek to make an excessive profit off the backs of ordinary mortgage customers.
I appreciate the rationale that the hon. Gentleman is putting forward and that he is trying to protect customers, but I have to agree with my hon. Friend the Member for Vale of Glamorgan (Alun Cairns) on the impracticality of the proposal. There now seems to be a tendency to make proposals on single products, but the Bill is about financial stability in the round, which we are trying to achieve, so is he seeking to introduce a similar forewarning system for savers on fixed incomes, who find interest rate changes equally worrying?
There might well be a case for that, but we are talking about people’s homes and the roofs over their heads. Repossessions can seriously hurt people, especially if they were unable to anticipate the situation because of a shock or unpredicted changes to their interest rates. As I have said, this point in the cycle is the right time to make this sort of change. It is about preparedness and information for home owners, and I feel strongly that we ought to have that in statute. If the Minister does not agree, this is certainly one of the issues on which we want to test the will of the House.
I will give way, but there are a number of other amendments I have to talk about.
I am incredibly grateful to the hon. Gentleman. He talks about an incredibly significant problem in this country: the £1.2 trillion-worth of mortgage debt for all the people of this land. What he is describing is a steepening in the yield curve, but that could also be the result of an increase in deposit rates, so what could be taken away with one hand could be a result of giving with the other hand. What I am really struggling with in the new clause is how he envisages mortgage lenders being able to deliver the warning, given the fact that he defines a shock in interest rates as something that cannot be predicted. Moreover, how does he envisage this working in practice?
The hon. Gentleman might know that in annual pension statements, for example, in the key facts documents a number of scenarios are put forward for what the pension might be worth under a range of growth options, such as annual growth of 3%, 5% or 9%. All I am seeking to do is ask the Financial Conduct Authority to consider a way of giving a range of scenarios and helping to provide information for customers, which would not be impossible. That is why I think that that is necessary for mortgages. I hope that hon. Members on both sides of the House will support what is a pretty modest change. It is something that I know we are all concerned about. The Government definitely need to go away and look at the issue again.
Amendment 37, which also stands in my name, relates to the Consumer Financial Education Body, which we now call the Money Advice Service. We are seeking to amend the Bill so that it specifically targets
“proactive and easily accessible advice to those encountering economic disadvantage, financial exclusion or financial exploitation.”
In our view, it is vital that the Money Advice Service focuses as much effort as possible on the vulnerable and those susceptible to problems, whether as a result of misinformation or choices made in financial investments. We know already, from examples in our surgeries, that those on the lowest incomes—the most vulnerable in society—need to be better protected in legislation, and that is why the new clause has been tabled.
I appreciate the hon. Lady’s comments, but if she cannot support the new clause, will she at least join me in encouraging the regulator to ensure that all banks think about informing customers of potential interest rate changes as a matter of course? One bank doing it would not be enough; we need them all to engage in that forward planning.
I agree entirely, and we already have a provision to enable that to happen.
My hon. Friend said that one building society requires customers to save with it before getting a mortgage there. When I had my first mortgage, more years ago than I care to admit to, that was the norm. People were expected to be a customer of a building society before getting a mortgage from it, which encouraged a way of saving that we seem to have lost in many areas of our society. I support the sentiment behind the new clause, but I do not believe we need it.
New clause 12 calls for a review of prepayment schemes, including an analysis of whether customers should be preferential creditors in the event of insolvency. The Farepak issue, and the tragedy of its customers, is emblazoned on our minds. Victims of other financial schemes such as Equitable Life still write to me virtually every week, but the new clause relates particularly to prepayment. Many structural issues contributed to Farepak’s demise and they need to be addressed. Many unsecured creditors suffer when such a company collapses. I am attracted to the idea of giving prepayment scheme customers a form of secured creditor status, as the hon. Member for North Ayrshire and Arran (Katy Clark) suggests. The Minister has advised that such a measure is not appropriate within the remit of the Bill, because a prepayment company is not a financial services company, but perhaps he could advise us on an appropriate route for looking at the proposal in a little more depth.
I welcome the Minister’s comments. Setting aside whether he thinks the new clause should be added to the Bill, he seems to be saying that he agrees it would be a good idea in principle to encourage all banks and other lenders to engage in some sort of forewarning of customers. Does he agree that if he says that is a good idea and the Opposition think it is a good idea, that sends a signal to the new regulator to make that a priority?
I do not think this needs regulatory action. I think it is in the interests of lenders to provide the right information to their borrowers to enable them to plan ahead, however, because it is not in the interests of lenders for borrowers to fall into arrears as a consequence of increases in interest rates. That is why it is important that potential changes in interest rates are considered in lending decisions and that information is available to help borrowers to think about the impact on their circumstances of changes in interest rates. I do not believe that is necessarily a regulatory matter; rather, I think it is in the interests of firms and their borrowers that such information be available.
On the issue of consumer credit, I do not think amendment 40 is necessary. The Treasury is confident that a range of powers is in place to help people in respect of payday lenders and high-cost lenders. I do not believe new clause 10 is necessary either, but I think it is in the interests of lenders to ensure that the information in question is available.
On new clause 12, the hon. Member for North Ayrshire and Arran (Katy Clark) spoke very powerfully about the Farepak issue and how to protect such consumers in future. We must recognise, however, that there is a cost attached to any additional protections for consumers, and that it will, to some degree at least, be borne by consumers.
The question of the regulation of prepayments is complex, as was evident from the work done by the previous Government after the publication of the “Pay now, pay later” report by Consumer Focus. There are no simple solutions, particularly when we want to ensure that vulnerable consumers or those on low incomes can still access the goods and services they want. Introducing some form of set-aside or ring-fencing of funds or some form of insurance in order to be able to compensate consumers in the event of an insolvency can impose significant additional costs on businesses and therefore potentially on consumers. Several industry sectors have concluded that the gains from increased consumer confidence outweigh the costs, however, and have gone ahead with sector schemes. We will continue to monitor this topic. My hon. Friend the Member for Solihull (Lorely Burt) asked who was the right Minister to pursue in this regard: I suggest it is the Minister responsible for consumer affairs, the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for North Norfolk (Norman Lamb).
The hon. Member for North Ayrshire and Arran also asked about credit hierarchy. That is an important subject, and I am very conscious of delays in making payments to the Farepak creditors. We must, however, bear in mind the fact that one of the aims of insolvency law is, as far as possible, to achieve an equitable distribution among the unsecured creditors. Those unsecured creditors could, of course, include small suppliers for whom the debt from a prepayment scheme could result in the failure of their business. There is therefore a difficult balance to strike.
I am grateful for that support from my Committee colleague. Competition is now one of the operational objectives, but the punch of the FCA’s three operational objectives has been diluted by the fact that an overarching strategic objective has been placed above them, and it could be used to trump the operational objectives and enable the FCA to avoid a primary duty to take account of competition. I completely agree with my hon. Friend.
The PRA veto on the FCA’s work as a whole is another issue that the Committee has raised from time to time, but I must admit that it is not covered by this group of amendments. I shall therefore move on swiftly before I am ruled out of order.
It is now common ground that the proposed governance and accountability of the Bank and the FCA are defective and need to be strengthened. The Committee is determined that they should be strengthened. We regret that they are not already in much better shape, and there is a great deal of work for the other place to do to the legislation. As a Committee, however, we showed by our decision on the need to obtain a full explanation for RBS’s failure that we would not hesitate to take new steps in order to get information that we think should be in the public domain. We took the unprecedented step in that case of sending specialist advisers into the FSA to conduct a full investigation. It should be made clear now that we will not hesitate to do the same with respect to the Bank of England if this legislation remains defective. Sending in specialist advisers was a somewhat cumbersome route to getting to the facts of the RBS issue, and it would be far preferable to improve the Bill so that such action by the Committee would no longer be necessary.
The bottom line for improving Bank accountability, to its own board and to Parliament, should be judged by two criteria. First, does the proposal hold out the prospect of improving the performance of the institution—that is, the quality of public policy? Secondly, does it help secure public consent for the decisions that that body takes? The latter is particularly important for an institution as powerful and as remote, in many respects, as the Bank of England. The Committee believes that new clause 1 would meet both those criteria and I commend it to the House.
I thank the hon. Member for Chichester (Mr Tyrie)—or is he right honourable? If he is not, he should be. I thank him for his eloquent and powerful advocacy of new clause 1. The Treasury Committee has done sterling work in trying to cajole and persuade the very reluctant Bank of England to move from the 18th century to the 19th century. If we could speed things up a little through his new clause, that would certainly be welcome. The hon. Gentleman is not exactly asking for the moon on a stick; he is simply asking for the publication to a reasonable degree of the minutes of the court of the Bank of England—shock, horror—and for proper internal scrutiny in the Bank and a review of how it has performed. The hon. Gentleman is entirely correct that it is appalling that the Bank of England has never conducted a review of its role in the 2008-09 crisis. Every other branch of government, including the FSA, has done similarly and I would have thought that such a review would be a pretty basic prerequisite for moving on, especially if we are moving to a new era when the Bank of England will be incredibly powerful thanks to the great news powers that the Government wish to bestow on it.
The Bank of England is an old institution. It started life in 1694 with just 17 clerks and a couple of gatekeepers, and it has subsequently been modernised by a number of Acts of Parliament. It is time, however, for it to become less of an honorific institution. The court should be made up of individuals who really take seriously the responsibility to scrutinise the performance of the executive of the bank, and the hon. Member for Chichester made his points perfectly well. As he says, it is like getting blood out of a stone. Some sort of oversight committee might, as the Minister said in Committee, be able to conduct retrospective reviews. The hon. Member for Chichester is entirely correct that it is ridiculous for only a record of the minutes to be published.
I will support the hon. Gentleman’s new clause, if it comes to it, but I suppose we should wait to hear what the Minister has to say. I shall not dwell on the new clause, though, as the group includes many other amendments which address a range of issues on the governance of the Bank of England and the new regulatory structures, and we have a very short space of time in which to debate it. I have, I think, 11 amendments in the group. I will not dwell on them all; I will focus on the key ones.
There is a sense of déjà vu, as the Bill Committee spent a lot of time debating this measure. The hon. Gentleman talks about what he perceives is the present Government’s blind spot, but the previous Government’s was clearly a regulatory system that was woefully inadequate to cope with the challenges that came its way and was found wanting. What the Bill aims to address is financial stability and to make it a core focus. Why does he want to diffuse the focus at a time when the key element we have to tackle is financial stability? Government policy more generally tackles what he wants.
This goes back to the odd statement from the Minister in Committee, when he said it would be wrong for the Bank of England and the FPC to be asked to have regard to the impact of its decision on economic growth and employment. I ask the hon. Gentleman to pause and reflect on what he is saying, which is that it is not the Bank’s and the FPC’s job to think about jobs and growth. If he goes to his electorate and says that that is what he is legislating for, I doubt he will get much of a response, but it is important. The FPC will be a vital player in our economy. The Monetary Policy Committee has this objective in its remit; it seems only reasonable to have it mirrored in the Financial Policy Committee’s remit.
This attitude, which we called the Fareham doctrine of compartmentalism, that it is for the Treasury alone to think about jobs and growth—that it would be wrong and somehow dangerous for the Bank of England to think about such issues too—is an extremely dangerous way to think about this vital and extremely powerful institution. The Chair of the Treasury Committee said that, in certain ways, the Governor of the Bank of England could become even more powerful than the Chancellor of the Exchequer. I want all the players in our economy to be thinking about the impact of their decisions on our constituents, their employment prospects, their business prospects and the prospects of growth.
I think the amendment should be made. It is exceptionally important, and I feel strongly that we should press the matter. In a sense, it is similar to amendment 24. In the Bill, we enter new verbal territory with descriptions of how policy will be made. I know that many Members are intimately familiar with macro-prudential regulation, but essentially, it is that suite of rules and powers that the Bank of England and the FPC will be able to use to intervene in their systemic oversight of the economy as a whole. We suggest simply that every time the Bank of England produces a financial stability report it should give an assessment of the impact that each of the new macro-prudential measures will have on employment and growth—a simple assessment of their impact on the real economy. As the Bill stands, there is no requirement on the Bank of England, when exercising those massive powers, to provide that assessment. As the House knows, in many policy areas, we require frequent regulatory impact assessments to be made; this is a parallel requirement. We want the Bank of England properly to analyse the impact of the measures.
Let me give hon. Members some examples, so that they understand what macro-prudential regulation is. It is about setting maximum leverage ratios; sectoral capital requirements; rules on the terms of or the conditions on a loan, either to businesses or to consumers; loan-to-value ratios and loan-to-income ratios in mortgages; haircuts on secured finances or derivative transactions; disclosure requirements; and minimum credit card repayment levels. All those things are of real and great concern to our constituents. If the FPC and the Bank are able to assess the impact of their policies on credit availability, they should also be able to assess and analyse their impact on jobs and growth. Amendment 24 would achieve that.
I thank the shadow Minister for his lecture on macro-prudential tools. I was on the Joint Committee and I certainly did not recommend the inclusion of a growth objective, because I believe that stability and growth are potentially competing objectives. We are passing the Bill because of what happened in October 2008. I was concerned that anything that diluted the absolute requirement for stability might give an excuse for failure, which I did not want to arise.
It was the Chancellor of the Exchequer himself who warned against the stability of the graveyard. We have to have joined-up Government and co-ordinated economic policy—I hope hon. Members accept at least that much. It should not be impossible to ask the Bank of England simply to have regard to Her Majesty’s Government’s strategy—not the Opposition’s; obviously, ours would be different—and objectives on growth and jobs. That is all we are saying. We are not saying that that should overrule the broader stability objective of the FPC. It is a simple bit of wiring to make sure that we have joined-up Government and that all the branches of Government talk to one another.
I support the amendment in principle, but surely it should have referred to a range of impacts, in the sense of a fan chart? It is not just macro-prudential tools, of course, but the impact of those with monetary policy, which may change —it may tighten or loosen—and fiscal policy, which may also have the impact of tightening or loosening monetary policy.
I accept that. It gets to the nub of the issue. There is no single variable that has an impact like pulling a lever and an economic outcome comes along down the track. A number of factors combine to create an economic outcome. That is why people say it is sometimes more of an art than a science, but in so far as there is an ability to make projections or to measure, that assessment is needed. I hope it could be as sophisticated an assessment as the hon. Gentleman suggests.
I endorse the points made by the Chair of the Treasury Committee. Is it the accepted view on the shadow Front Bench that the promotion of competition is the key objective?
We want to see more competition in the financial services sector. That is an important aspect of improving choice and reducing costs for consumers, but essentially the amendments that I have been discussing relate to prudential regulation. I do not think the competition argument necessarily supersedes that.
I agree, and there is cross-party support for this, that we need to improve prudential regulation within our financial regulatory system. There is a degree of consensus in that area, which is why we did not vote against the Bill on Second Reading, for example. The question is how that pans out. The Chair of the Select Committee began his comments by saying that the Bill is defective in a number of regards and needs significant improvement. Amen to that. I agree. That is the problem and that is why I have so many concerns about aspects of the Bill, particularly in clause 5, in respect of the way the Government are choosing to divide up the regulators.
I must move on. Another area about which I have concerns is the Government’s refusal to accept that the Bank of England should be under a duty to minimise the use of public funds—to minimise the recourse to taxpayers’ money—in order to support or rescue parts of the UK financial industry. If we were all to go back to our constituencies and explain what we were doing on Monday, we would say that we had been talking about the Financial Services Bill. Most of our constituents would say, “Good. Does that mean that the taxpayer is not going to be on the line to bail out all those banks again in the future?” and of course we would all want to say yes. That is the whole purpose of what we are supposed to be doing here.
One of the most important things we need in the Bill is a provision to ensure that the system is designed such that any changes or rescue arrangements will not burden the taxpayer in the future. It is important to specify that the Bank of England should take responsibility for minimising that likelihood. It is a pretty straightforward amendment. These should not be partisan issues. That aim should be at the heart of the Bank’s financial stability objective. We know about the costs of bailing out the banks and how those have hit public finances.
Having heard the Minister’s entreaties in Committee, the hon. Members for Wyre Forest (Mark Garnier) and for West Suffolk (Matthew Hancock) and others said that the our earlier amendment was deficient because it would have placed a duty on the Bank of England to minimise the use of public funds. I have thought about that carefully and come back with an amendment that simply requires the Bank to have regard to the need to minimise that. I hope that removes any worry about justiciability, which was one of the arguments upon which the Minister relied to rebut the suggestion in Committee. I do not think it is reasonable to say that it will blur or confuse the issue if we ask the Bank of England to keep in its mind’s eye the impact that any of its decisions will have on public funds. Ultimately, most of our constituents would expect us to legislate today to minimise the recourse to public funds. I hope the Minister will accept the amendment. If not, the other place will return to the issue.
The hon. Member for Chichester pointed to amendment 53 in my name and that of my hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson) about parliamentary scrutiny. For this House, it is an incredibly important issue and I know that Members on the Government Benches feel strongly about it too. We are giving the Bank of England extensive new powers that will affect businesses, consumers and our constituents. We still do not know what these macro-prudential tools will be. We had a report from the Bank of England last December intimating that they may touch on certain aspects of loan-to-value ratios, although Paul Tucker, the deputy governor at the Bank of England, said the other day, “This looks like hot stuff. Maybe it’s too hot for us to handle at the Bank of England.” Maybe that is for the Treasury to decide. I think the Bank of England recognises that there is an accountability deficiency. That golden threat of accountability does not lead back to Parliament, as it should.
We have spent a lot of time discussing the issue. Does the hon. Gentleman not remember that the power to grant macro-prudential tools is subject to the affirmative procedure? There is a role for Parliament to play. My right hon. Friend the Chancellor said on Second Reading that he hoped that that debate would take place on the Floor of the House.
That was a minor concession but, as we can see, we have possibly an hour and a half to debate a major macro-prudential tool—and only the Treasury’s order to enact the power in principle for the Bank, not the actual use of that power by the Bank. That would be delegated to the Bank.
I will give way to the hon. Lady as I know she has thought about the matter in great depth.
It is important that we look at the work of the European Scrutiny Committee, for example. As hon. Members know, there is a steady stream of regulations coming from Brussels. Members of the Committee try their best to grapple with those, pick the most important ones and have a debate, albeit upstairs in Committee. When there are important issues, the measure is brought back to the Floor of the House for a vote. Ideally, I would like the Treasury Committee to deal in the same way with the sets of regulations that come on the conveyor belt from the Bank of England, but it has enough on its plate as it is. Perhaps we need a sub-committee of the Select Committee. Some sort of financial services scrutiny committee is required, with the time and space to go through the ramifications properly and thoroughly. Yes, then let the measure come back down under the affirmative procedure, but it is super-affirmative procedure that is necessary. That is essentially what we are doing.
We cannot amend the Bill to affect the Standing Orders of the House. That must be decided as a separate arrangement. What I am doing in amendment 23 is suggesting that there should be a longer period of time to allow the House to conduct its own inquiries into these issues. Essentially, I have cut and pasted the procedure under the Public Bodies Act which was recently passed by the Government, whereby if they wanted to abolish any quangos, the relevant Select Committee should have time and space to conduct its inquiries. That is, I hope, an appropriate way of allowing space for better parliamentary scrutiny.
I apologise to the hon. Lady; I know she wanted to come in.
I am grateful to the hon. Gentleman. He has probably given me the reassurance that I was seeking. It is not that we do not want the Bank of England to have those powers. In the past a lack of accountability and of central management has led to some of the problems that we saw during the financial crisis. It is not a question of focusing the authority and the powers within the Bank. It is a question of the accountability of the Bank in implementing those powers. Does he agree?
Absolutely. That is right. We are not saying that these powers might not be necessary. However, let us say, for example, the Government and the Bank consider it necessary to lean against a consumer credit bubble. They want to change the minimum repayments that our constituents make on their credit cards from 2% a month to 5% or 10%. That will have a big effect on our constituents. Imagine us going back to those constituents when they complain to their Member of Parliament, as they undoubtedly would, and ask, “Whose decision was that?” We would say, “It was the Bank of England’s decision. We voted on this in theory a couple of years ago, but now the Bank has pulled the lever and pressed the button, and this has happened.” There would be great anger. The public would expect us, at the very least, to have had the opportunity to debate and discuss that in more thorough and substantive detail, albeit in a Committee. That is all we are suggesting in the amendment.
The hon. Gentleman is absolutely right that there would be anger, but there would also be economic consequences. If one of the macro-prudential tools invoked was a change in sectoral capital ratios, which impacted to ration mortgages, and there was a 60-day consultation period, the impact in the market, either with deals being rushed through or deals being abandoned, might be as bad. Has he considered the downside of putting such information into the public domain for such a prolonged period?
I did indeed consider the downside of having parliamentary scrutiny that might in some way impact adversely in an emergency scenario. We have not sought to amend the provision that would allow the Treasury to bring forward those orders in an emergency situation. It could do that. We could have retrospective scrutiny of that order once it had come into place. These are for ordinary, normal times scenarios. The amendment may be imperfect. I would have liked a proper way to deal with the issues, but there has been significant resistance along the way for such measures.
I totally agree with the hon. Gentleman. That is the very least that we should have. I simply counsel the House that many hon. Members are already under significant pressure because of the European rules and regulations that seem to come from an unaccountable place. It is not entirely unaccountable, but it can sometimes feel that way to our constituents. If we end up with a situation where we do not put in place at this stage the right parliamentary scrutiny arrangements, we are potentially opening up another front where a powerful institution, unelected and seemingly very distant from our constituents concerns, could have a major impact on their day to day lives, and we would be sitting here twiddling our thumbs unable to do anything about it, never mind even to debate it. We have had debates in the past on the retail distribution review and other examples where there has been massive frustration in the House about the lack of an accountability thread between parliamentarians and regulators. That would be magnified many times over if we did not put in place the right arrangements.
In certain circumstances, Parliament should be sovereign. That is an important principle in our constitution. I do not think that regulators should be able to override Parliament, if that is the Minister’s suggestion. I am pretty sure it is not. Ultimately, in certain circumstances, Parliament should be able to make the final decision. That is an important cornerstone of our constitution.
It would helpful if the hon. Gentleman could outline some of the circumstances in which Parliament should overrule the regulators.
It is entirely hypothetical. Of course we cannot do that at this stage, but there might be circumstances. I will remember the hon. Gentleman’s intervention for the many years that he will be in Parliament for when the time comes, if it comes, that he disagrees with a particular outcome of a regulation as it affects his constituents.
Amendment 35 talks about the impact of many of the changes within the regulatory system on consumers, particularly those on lower incomes. We believe that the FCA should have enshrined in its objectives a commitment to consider how easily consumers are able to find products that are appropriate to their income, and more broadly, products that provide value for money. In difficult times as incomes are squeezed it is right that consumers feel that they have a regulator that is on their side. If we are creating a genuine consumer champion in the FCA, it is important that it has a set of objectives and values that reflect that, particularly for those on the lowest income. It is a similar argument to that made in the previous group of amendments in respect of the Money Advice Service. We have seen excessive overdraft charges, high interest rates, and charges for hidden services. Those require a genuine consumer champion and this amendment would help to create that.
Amendment 36 would also shift the balance in favour of the consumer. It would introduce what is known as a fiduciary duty of care by authorised persons, by financial services providers, towards the consumers who are their clients. “Fiduciary” means holding in trust, holding in good faith, a concept that would help to rebuild confidence among the public in financial services. There is a serious lack of trust at present that is bad for consumers, providers and society at large. The Bill contains no explicit obligation on firms to avoid conflicts of interest, nor to profit at consumers’ expense without their knowledge and consent, nor to have undivided loyalties and duties of confidentiality to the customer. The pre-legislative scrutiny Committee commented on many of these aspects and recommended that some action be taken. Although the FSA has recently had its treating customers fairly initiative, we do not think that that is enough. We believe that a fiduciary duty of care is necessary, especially in the light of some of the major concerns of mis-selling scandals and the need to learn lessons from those.
Amendments 33 and 34 relate to the costs and expense of establishing the FCA and PRA, splitting the FSA into those component parts. I apologise for rattling through these. We have to minimise unnecessary additional expenses incurred, because ultimately the consumers will pay. The FSA’s budget for 2013-14 has gone up by 15.6%. I accept that the new regulatory system will have some costs involved in that, but the majority of those costs are operational and not necessarily related to the principles of regulation involved. It was a bit of a joke to see in the White Paper the Government say that the running costs under the new arrangements should not be “materially different” in real terms and aggregate from the current FSA. That will not happen. We are talking about extremely significant extra costs.
We suggest that the memorandum between these organisations should contain an estimate of the annual costs involved in administering the FCA and PRA, and compare those to the estimated costs of the administration of the FSA. That is a bit of a crude way of getting a cost comparator, but I would be interested in seeing it. Similarly, amendment 34 talks about minimising the
“unnecessary additional expenses that might be incurred by virtue of the separate administration of the FCA and the PRA, and to maximise any common administrative savings achievable through close co-ordination.”
The PRA is moving to plush offices in Moorgate, leaving vacant space at Canary Wharf, a lease that expires way down the line in 2018. There is a sense in which there is a bit of empire building going on at the Bank of England, which will be responsible for the PRA. The Threadneedle street empire is growing strongly.
Will my hon. Friend also give some thought to those organisations that will be dual regulated and the additional costs that might be incurred?
That is why it is important that at the very least they have information, and some level of accountability, about the likely costs of this tangle of regulatory structures for them. The Association of British Insurers has voiced its concerns about the costs of the new regulatory system and it is important that we at least know from the Minister exactly what those costs will be. He skirted around the issue in Committee. Even when I asked the cost of the new building for the PRA next to Threadneedle street he said that that might be commercial in confidence. If he can help us with that I will be grateful.
The hon. Member for Chichester also spoke about publication of the minutes of the Bank of England’s court of directors. Amendment 27 seeks to introduce exactly the same for the FCA. If the FCA is to be a consumer champion, at the very least consumers should be able to see what is being discussed, who—potentially—is discussing it and, most importantly, what the nature is of the dialectic and discussions going on in its board. The Financial Secretary said in Committee that that will be a matter for the FCA, even though he could not really argue against the transparency principle, but he did promise that he would think about it. I saw a chink of light at the time and thought that publication of the FCA’s minutes was a simple concession that we might get in the Bill. I hope that he has had a chance to reflect on that.
Amendment 39 relates to the relationship between the new regulators and the European supervisory arrangements. We might think that all these decisions on regulating credit, businesses and financial services are for us to take domestically in the UK, but I am afraid that 80% of the regulatory decisions are in fact taken in Brussels by the European Commission. Commissioner Barnier has his pipeline of proposals, which is very much the driving force behind the regulatory arrangements. Some of those are good changes, but nevertheless many people feel that the UK’s domestic regulators are there merely to transpose what is decided further up the chain, and that is of concern. Therefore, we want the regulators to be fit for purpose and able properly to influence and steer some of the policy decisions that are taken in Brussels.
I was just coming to my conclusion and am conscious that other Members wish to speak, so I will not give way. I simply urge the House to vote for the amendment in the hope that the House of Lords will improve clause 5.
I rise to support new clause 1 briefly. I had the privilege of sitting on the Joint Committee on the draft Bill and of being a member of the Treasury Committee, which is chaired by my hon. Friend the Member for Chichester (Mr Tyrie)—colleagues have noted that he is not a Privy Counsellor, but as far as many of us are concerned he is right honourable in spirit.
The main purport of new clause 1 is to establish a duty on the court of directors to conduct retrospective reviews of the Bank’s performance. The Governor of the Bank of England, in giving evidence to the Joint Committee and the Treasury Committee, has argued that it would be a bad idea to have a review into anything other than the processes by which certain policy decisions are reached. In other words, he does not want there to be a duty on the Bank to scrutinise retrospectively how good its decisions—meaning the decisions of the Financial Policy Committee or the Monetary Policy Committee—turned out to be. One of the reasons he gave was that there are lots of external commentators, such as outside economists in the City and the commentariat in the fourth estate, but it is fairly obvious that those entities are under no statutory duty to crawl through every decision of the FPC or the MPC and decide with hindsight whether they were good or bad.
The second reason the Governor gave is that the Treasury Committee holds the Bank to account, a point alluded to by the hon. Member for Nottingham East (Chris Leslie). The Treasury Committee, packed with talent though it is on a yearly basis, still has a huge amount of work to do and, not for the want of trying, does not have the amount of technical expertise or the number of macro- and micro-economists needed to conduct work month after month, tracking back and looking at how good or bad the judgment calls of the FPC, as constituted by the Bill, and the extant MPC turned out to be. My word, don’t we need such backward-looking analysis? If it had been present in 2007 and 2008, we might have avoided the difficulties of which we are all too well aware.
The Bill gives the Bank of England unprecedented powers. As a result of it, we will have a Governor of the Bank of England, whomever he or she is in the future, who will be chair of the Monetary Policy Committee, have a place on the court of directors of the Bank of England, chair the Financial Policy Committee and chair the Prudential Regulation Authority. With the creation of the FPC, alongside all the work that the Bank does on monetary policy, a lot of decisions are going to be made.
Not since the creation of the Bank of England in the late 17th century has its senior management and Governor had so much power, and, from even a cursory glance, the Joint Committee’s evidence and the evidence taken by the Treasury Committee in recent months all leads to one thing: one cannot have enough scrutiny of this big beast that the Bank will become as a result of the Bill coming into force.
The Treasury Committee argued forcefully for a severe new set of accountability and scrutiny powers. We advocated the creation of a new supervisory body inside the Bank of England in order to replace the court of directors, because the court, as everybody knows, is packed full of amateurs—well-meaning amateurs, but people who simply are not, by any stretch of the imagination, able to hold the Bank of England’s senior executive members, who are on the MPC and will soon be on the FPC, to account.
The court includes has-beens in the City, or “never-was’s”, and people with indifferent reputations in the trade union movement, in manufacturing and in all aspects of public policy. But the evidence shows that remarkably few of them have any expertise in central banking matters, in fiscal policy, in macro-prudential policy or in monetary policy. The court is desperately under-geared, and its intellectual horsepower is not what it should be.
A supervisory body, with a majority of external members, overseeing the FPC’s and MPC’s judgments and undertaking retrospective reviews is the best-case scenario; it is what the Treasury Committee thought would be the best solution for scrutinising this very powerful—all-powerful, I might add—Bank.
I understand why Ministers have concluded that they do not want to go into battle with the Governor and the senior executives about a supervisory body, because it is way too radical, but it is absolutely incumbent on this House to look at the purport of new clause 1 to see that it actually imposes more scrutiny than the Bill currently provides on the policy decisions of not just the MPC, but the FPC. Let us not forget that the MPC has recently acquired, or arrogated to itself, certain very significant discretionary powers over monetary policy—not in setting the bank rate, but in quantitative easing.
How many debates have we had in this Chamber about QE and its merits or relative de-merits? The answer is relatively few. The Monetary Policy Committee is held to account only by the Treasury Committee. It is my suggestion that the Treasury Committee, marvellous and wonderful though it is—I am a member of it, so I would say that—will need the assistance of ex-post reviews to look retrospectively at the quality of the decisions that the Bank, with its new powers, makes. I therefore urge colleagues to support new clause 1.
My hon. Friend makes an important point. We need to ensure that the right scrutiny arrangements are in place, but we also need to recognise that the super-affirmative procedure can create delays, because there are times when if the House is in recess the clock stops, so there is a challenge there. In addition, a blanket adoption of a super-affirmative procedure may mean that even minor technical changes are subject to quite a lengthy process. The point that I would take from this debate is that we need to ensure that proper parliamentary scrutiny of these measures is in place, and that there is proper consultation with the public and a proper assessment of the economic impact of these macro-prudential tools on the wider economy. I hope that the Government’s position is clear. I am not ruling out the proposal. There are some issues with it, but we are committed to ensuring that the right procedures are in place to ensure proper parliamentary scrutiny.
I come now to the matters at the heart of new clause 1 tabled by my hon. Friend the Member for Chichester (Mr Tyrie) and his colleagues from the Treasury Committee. I agree entirely that the robustness of the Bank of England’s governance arrangements is vital. Hon. Members on both sides of the House have been absolutely right to point out that it is even more important given the expanded responsibilities provided to the Bank of England under the legislation. There is a consensus that the governance of the Bank needs to be strengthened in order better to equip it for these new roles. The court will need to adapt and evolve in order to operate as an effective governing body, able to oversee the Bank in transition and in steady state, ensuring that the Bank is adequately resourced to meet its new responsibilities, offering challenge to the Bank’s executive and supporting accountability to Parliament. With that in mind, a set of proposals has already been put forward by the Bank of England to help address these concerns.
Last year the Treasury Committee published an in-depth and thoughtful report into the accountability of the Bank. In response to that, the court of the Bank of England set out some positive and constructive proposals to strengthen its oversight of the Bank’s financial stability activities and to enhance accountability. Central to the court’s proposals is the creation of a new oversight committee for financial stability, a sub-committee of the court that will be responsible for overseeing the entirety of the Bank’s financial stability activities. This wholly non-executive committee will have access to the meetings and papers of the Bank’s policy-making committees, including the FPC, and will be able both to review the internal decision-making processes leading to policy outcomes and to commission periodic reviews of policy-making performance from expert external authorities. These reports will be published, unless publication would be contrary to the public interest. We welcome the court’s proposals.
My hon. Friend the Member for Chichester, in his remarks welcoming the court’s response to the Treasury Committee’s recommendations, recognised that there has been change, but he also outlined a number of areas in a report published on 23 January and argued that the court’s proposals did not go far enough, particularly with regard to the policy reviews. Recognising this, the Chancellor agreed with the Governor and the chair of the court that the new oversight body will be expected to commission retrospective internal reviews from the Bank’s policy makers of their own policy making and implementation performance. I think that the Bank has made some progress, but my hon. Friend raised the important question of whether the oversight arrangements should be set out in primary legislation in the Bill.
My hon. Friend the Member for Chichester also mentioned publication of the court’s minutes. The Bank has committed to publishing what it terms a record of future court meetings. It is worth pointing out that the FPC also produces what it calls a record of its meetings, which is a very full account of the debates that go on in the FPC, and we will expect a similar process to be undertaken for the court’s meetings. Let me be clear: I believe that there is a clear need for the Bank’s accountability arrangements to be strengthened through the publication of the court’s minutes and the enhanced scrutiny of the court’s work, although I believe that the changes announced by the Bank help address the concerns raised by my hon. Friend and the Treasury Committee. He made some powerful arguments that have been echoed by other members of the Committee, and we will consider further whether these arrangements should be put in the Bill. We will reflect on these matters and reconsider them when the Bill goes to the other place. I hope that that helps to reassure the House on how seriously we take these matters and our willingness to listen and respond to the concerns raised by Members during the debate, particularly the contributions made by my hon. Friend and others.
I just want to be clear about what the Minister is saying. Is he saying that when the Bill comes before the other place for consideration he will accept retrospective reviews and publication of minutes or that he will simply consider it?
We are clear that we want to see the court’s minutes published, which I think is absolutely vital, and that we want to see those retrospective reviews in place. The questions my hon. Friend the Member for Chichester has asked are whether we have gone far enough, whether the proposals should be in the Bill or whether we should just accept the proposal put forward by the court. Tonight I have committed to listening to those arguments—he made a powerful speech—and returning to the issue when the Bill goes to the other place.
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This has been an excellent debate, thanks to my hon. Friend the Member for Gateshead (Ian Mearns), and we are left with one question, which was asked not just by my hon. Friend the Member for Jarrow (Mr Hepburn), but by most contributors. Will the Minister dare to have the audacity to utter the phrase, “We’re all in it together”? I hope that she will. I want to give her ample time to respond to the debate, because so many points have been well made, including the impact on families with children and on single individuals, and the statistic that the typical family with children will be £511 worse off annually as a result of cumulative Budget measures. When people open their pay packets at the end of this month, they will see the impact not just of VAT, but the tax credit changes that will also hit working people exceptionally hard.
People are shocked at seeing a Government hit elderly people and pensioners by freezing age-related allowances and using that money to give a tax cut to the wealthiest in society. Those earning more than £150,000 and typical millionaires—if there is such a thing as a typical millionaire—will receive a £40,000 tax benefit. That is astonishing. Is it any wonder that the Government’s fortunes are plummeting? What is even worse—as my hon. Friends the Members for Sedgefield (Phil Wilson), for Jarrow, and for Washington and Sunderland West (Mrs Hodgson) mentioned—is that there is no action of any substance in the Budget to tackle the crisis in jobs and growth. That is at the core of the issues.
The Government have taken a wrecking ball to institutions in the north-east that existed to try to help the economy, whether it was a Minister for the north, the regional development agency, or local authorities whose grants have been slashed disproportionately in the north-east compared with other parts of the country.
Does my hon. Friend agree that the lack of a growth strategy for the north-east is a complete travesty? Getting rid of the RDA and replacing it with LEPs and enterprise zones, fragmenting the whole support system, is not working. The Government are leaving the north-east without the support that it needs to keep regenerating itself.
The jobs crisis worries people, and all contributors today have talked about that, including my hon. Friends the Members for North West Durham (Pat Glass), for Hartlepool (Mr Wright) and for Wansbeck (Ian Lavery). The statistics that 22 people apply for every vacancy, and that youth unemployment in the north-east is rising by 155% are shocking. The Minister must react to that crisis.
What does my hon. Friend think about the fact that the Minister of State, Department for Work and Pensions, the right hon. Member for Epsom and Ewell (Chris Grayling) refused to meet me to discuss the severe problems facing unemployed people in my district, saying that it was inappropriate at this point?
I have heard of similar cases. What sort of Minister refuses even to discuss such issues, and turns a blind eye to the problems? A pointless Minister, so what is the point of having that individual in that post.
Many issues have been raised—too many to mention. My hon. Friend the Member for Gateshead and others referred to the case for investment and infrastructure. There is the impact on the so-called big society, with major charitable trusts and others losing out. The Chancellor is taking away from them while staff who are being made redundant from Alcan and elsewhere have dug into their own pockets for their works welfare fund donations to local charities. Their example contrasts so much with that of the Chancellor of the Exchequer.
Greggs was founded on Tyneside in 1939, and if ever a part of the country should be astonished at the Chancellor’s move to extend VAT, it is the north-east. The hon. Member for Redcar (Ian Swales) referred to the temperature of his sausage roll, and he will have the opportunity to vote on the matter in the House this week. We hope that he will join us in the Lobby.
I do not want to take up any more time, because we want to hear from the Minister. She should listen to these exceptionally powerful voices from the north-east. People know what they are talking about. She should recognise the warning signs for jobs and growth, and change course now before it is too late.
I am afraid that I have no time. If we do not tackle our deficit, it will be worse for everybody. The really outdated view is to burden future generations with more debt, and for the Government to fail to take responsibility and consign all regions in the country to economic disaster. One need only look to the eurozone to get the picture. The Government’s actions have kept our interest rates closer to those in Germany than those in Greece, and made Britain a safe haven.
The topic of young people was raised by the hon. Members for North West Durham (Pat Glass) and for Hartlepool (Mr Wright). I am shocked that the hon. Gentleman thinks that it is patronising to believe that young people can start their own businesses and I disagree strongly. As a constituency MP, I make it my business to support Jobcentre Plus, the youth contract, the work experience programme and the Work programme—perhaps the hon. Gentleman acts differently in his constituency—and that is what I call working together to achieve things for our young people.
No. I am afraid that I must move on. I know that the hon. Gentleman’s colleagues wish me to talk about regional or local pay.
It is a very quick question. I wish simply to ask whether the Minister will utter the words, “We’re all in it together”?
The hon. Gentleman asks me to do that as well as to respond to other hon. Members in three minutes, but I value his Back Benchers more than he does, and I wish to talk about local pay. The hon. Member for Gateshead focused much of his contribution on that issue, and I wish to reassure him about something that he already knows. At this stage, the Government are not setting out detailed proposals; they are asking experts how public sector pay might better reflect local markets. Localising pay has the potential to improve the resources available to private sector businesses that need to compete with higher public sector wages. It can improve or reduce unfair variations in the quality of public services, and tackle a limit on the number of jobs that the public sector can maintain created by having to support disproportionate wages. The principle of local pay has already been established, and I confirm, as has been mentioned, that the Labour party did that in 2007.
I will move on briefly to pasties and the sausage rolls mentioned by the hon. Member for Redcar. The point is that the Budget closes loopholes and addresses anomalies to ensure a level playing field. The National Federation of Fish Friers states:
“There should be a level playing field. Why should the UK’s fish and chip shops have to pay 20 per cent. on all the hot food they sell…when the bakery next door sells hot pies, pasties and sausage rolls free of VAT?”
The Budget seeks to introduce that level playing field.
(12 years, 5 months ago)
Commons ChamberUrgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
(Urgent Question): To ask the Chancellor of the Exchequer if he will make a statement on whether he will instigate a Budget leak inquiry, in view of the accurate pre-reporting of a number of the detailed proposals in his Budget statement, including one of the matters that was agreed under the Provisional Collection of Taxes Act.
As with every Budget, we have seen a vast amount of speculation, and, as ever, a vast amount of it has proven to be unfounded. As the Chancellor has said, a Budget produced within a coalition is different. The days of the Chancellor coming up with a Budget in secret are gone. This was not a Conservative or a Liberal Democrat Budget; it was a coalition Budget. In the course of coalition Budget negotiations, various proposals were raised, discussed and debated. That occurred more widely than in the past, when the Chancellor told the Prime Minister what was in the Budget the day before or, as in even more recent days, when the Prime Minister told the Chancellor what should be in the Budget the night before. The Treasury does make announcements throughout the year. For my own part, people will have seen the work on tax transparency and personal tax statements, which was in response to a consultation on this very issue laid before the House in November and subject to a ten-minute rule Bill from my hon. Friend the Member for Ipswich (Ben Gummer).
On the specific question, it is a long-established practice of the Treasury not to comment either on whether a leak inquiry has been established, or on its conduct or outcome. There will be ample opportunity to debate the Budget over the coming days. Today is the second of four days of debate on the Budget. It is perhaps an unfortunate consequence of this urgent question that this is being delayed, and so is delaying the shadow Chancellor, from whom I am sure the House is eager to hear.
Coalition government is absolutely no fig leaf for these very serious breaches of the ministerial code—[Interruption.] Government Members may wish to listen. Paragraph 9.1 of the code states:
“When Parliament is in session, the most important announcements of Government policy should be made in the first instance, in Parliament.”
There have been clear and flagrant violations of this crucial principle. It is a significant insult to the primacy of Parliament and this House of Commons, to whom the Chancellor should be accountable. It is a shame he was not able to come here to answer for himself on this matter.
Our constituents expect that Members of Parliament should be the first to hear and question policy announcements from the Chancellor, and hold him directly to account. The Chancellor is treating Parliament as a peripheral afterthought, and that is totally unacceptable. But this is not just about the sovereignty of Parliament; if the Chancellor and his acolytes are prepared to pre-brief and leak key information about very sensitive tax changes, that risks handing privileged information to those who can take advantage of any advance knowledge.
The ministerial code is enforced by the Prime Minister, who should instigate a leak inquiry if the Exchequer Secretary refuses to do so. He did not say whether he was or was not going to have an inquiry—at least he could leak that little bit of information for us today. It is also necessary, of course, to include an investigation of conversations between the Chancellor’s special advisers and the civil service and the media. Of course, civil servants are guided by the civil service code. It is unlikely that newspapers will reveal their sources, but Ministers and special advisers should be interviewed and asked who they spoke to, when the conversations occurred and who sanctioned those conversations. If information was released pre-Budget without approval from the Chancellor and was leaked, it is a very serious breach of security and of the civil service code.
Yesterday’s Budget was described by The Economist as
“more of a newspaper review than a Budget”.
Another view was that
“the Budget has had all the leak-free qualities of a teabag in a sieve.”
It might be quicker to list what the papers did not publish before the Budget, but for the benefit of the House I shall list some of those measures that did come out: the reduction in the 50p rate appeared in The Guardian last week and in the Financial Times; the changes to the personal income tax allowance appeared on ITV News on Tuesday night, when the exact figure was given; the stamp duty land tax changes appeared very precisely in the Financial Times and in basically all the newspapers on Wednesday morning; the changes to stamp duty land tax on residential property associated with capital gains tax changes appeared on the “Andrew Marr Show” at the weekend; and the North sea oil and gas commissioning certainties appeared in the Herald Scotland on Saturday 17.
The one Budget change that was not leaked was the £3 billion raid on pensioners, now dubbed the “granny tax”. Some 4.5 million pensioners are to lose an average of £83 next year. In times gone by, Chancellors did the honourable thing when it was revealed that their Budgets had leaked. In contrast, when asked about the Budget leaks on this morning’s “Today” programme, the Chancellor said:
“inevitably the days when the Chancellor dreamt this all up in secret, shared it with the PM 48 hours before he delivered his speech...are gone”.
Well times are not so different that they give licence to the Chancellor to fling around the contents of the Budget red box to any passing journalist, regardless of the consequences. Mr Speaker, we have heard the usual dismissive indifference from the Minister to these serious concerns, so perhaps I need to ask you, as a point of order, for general guidance about how the rights of this House, and the public’s expectations of orderly policy announcements, can be protected? Can you take steps to ensure that the Chancellor does not treat Parliament and the wider public with such utter contempt in the future?
I was not entirely sure whether that was a question or a point of order, Mr Speaker, and at one point I was not entirely sure whether the hon. Gentleman was complaining about measures not being briefed in advance or being briefed in advance. He referred specifically to the 50p tax rate. In the days running up to the Budget there were various reports about the 50p rate and it was public knowledge that the Chancellor had commissioned HMRC to undertake a report on the 50p rate and how much that tax was raising—an issue that I am sure the hon. Gentleman does not want to debate for very long. In that time, it was very clear that the Chancellor was going to make a statement, but what did we see in the press? We saw stories that it was going to stay at 50p, be cut to 45p or be cut to 40p. We saw press reports that it was going to happen this year or next year. There were at least five different versions of what was going to happen on the 50p rate, so it is not surprising that one of them turned out to be correct. However, it is also the case that four of them turned out to be incorrect.
The hon. Gentleman asked about sensitive numbers. I can assure him that the numbers on the stamp duty land tax—the increase to 7%—which I am sure he welcomes, certainly did not come from the Treasury, and neither did the exact number regarding the personal allowance as far as I am aware. We also heard from the hon. Gentleman that in days past these things did not happen. May I remind him what happened when he was last a Government Minister? In the 2005 Budget there was a leak about tax credit increases that turned out to be correct, a leak about alcohol duties that turned out to be correct, a leak about fuel duty that turned out to be correct, a leak about inheritance tax that turned out to be correct and a leak about stamp duty that turned out to be correct. There were also leaks about council tax refunds and the winter fuel allowance, all of which were entirely correct.
I could look at more recent announcements such as those about VAT in 2008, about the green bank, the youth jobs package, fuel duty and schools, all of which turned out to be accurate. I am sure that Government Ministers would then have said that that was speculation and I am sure that in many cases they were absolutely correct. It is difficult to give full credit to the hon. Gentleman given that detailed information about Budgets has been put into the public domain by previous Governments for many years, but he has only now suddenly become very upset. I am not surprised that the Labour party wants to focus on an issue of process rather than on the substance because this Budget is going to get the country growing again and is reforming the tax system in a sensible and growth-friendly way.
(12 years, 5 months ago)
Commons ChamberWhat the Chancellor has done is prevented us from having to go through a huge amount of paperwork that would have cost the country an awful lot of money. People might say, “Oh, but we don’t live together. We used to, but we are no longer together.” There will be so many loopholes, but he has done a good thing by going up to £60,000. I think that the majority of people in this country would agree with that, although of course Labour Members will not.
I will not, as I do not have much time left.
We have not heard much about the rate of corporation tax going down significantly, yet that will benefit small businesses in particular. We need those businesses to thrive and to employ more people. The Chancellor has also introduced the new enterprise allowance and enterprise loans, which will help more people, particularly women, to start up businesses. That will give those businesses an opportunity to flourish and to take on more people to work for them.
No one has mentioned the fact that the national planning policy framework is to be published shortly. The increase in construction that that will bring will significantly help the country to move out of recession. There will be protections for the countryside, for the green belt, for national parks, for sites of special scientific interest and for areas of outstanding natural beauty, despite the doom-makers on the Opposition Benches trying to persuade people otherwise.
I am very pleased to see the introduction of an above-the-line research and development tax credit. In my area, Rolls-Royce, Toyota, JCB and Bombardier employ a lot of people from my constituency, and they will benefit from such a measure. We must remember that Rolls-Royce is doing exceptionally well in the aerospace industry in our area. We have not heard much about the investment decision by GlaxoSmithKline, which is a direct result of the Government’s policies. It would not have decided to spend that money in this country if the Government had not come up with the solutions that they put forward yesterday.
I would, however, like to put in two pleas to the Ministers. I would like Derby and the area of Derbyshire around it to be considered as one of the areas that will benefit from high-speed broadband. There is a part of my constituency in Derby that used to be the largest private housing estate in Europe, and it has some of the slowest broadband speeds around. I would like to put in a bid for Derby to be a recipient of any improvements. I should also like to point out that the electrification of the midland main line was missing from the Budget statement. I would have liked to have heard that in this Budget, but perhaps it is in the pipeline and the Chancellor will bring forward those plans in the future.
(12 years, 5 months ago)
Commons ChamberI have noticed in the Budget representations from Labour Members that they are always very good at suggesting things we can spend money on but never have any ideas about how to save money, despite leaving us with the largest budget deficit in our peacetime history. They are all over the place: one week it is a tax cut, the next it is a spending increase. The truth is that we need economic credibility. The budget deficit is coming down but it is still far too high. Of course, we will not have the unfunded giveaways that got this country into a mess under the previous Labour Government.
At the budget a year ago, the Chancellor published his “Plan for Growth” with the rhetorical flourish that it would create
“a Britain carried aloft by the march of the makers.”—[Official Report, 23 March 2011; Vol. 525, c. 966.]
A year later, we can see that he has achieved less than half of the downgraded growth forecast made at the time. We had a shrinking economy in the last quarter with—and this is true—only one private sector job created for every 13 public sector jobs lost. Looking back at the past year, where did his plan go wrong?
We have secured for this country economic credibility and stability in the most intense global storm, with the eurozone crisis and rising oil prices. Of course it is difficult, but where is the credible economic policy from the Labour party? It is completely absent. Is it not striking that we have not had a single Labour MP get up and talk about the good news from Nissan today? The car is called the Invitation, but the only invitation the hon. Gentleman is interested in is one to the lasagne parties held by the shadow Chancellor.