Bank of England and Financial Services Bill [Lords]

Debate between Harriett Baldwin and Lord Tyrie

3rd reading: House of Commons & Report stage: House of Commons
Tuesday 19th April 2016 Commons Chamber

[Harriett Baldwin]

In responding to the debate, I will perhaps leave aside the comments of the hon. Member for Coatbridge, Chryston and Bellshill (Philip Boswell), as I do not recall him participating in the debates on Second Reading, in Committee or earlier today, and his speech did not reflect the full view of other parties in this House that the Bill is a very good Bill, in the words of the Chair of the Treasury Committee.

I want to respond to some of the points raised in the debate and, in particular, to put on record how pleased I am that everyone welcomes Government new clause 12, which is supplemented by the text of the letter from the Chancellor to the Chair of the Treasury Committee that was sent earlier today and that I read out in my opening remarks. This has been an important opportunity to put on record how our amendment recognises the important scrutiny role of the Treasury Committee.

I would also put on record the important role of this House in scrutinising the Executive. This is another opportunity for us to emphasise the importance—the necessity, even—of preserving the independence of the FCA chief executive’s operational role, apart from Government. Our amendment reaffirms that commitment to continued independence of the FCA. It is vital consumers and firms know that regulatory decisions are being taken in an objective and impartial way. The FCA is an operationally independent regulator and must carry out its functions in line with the framework of objectives and duties established in statute and the independence of that chief executive is protected by statute, with clear provisions requiring the terms of appointment to be such that the appointee is not subject to direction by the Treasury or any other person.

Throughout their appointment, the FCA chief executive is scrutinised on an ongoing basis to ensure their continued independence. It was notable that in the course of the debate nobody could point out anything as regards the allegations made in the press about operational interference. I look forward to seeing the Treasury Committee’s report, because I know that it has carried out a thorough investigation into the matter.

Our new clause ensures that the Treasury Committee will always have time to scrutinise an appointee before they get their feet under the desk. I have also put it on the record that the legislation is very clear that once they are appointed the Government absolutely cannot dismiss an FCA CEO except in the limited circumstances set out in statute. I will not read out paragraph 4 of schedule 1ZA to the Financial Services and Markets Act 2000 again, but I referred to it in my opening remarks and reiterate that it applies not only to the CEO but to the chair and the external members.

We heard from my right hon. Friend the Member for Chichester (Mr Tyrie) about his reaction and his decision to withdraw his new clause 1. He asked whether he could expect legislation in the next Session outlining the five-year term. As he knows, he has our commitment to find an early opportunity to put that into legislation. He is aware of the strictures that exist in relation to writing round and getting Cabinet agreement, but he has that commitment now from the Dispatch Box. He asked whether the legislation is permanent—a good question. It is possible that legislation becomes permanent, but it is also possible for a future Government, a future House of Commons and a future Treasury Committee to change legislation.

[Mr Tyrie]

I am grateful to the Minister for what she says. The clarification that I seek relates not to legislation, which stands or falls like any legislation, but to the arrangement. Is it intended that the arrangement between the Treasury Committee and the Chancellor, put in place in the exchange of letters today, will be permanent?

[Harriett Baldwin]

The Chancellor has many powers, but not necessarily the power to ensure permanence, which is a very long time. I can assure my right hon. Friend that it is the Chancellor’s intention that that remain the case for the length of time that he is able to exert power and influence over the matter. I hope that answers the question in the spirit in which it is asked.

The hon. Member for Leeds East (Richard Burgon) asked me to confirm that the NAO can look at the Bank’s success in meeting its objectives, but not necessarily at the desirability of those objectives. I have already said that that is exactly what the Bill achieves. The arrangements set out in the Bill have been agreed by both the Comptroller and Auditor General and the Governor, and the terms of reference have been made available to the House. The CAG is content that the scope of his powers is appropriate and the Bank is content that they do not go too far.

The hon. Gentleman asked whether the Bank should have practitioner representation. The Prudential Regulation Authority has a practitioner panel, which ensures that the interests of those who must put the PRA’s rules into practice are communicated to the PRA. That panel includes representatives of banks, insurers, building societies and credit unions, among whom the hon. Gentleman’s new favourite publication, City A.M., is widely read. Consumers also have an input through the FCA consumer panel, which has a statutory right to make representations to the PRA.

Speaking to her amendment, the hon. Member for Bishop Auckland (Helen Goodman) asked about the Bank of England and the extent to which it is subject to the Freedom of Information Act 2000. It is thanks to this Bill that the Bank is subject to the FOI Act. There are three specific limited exclusions from the Act as it applies to the Bank and, as I explained earlier, those are entirely sensible. The Bank of England is not alone in having particular elements of its work carved out from the Act. Other organisations to which specific exclusions apply include the Verderers of the New Forest, S4C in Wales, the Competition Commission and the BBC.

On the hon. Lady’s question about the Governor’s analysis supporting selling RBS shares at prices substantially above the price at which the shares are trading today, the Governor has explained that his analysis is based on commercially confidential information obtained as part of the PRA’s supervisory responsibilities. In the Freedom of Information Act there is, rightly, a standard exemption for commercial interests.

The hon. Member for East Lothian (George Kerevan) said that there was a lot to be commended in the Bill. He asked about the range of expertise and perspectives on the court. He raised an interesting philosophical question, which is that in the past the court has been a much larger organisation, with 19 members—unwieldy, in the Treasury Committee’s view—but that it should represent the views of the entire UK. All members of the court should consider the whole UK, rather than acting as a representative of a particular part. He seems to have forgotten our exchange in Committee, when we talked about the trade union representation of the court and I assured him that we have said nothing during the passage of the Bill that would change the post-war reality.

Bank of England and Financial Services Bill [Lords]

Debate between Harriett Baldwin and Lord Tyrie

Monday 1st February 2016 Commons Chamber

[Harriett Baldwin]

As the hon. Gentleman knows, the measures in the 2013 Act are due to come into force on 7 March this year. The position in relation to the reverse burden of proof is becoming increasingly clear. Andrew Bailey said in his evidence to the Treasury Committee, of which the hon. Gentleman is a member:

“I support the change, because what the change does is it turns the process round and puts the judgment back on to us”

—that is, the regulator.

“I would rather it does that than have us heading down this tick-box regime with legal questions around it over human rights.

I do not want to come back or have one of my successors come back to you in the future and have to say, ‘I am sorry; we could not use this regime in the way that was intended, because it was always a bit doubtful that we could make it stick’. It is far better we come at this point to you and say, ‘I do not think this has a sufficient probability of being effective’.”

I could supply further quotations, from members of the Parliamentary Commission on Banking Standards in the other place, but I must make fairly rapid progress now.

[Mr Andrew Tyrie (Chichester) (Con)]

Will the Minister give way on that point?

[Harriett Baldwin]

I will give way to the Chair of the Select Committee on that point.

[Mr Tyrie]

It surprised a number of members of the Committee when both the Prudential Regulation Authority and the Financial Conduct Authority told us that they supported the removal of the reverse burden of proof. I think that many of us would be in a different place had they not given that evidence.

The Minister has just placed great emphasis on the need for the senior managers and certification regime. Has she asked the regulators for a report on progress in its implementation? If so, will she tell us what it said and put it in the public domain? I have to say, on the basis of what we have heard, that progress is inadequate.

[Harriett Baldwin]

I appreciate my right hon. Friend’s contribution, because he has been examining the issue for longer than most. He will know of the points that were made about this topic in the other place. The regime is due to come into force on 7 March 2016, which is pretty soon. The rolling out of the implementation will focus on the larger organisations first, but the Committee and, I am sure, the Treasury will want it to apply in particular to the large, systemically important firms by 7 March.

The third element of the Bill relates to the extension of the important new freedoms that the Government are granting to allow people to take control of their retirement savings. It will help to ensure that consumers who will be able to sell their annuity incomes through the secondary market in annuities are sufficiently supported. There are two key measures. The first will extend the Pension Wise guidance to those who, from April 2017, will be eligible to sell their annuity incomes through the secondary market in annuities. That will include the offer of guidance to those who have a right to an income under the annuity, such as any dependants and beneficiaries as well as the primary annuity holder.

The second measure will require the FCA to make rules to ensure that specified firms check that individuals with annuities above a threshold value have received appropriate financial advice. On 19 January, the Chancellor set out the Government’s intention to legislate to place a new duty on the FCA to cap excessive early exit charges. I should like to take this opportunity to announce that that new duty will be introduced as a Government amendment in Committee.

Royal Bank of Scotland

Debate between Harriett Baldwin and Lord Tyrie

Thursday 11th June 2015 Commons Chamber

[Harriett Baldwin]

Clearly, the Chancellor is not dodging any difficult questions because I did not hear any difficult questions from the hon. Gentleman. It is a bit rich that the new shadow Chancellor has chosen to make his first attack on the Government’s economic policy by drawing attention to his party’s woeful track record on bank regulation and by publicly disagreeing with the advice of the Governor of the Bank of England.

Last week the hon. Gentleman told this Chamber:

“I have had plenty of time to reflect on the result of the general election. Obviously, we are disappointed with it and we will review our policies accordingly”.—[Official Report, 4 June 2015; Vol. 596, c. 789.]

Clearly, that reflection does not include apologising for the lax regulation of our banking sector or realising that the British people do not want a Government who are committed to borrowing more, spending more and nationalising more. Above all, the hon. Gentleman’s reflection clearly does not include recognising that his mentors, Gordon Brown and Ed Balls, paid a high price for their intervention in the Royal Bank of Scotland. I will take no lectures on economic competence from an Opposition party that in office sold off the country’s gold reserves at an all-time low, crashed the banking system and the economy, and left us with the biggest peacetime deficit in our nation’s history.

I will answer the hon. Gentleman’s questions. He asked whether the Government will publish a break-even share price for RBS. I do not know whether he is Mystic Meg, but I do not know exactly at what price the sales will be made. The hon. Gentleman will have seen the Rothschild report that we have published today. Under his Government, it was forecast in 2009 that the bank interventions would result in a total loss of between £20 billion and £50 billion. We have turned the economy and the banking sector around, and as of this week the Rothschild report estimates that the overall sum total of the interventions will benefit the taxpayer by £14 billion.

[Mr Andrew Tyrie (Chichester) (Con)]

First, may I warmly welcome the Minister to her new role? She has a great job and I congratulate her on obtaining it. May I also warmly welcome her statement? We need to grasp that the loss has already occurred: it took place in 2008. It was made possible by poor regulation and it was made certain by shocking incompetence by the RBS board.

The Rothschild report was made available in the Vote Office only a few minutes before the end of the previous statement, so I have had only a brief chance to look at it. The overall surplus identified from the total sales of financial sector interventions is £14 billion, but a footnote makes it clear that that excludes the cost of funding. I gave the Minister only a few moments’ notice that I would raise this issue, but I would be extremely grateful if she could say what the cost of funding is and what the number would be, were it included in the table.

[Harriett Baldwin]

I congratulate my right hon. Friend on his unopposed re-election as Chair of the Treasury Committee. That he asks a question about the footnote illustrates his forensic reading of the published materials. As he knows, at the end of 2009 the estimate was that the cost of bank interventions would range between a £20 billion loss and a £50 billion loss. As of last week, the Rothschild report estimates that that situation has completely turned around, and that the overall recovery from the bank interventions is in the order of a £14 billion magnitude. The overall cost of funding on our Treasury issuance is at record lows thanks to the prudent economic management of my right hon. Friend the Chancellor.