Financial Services Bill

Debate between Gareth Thomas and Chris Leslie

Monday 10th December 2012 Commons Chamber

[Chris Leslie]

It is worth noting that when we talk about the independence of the Bank of England we are talking about operational decisions of the Monetary Policy Committee. They have to be made, of course, without political interference. We can come on to the questions of quantitative easing and the Chancellor’s recent decisions on that, but we will put them to one side for now. The questions of governance of the Bank of England are a matter for Parliament to take very seriously indeed.

As the debate progresses, we will discuss the vast powers that the Bank will be taking, which are known rather opaquely as macro-prudential powers of regulation. Essentially, the Bank of England can intervene in any number of financial services, products and transactions and affect the financial well-being of businesses, consumers and households in the constituency of my hon. Friend the Member for Wirral South (Alison McGovern). We are talking about mortgages, lines of credit and supply and so on. That is why we need to get the arrangements right, and it is a shame that the Government did not do that.

I want to skip on, if I may, to Lords amendment 16, to which we have suggested another small amendment.

[Mr Gareth Thomas (Harrow West) (Lab/Co-op)]

While my hon. Friend has his arguments firmly in his mind, may I remind him that for some time many Members of this House have been concerned that the Bank of England has not done enough to encourage our high street banks to invest in deprived communities. Does he think that his amendment to Lords amendment 3 might help to encourage the Bank of England to pay a little more regard to those concerns?

[Chris Leslie]

Indeed, and I am grateful to my hon. Friend for taking the time to participate in this debate. A string of amendments that we will discuss later cover consumer credit and the interests of consumers, and we will talk about ease of access to financial services when we consider them. He is right, as the Bank of England is a key player in this regard.

That point neatly takes me on to our amendment (a) to Lords amendment 16. It tries to ensure that under the new arrangements the Bank of England—in particular, the new powerful committee that is being established, called the Financial Policy Committee—will, when it explains the decisions it is taking, also have to include an assessment of the impact of its decisions on economic growth. I know that the whole question of jobs and growth is somewhat of a blind spot for Treasury Ministers, but notwithstanding their rather peculiar inability to see the importance of these issues, we feel that it is important to put that requirement in the Bill.

We are delighted and overjoyed that the Government finally relented and granted a concession in the other place, after months of labour in Committee in this place, by agreeing to Lords amendment 10. It was a major victory for the Opposition when the Government were forced to change the Bill to ensure that the FPC would not only contribute to the financial stability objective but, subject to that, support the economic policies of Her Majesty’s Government, including their objectives for growth and employment. That concession was made because of the amendments we tabled and the evidence heard in Committee from a wide number of organisations, including the British Bankers Association, the CBI, the London stock exchange and others. They all said in submissions to Parliament that the new regulators should have regard to growth, so we are glad that the FPC has that general backstop requirement on its shoulders. However, we do not think it goes far enough.

As I said earlier, the powers the Bank of England will take—that rather opaquely described set of macro-prudential tools—will be very wide ranging. Each time it pulls one of those levers, each time it makes a particular decision, it should explain the impact of that change. The Bank of England will be able to affect a number of key areas. Perhaps the Minister will tell us when the draft order at the back of the Treasury’s consultation document is likely to find its way on to the Floor of the House for debate, because I know that a number of hon. Members will be interested in that.

The Bank will have powers called counter-cyclical capital buffers. I know that the Treasury Bench has a difficulty with the concept of counter-cyclicality, but it essentially means that banks will be required to build up capital when times are rather exuberant and things are going well in the economy, but to unwind those capital buffers in a downturn. The Bank will say that there should be sectoral capital requirements. In other words, the FPC can make the residential mortgage sector have a certain amount of capital or structure its business in a particular way. The commercial property sector will have to do the same. This is a Bank of England decision, not the result of parliamentary or legislative changes. Consumer credit decisions will be made. If my hon. Friends have constituents who pay off their credit card, perhaps currently a 2% or 5% minimum repayment on a monthly basis, at the flick of a switch the Bank of England will be able to say, “No, you have to pay off 10% each month,” or perhaps even more. That is the sort of power that the Bank of England will have.

--- Later in debate ---

[Chris Leslie]

That is true. The Opposition take the view that the financial services sector needs to move away from the old model of essentially extracting profit on the basis either of the ignorance or lack of awareness of customers—basically taking advantage of the inertia in the system—or of the fact that the consumer has no other choice. We need to support a financial services sector that genuinely adds professional value and acumen to products fairly and transparently. That is the modern sort of financial services sector that this country deserves and can have. We need to get away from that old era, in which the banking system essentially raked in multiples of small penny packets of income and profit off the backs of people who were not necessarily aware they were being charged 25p or 50p for cash withdrawals. That is the sort of bad practice we need to move away from.

The Opposition have called for action to ensure that pockets of the country are not left isolated and on their own. In the United States, they have clear safeguards requiring banks to reinvest in communities and provide basic coverage. That counts not only for consumers, but for small businesses, which, as we know, also struggle to access affordable loans.

[Mr Thomas]

My hon. Friend is making an extremely important point. He will be aware that President Obama, in backing stimulus legislation in Congress, ensured that it required banks to disclose their lending to businesses across the USA, allowing us to see the lending deserts not only for individual financial consumers, but for individual business financial consumers. Surely that is something the FCA might usefully consider requiring of our banks.

--- Later in debate ---

[Chris Leslie]

Exactly. I imagine that what my hon. Friend describes is absolutely correct. Incidentally, I pay tribute to him for his endeavours in trying to improve the legislation, month after month after month, as we proceeded through Committee and on Report. The situation in Northern Ireland will be compounded by different factors, so how much more useful would it be if he and his neighbouring parliamentary colleagues had access to data about lending availability in a more rigorous form? That is how we want to interpret amendment 25 and how we will press the FCA to interpret it.

[Mr Thomas]

Is there not a danger that the Minister might see amendments 25 and 78 as a “Get out of Jail” card when it comes to taking real action to tackle the problem of payday lenders and the lack of access to financial services in many of our most deprived communities? Might he not say, “Well, 2014, when the FCA comes in, will be the time to act”? Does he not need to adopt the same initiative as my hon. Friend mentions by having a meeting with the chief executive of the FCA and saying, “We want action on these issues. We want you to set out clearly before you take office what you’re going to do about the problem of payday lenders and what steps you’re going to take to require better access to financial services in the most deprived communities”?

Financial Services Bill

Debate between Gareth Thomas and Chris Leslie

Tuesday 22nd May 2012 Commons Chamber

[Mr Gareth Thomas (Harrow West) (Lab/Co-op)]

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?

[Chris Leslie]

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.

--- Later in debate ---

[Chris Leslie]

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.

[Mr Thomas]

Will my hon. Friend give way?

[Chris Leslie]

How can I fail to give way to my hon. Friend?

[Mr Thomas]

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.

Co-operatives and Mutuality

Debate between Gareth Thomas and Chris Leslie

Thursday 30th June 2011 Westminster Hall

[Chris Leslie]

rose—

[Mr Thomas]

rose—