Infrastructure (Financial Assistance) Bill

John McDonnell Excerpts

Monday 15th October 2012 Commons Chamber

[Mr Redwood]

I normally agree with my hon. Friend, but I am afraid that I do not on this occasion. There is not now an excuse to go in for projects that do not make any economic sense just because we all want some more growth and jobs. Indeed, that would be a very good way of setting us all back further as it would damage the public finances without giving us the benefit of a good project that people wanted to use and that produced plenty of user revenue. When one is in a financial hole, as our country is, one needs to be very careful. We look to the Treasury, in particular, to evaluate such matters carefully and I want a little more guidance because £50 billion is a huge sum. I am not surprised that so few MPs want to discuss it—if we were debating £500 million, the place would probably be packed, but because we are discussing £50 billion everyone has gone off for a tea or a coffee—but to me it is a serious sum of money and I want some reassurance that we will get something worth having for it.

[John McDonnell (Hayes and Harlington) (Lab)]

The right hon. Member for Wokingham (Mr Redwood) roamed over many of the issues covered on Second Reading and over the scepticism on both sides of the Committee. I say to the hon. Member for Cities of London and Westminster (Mark Field) that I think evaluation is critical, as we have seen with the west coast main line, and undertaking projects on a wing and prayer at this stage is dangerous, to say the least.

The Bill, as we said on Second Reading, seems to be the reverse of the private finance initiative. PFI was meant to shift the risk on to the private sector, yet the Bill seems to shifting it back on to the public sector. I share the concerns. Clause 1(4) defines financial assistance in the broadest terms possible, so it could involve revenue assistance, and clause 1(3) refers to the operation of a project. In addition to a capital project, we could be subsidising in revenue terms the operation undertaken by a capital project. That leaves open the issue of hospitals being built by the private sector and then revenue supported under the Bill.

--- Later in debate ---

[Mr Blunt]

The thrust of my speech will reinforce the remarks made by the hon. Member for Hayes and Harlington (John McDonnell) and my right hon. Friend the Member for Wokingham (Mr Redwood) about the reassurance we should receive about the possibilities opened up by the Bill. The mechanism I have chosen to secure that reassurance is to table an amendment that would delete the reference to housing. I have no intention of pressing it to a Division; I am merely seeking clarity on what we want to achieve with the Bill.

On Second Reading, the Opposition spokesman said he thought that housing was infrastructure, but I am afraid that I do not—neither does the “Oxford Dictionary of Economics”, nor do The Economist or the Government in their 2011 national infrastructure plan. That does not mean, however, that I do not think that investment in housing is essential or necessary, which was the conclusion slightly unfairly drawn by the hon. Member for Hayes and Harlington on Second Reading. Given his interest in criminal justice, I was somewhat surprised that he then juxtaposed the need for decent prison facilities—

[John McDonnell]

I admit that I was a bit harsh.

[Mr Blunt]

I am extremely grateful to the hon. Gentleman for his customary self-criticism and generosity.

The Minister must give us the necessary clarity. I note that the right hon. Member for Greenwich and Woolwich (Mr Raynsford) has tabled an amendment on housing schemes that would add the words “of national significance”—or words to that effect. It is at that point that alarm bells start ringing for me, as the Member for Reigate, a constituency wholly within the metropolitan green belt. We have had a significant increase in housing, particularly through infill but also through new housing schemes that were agreed and supported by the local authority, and there has been development in parts of Redhill, but that has actually led to a shortage of infrastructure to support the people in that housing.

We desperately need two new primary schools locally, and then there is the small matter of the M23 never being finished. In these circumstances, when we are looking for capital schemes, it might be rather nice if the M23, several decades later, was finally finished properly where it joins the A23. In addition to the schemes that the Government will come forward with, which I anticipate will be announced in the expenditure statement, I hope that we can begin to look at some of the schemes that have been around for a long time and that these funding mechanisms will help to enable expenditure on them to take place.

I am seeking the same level of reassurance that my right hon. Friend the Member for Wokingham seeks. I have the same implicit trust that he has in the ability of the Economic Secretary and the team of Treasury Ministers to manage these things satisfactorily, but Parliament is owed proper accountability on this.

I am concerned that we will find housing schemes, particularly those of national significance, being imposed in the way they were under previous regional development strategies, with housing numbers simply being cascaded down from Whitehall to the regions, to the counties and then to local authorities, such as mine, in a way that leaves the borough councillors, as owners of the planning policy, completely unable to do anything other than mitigate the consequences. They have never been in the position that we, as a localist Government, want them to be in, in which they can judge between the economic and social need for housing locally and the environmental consequences of such development. Those are the balances that local authorities are there to draw.

The Bill will suddenly enable a substantially greater amount of new expenditure to take place, but where is the link with the rhetoric about planning policy? I just want to raise that concern, as I did on Second Reading. I do not want the financial provisions set out in the Bill to be combined with planning policy debates that take place elsewhere, and then suddenly find that in constituencies such as mine the powers of local representatives are being overridden in some rush to develop housing, which by no stretch of the imagination is infrastructure in the proper sense of the word.

Infrastructure (Financial Assistance) Bill

John McDonnell Excerpts

Monday 17th September 2012 Commons Chamber

[Danny Alexander]

I am going to make some progress; I will come back to the hon. Gentleman later.

It could be used to support investment in utilities, transport, other infrastructure for the provision of economic and social public services or housing.

[John McDonnell (Hayes and Harlington) (Lab)]

Will the Minister give way?

[Danny Alexander]

No. I am going to make some progress.

The Bill does not affect any existing authority to incur expenditure that might already have been conferred on a Secretary of State; nor will it cover expenditure by a Secretary of State that can properly rest on the authority of annual supply legislation, without requiring specific statutory authority.

Where costs connected to the guarantee are incurred by the Exchequer that cannot reasonably be absorbed by the funds already provided by Parliament and where it is not possible to seek authorisation of Parliament for the additional expenditure—for example, because the House is not sitting—the Bill allows provision to be made from the Consolidated Fund. This is to cover the commercial reality of situations in which payments need to be made very quickly following an unforeseen obligation. Without this provision, any guarantee could lack commercial viability.

[John McDonnell]

rose—

[Danny Alexander]

I am going to make some progress; I shall take some more interventions later.

The Government intend to offer assistance in the form of guarantees, although the Bill makes provision for other forms of assistance that we intend to use only where unforeseen urgent provisions are required. We believe that up to £40 billion of investment in infrastructure could be brought forward or accelerated under the UK guarantee scheme, using the powers in the Bill. That will help to deliver core infrastructure that supports growth, to improve the UK’s energy, transport, water, waste and telecommunications, and it includes about £6 billion-worth of public-private partnership projects delivering essential public service infrastructure. We will issue guidelines and scrutinise proposals to ensure that any proposal that receives an infrastructure guarantee is nationally significant, financially credible, good value for the taxpayer, requires a guarantee to get under way and is ready to start within a year.

--- Later in debate ---

[Danny Alexander]

It is not an omission from the Bill, which puts in place broad and permanent powers to issue guarantees for infrastructure projects. The Government expect that under the UK guarantee scheme, which will be the first manifestation and use of the Bill’s powers, nationally significant projects will be the sorts of projects able to apply. That means projects listed in the national infrastructure plan or other such projects as may come forward, but the Bill gives a broader authority to the Treasury to issue guarantees in other circumstances. What I am describing is how the Government intend to use the powers in the Bill.

[John McDonnell]

rose—

[Danny Alexander]

I will give way to the hon. Gentleman, who has not intervened in the debate so far.

[John McDonnell]

On that specific point, I hope that the right hon. Gentleman is going to deal with clause 1(2)(b), which is one of the provisions defining the range of facilities that will be funded in this way. It refers to

“railway facilities (including rolling stock), roads or other transport facilities”.

Will he clarify whether those “other transport facilities” include airport expansion and runways? Although the third runway at Heathrow, or perhaps elsewhere, is not listed in the national programme and will not be brought forward in the next 12 months, there are no sunset clauses, so this Bill could be used to that effect.

[Danny Alexander]

The hon. Gentleman is right: there is no sunset clause. That is because we think that it is important to introduce these powers, not just for now but for the future. By circumscribing the financial limit of the extent of the powers and also by establishing strong requirements for reports to be made to Parliament, we can ensure that Members continue to be informed on how they are used. As the hon. Gentleman says, no such proposals are on the table at present, but in principle, should a major infrastructure scheme arise in the transport sector but be unable to attract the necessary finance because of conditions in the funding markets, it could be eligible in the future. However, that would be a decision for the Government of the day.

--- Later in debate ---

[John McDonnell (Hayes and Harlington) (Lab)]

This debate, on a Bill that most people agree with, has been fascinating. The last five speeches, by my hon. Friends the Members for Easington (Grahame M. Morris), for Glasgow North East (Mr Bain) and for Walthamstow (Stella Creasy), my right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford) and my hon. Friend the Member for Scunthorpe (Nic Dakin), are worth reading. They were superb. I do not usually follow the parliamentary convention of saying, “It is a pleasure to follow”, but it was a pleasure listening to their speeches. My hon. Friend the Member for Easington demonstrated a commitment to, and deep knowledge of, his constituency. My hon. Friend the Member for Glasgow North East set out the implications for Scotland and the overall economic situation. My hon. Friend the Member for Walthamstow was passionate about the problems and returned, as ever, to Wonga. My right hon. Friend the Member for Greenwich and Woolwich displayed his ministerial experience, while my hon. Friend the Member for Scunthorpe demonstrated his passion.

A succession of MPs have stood up and urged the inclusion of particular projects in the Bill. May I be a contrarian and suggest one that should not be included in the Bill—the expansion of Heathrow airport? I am worried because although the Bill is meant to account for ready-made projects—those on the drawing board and ready to be implemented over the next 12 months—there is no sunset clause. Furthermore, it can be renewed and additional sums can be bestowed simply by statutory instrument. Now, I am not a conspiracy theorist, but my constituents might start to believe in conspiracies: we had 12 months of intensive lobbying by the aviation industry; after that, the Chancellor expressed scepticism about existing Conservative party policy, which was against a third runway at Heathrow; then the Prime Minister announced a review of that policy by someone who was director of the CBI, which had lobbied for a third runway; and now we have a Bill that would go on the shelf as almost suitable for funding the expansion of Heathrow. It is no wonder, then, that my constituents are anxious about the attitude of the Government to that measure.

The measures in the Bill would perfectly suit Ferrovial, the Spanish company established by a fascist in the 1930s who made his profits as a result of contracts awarded to him by Franco. It would ideally suite Ferrovial to come forward and seek funding for the infrastructure expansion at Heathrow. I am sure it would be willing to pay for the tarmac, but not for all the infrastructure that goes with it, particularly the road and rail network needed to support a third runway. I fear that Ferrovial will come forward seeking Government guarantees to fund and back up the expansion. I say that because its construction company globally is in serious difficulties, or certainly is in doubt.

I give notice that despite the cross-party support for the Bill, which I also support, I will be moving amendments to ensure that the expansion of Heathrow is not part and parcel of it. I expect coalition support for that on the basis of the existing coalition policy, sworn in this Chamber by the Prime Minister, that the Government will not bring forward the expansion of Heathrow during the lifetime of this Parliament.

[Stephen Pound (Ealing North) (Lab)]

I am not entirely sure if Ealing North and Hillingdon constitute a coalition but, if it does, may I say that that coalition is solid and that we are as one on this?

[John McDonnell]

Interestingly, the coalition against the expansion of Heathrow has been cross-party up until now. If I remember rightly, the Government’s deputy Chief Whip committed to lying down in front of the bulldozers if it ever came about, and he was not moved in the reshuffle, so I take that as another commitment to opposition to the policy. I hope that the Government will support an amendment to prevent the Bill from being used to give guarantees on the funding of the expansion of Heathrow, certainly during the lifetime of this Parliament. We can then debate the matter with the subsequent Government.

Like everybody else, I am desperate for infrastructure investment in my constituency, which is suffering from a housing crisis on a scale not seen since the second world war. Housing should be included. The hon. Member for Reigate (Mr Blunt) argued for the funding of prison cells, but was not willing to argue that housing be funded. Housing my constituents is just as important as housing prisoners, given the housing crisis.

My schools also need to be renovated, because Hillingdon council pulled out of Building Schools for the Future at the last minute and pupils in my constituency are now being educated in crumbling schools. The buildings that are being built for new classes are portakabins, which are substandard for the long-term future.

On alternative energy, I want the green new deal to be implemented in my constituency as rapidly as possible. It has ground to a halt as a result of the Government’s measures on solar panels and on the funding of alternative energy in general.

As my hon. Friend the Member for Leeds West (Rachel Reeves) said, there has been an element of déjà vu to this debate. I remember Alan Milburn arguing in favour of private finance initiatives in 1997. We were told then that PFI was the solution to our infrastructure and investment problems and that it would transfer the risk from the public sector to the private sector. With the greatest of respect to a number of my hon. Friends, that did not happen. What we saw instead was profiteering at vast expense to the taxpayer and profligate expenditure that produced very little for the amount that we invested.

The bizarre thing about the plan under discussion, which will introduce another scheme to keep expenditure off the books and within the parameters set by the European Union with regard to public expenditure, is that it will transfer the risk back from the private sector to the public sector, so now the public sector will take all the risk for schemes. My hon. Friend the Member for York Central (Hugh Bayley) raised a number of detailed points that need to be answered and I have an additional question. If we look at the briefing paper for the Bill, we will see that it will also be able to fund revenue expenditure. Therefore, in addition to the capital expenditure, I take it that if some of these capital schemes go wrong, we will fund the revenue consequences as a result. There needs to be a detailed analysis—my hon. Friend the Member for Walthamstow mentioned the Public Accounts Committee—and it needs to take place now, before the next debate on this Bill. We are almost entering into another PFI-type situation whereby a grab of short-term resources will result in long-term costs.

That is all because no Government will grasp the real nettle, which is that there is no lack of resources in this country; the problem is that they are in the wrong hands and are not being used productively. The crisis in the economy was not caused by over-expenditure by the previous Government. The only time borrowing went up dramatically was when they had to bail out the banks and bring in large-scale quantitative easing. In fact, the level of public expenditure in relation to GDP just about met the John Major levels. The problem was that we never balanced that expenditure with an appropriate taxation regime. What we need to do now is introduce a fiscal package that includes a wealth tax, a financial transaction tax, land valuation taxation and measures to tackle tax evasion and avoidance, so that we can fund public expenditure and not have to create devices that in the long term will cost us more and produce so much less.

I regret that we may well be here in five years’ time—I do not look forward to it—as a result of this Bill, counting the cost as we did with PFI. Members need to consider the Bill’s detail as we move to the next stage, because it is the detail that will cost taxpayers dear and result in profligate spending and some abortive spending on some of the projects that have been mentioned tonight and that we all hold dear on behalf of our constituencies.

This has been an interesting debate, but I worry that when everyone agrees that we need to speed up and expedite the Bill, we will not give it sufficient consideration. That is what happened to the PFI legislation and we lived to regret it. I hope that we do not live to regret this Bill.

Bank of England (Appointment of Governor) Bill

John McDonnell Excerpts

Friday 6th July 2012 Commons Chamber

[John McDonnell (Hayes and Harlington) (Lab)]

I beg to move, That the Bill be now read a Second time.

I have had the good fortune of coming top of the ballot for private Members’ Bills for two Sessions running, which is unheard of. The BBC calculated the odds at 58,000 to one. I wish I had put a bet on—I certainly will next time the ballot comes up.

Hon. Members can choose to use private Members’ Bills to promote a minor good cause or to redress a small anomaly in the law, but they can sometimes use them to send a message to the Government about the need for reform in the interests of good governance. If Parliament wishes to send such a message to the Government, it is best that the message is conveyed with a cross-party voice.

The Bill is an attempt to send such a message to the Government, and I have sought a strictly cross-party support base for the Bill, hence the Bill’s sponsors include the hon. Member for Chichester (Mr Tyrie), the Conservative Chair of the Treasury Committee; my hon. Friend the Member for Leeds East (Mr Mudie), the Labour vice-Chair of the Committee; the hon. Member for Bury St Edmunds (Mr Ruffley), a Conservative; my hon. Friend the Member for Edmonton (Mr Love), a Labour Member; the hon. Member for South Northamptonshire (Andrea Leadsom), a Conservative member of the Committee; my hon. Friend the Member for Bassetlaw (John Mann), a Labour member of the Committee; the hon. Member for Dundee East (Stewart Hosie) of the Scottish National party; the hon. Member for Foyle (Mark Durkan) of the Social Democratic and Labour party; and my hon. Friend the Member for Erith and Thamesmead (Teresa Pearce), a Labour member of the Committee. Two senior Members expressed an interest in the issue—the hon. Members for Cities of London and Westminster (Mark Field) and for Altrincham and Sale West (Mr Brady)—and sponsored the Bill. I am grateful for their support for the measure. I would have been able to demonstrate wider cross-party support if more sponsors were allowed. Support was expressed by the leaders of Plaid Cymru and the Green party. There is balanced and wide-ranging cross-party support base for the proposal.

The message that the Bill conveys to the Executive is straightforward. The Government’s Financial Services Bill is creating an immensely powerful post in the Governor of the Bank of England. The new Governor will be given a vast range of new powers and responsibilities. The Financial Times has said that the Bill will create the most powerful Governor in the history of the Bank of England.

[Mr Denis MacShane (Rotherham) (Lab)]

It is often said that the European Parliament is powerless because it cannot initiate legislation. Although the House approves, votes on and debates legislation, it can never actually initiate it—the House does not have law-initiating powers. My hon. Friend is trying to initiate a law, but I worry that the Bill will be talked out and walked out by lots of whipped Conservative colleagues. Parliament is powerless. Mr Speaker calls Ministers to the House so they can be held to account by hon. Members, but is it not worrying that Parliament is powerless to initiate legislation?

[John McDonnell]

This is one of the few opportunities when the House has the opportunity to initiate legislation. I take what my right hon. Friend says as a caution that we should take that initiation role seriously. We should take all our activities seriously, but Back Benchers should be especially serious when the onus falls on them to make a change in the nature of our governance.

[Karen Bradley (Staffordshire Moorlands) (Con)]

If the hon. Gentleman does not mind, I should like to make a public service announcement. The Procedure Committee is holding an inquiry into private Members’ Bills, and would welcome all comments from hon. Members in the Chamber.

[John McDonnell]

That is a really useful advert—it might be one of the most constructive things said this morning.

I shall be as brief as I possibly can. The message contained in the Bill is that the appointment of the new, powerful post of Governor of the Bank of England should not be left solely to the Executive, and that Parliament, on behalf of the people, should also play a decisive role. The appointment is too important to be left in the hands of a single Minister.

[Mr Andrew Tyrie (Chichester) (Con)]

As the hon. Gentleman knows, his Bill has the support of the Treasury Committee—it is similar to the Committee’s proposals. The principle of greater parliamentary engagement that he is articulating is a strong one, but does he agree that it could be enacted in a number of ways? Does he also agree that we need flexibility from the Government on accomplishing that engagement while the Financial Services Bill is in the Lords?

[John McDonnell]

That is an incredibly constructive proposal, and I hope the Minister heard it. There are other ways of approaching this matter and we should be open to considering them. Yesterday, the Government entrusted the hon. Gentleman with a major inquiry—the inquiry Committee will comprise members of the Treasury Committee and Members of the other House. If the Government have the confidence in Treasury Committee members to undertake that inquiry, it should have the confidence in their having a decisive role in the appointment of a new Governor of the Bank of England. I therefore welcome the hon. Gentleman’s constructive comments.

May I thank Kate Emms, the Clerk, and Gordon Nardell QC for their assistance in drafting the Bill and the explanatory notes? I am extremely grateful for their assistance. The Bill amends the Bank of England Act 1998 to give effect exactly to the recommendation of the Treasury Committee from its report of October 2011 that the appointment of the Governor should be subject to the approval of the Treasury Committee.

Between the time of choosing the appointment of the Governor of the Bank of England as the subject of my private Member’s Bill and debating it, the world has changed somewhat. Last week’s revelations about the role of Barclays bank—and, more than likely, others—in the LIBOR scandal have given the Bill a new context, and there is a new significance in the appointment of the Governor of the Bank of England. Mervyn King will retire in the next year, and the new Governor will play a pivotal role in what, it is increasingly clear, will of necessity be a radical reform and reconstruction of our financial system.

[Mike Freer (Finchley and Golders Green) (Con)]

From the debate yesterday, the Opposition seem to hold the view that the Treasury Committee is not qualified to investigate banking and banking reform, yet the hon. Gentleman today argues that the Committee is qualified to appoint the Governor.

[John McDonnell]

I am pleased that consensus was eventually reached yesterday and that the Chair of the Treasury Committee will now be able to perform his role in that inquiry. The Government’s confidence in the Treasury Committee Chair and its members in respect of that inquiry contrasts with their lack of confidence in respect of allowing the Committee a decisive role in the appointment of the Governor.

It is increasingly clear that the new Governor will have significant responsibility, and it is becoming obvious that we need root-and-branch reform of our financial services and our banking system. Therefore, whatever recommendations come out of the various inquiries, and especially the inquiry that was established yesterday, much of the work of implementing reforms will fall on the shoulders of the new Governor.

[Richard Harrington (Watford) (Con)]

The hon. Gentleman mentions the Treasury Committee’s role in the inquiry into LIBOR, but does he accept that inquiries are the traditional role of Select Committees, and that making Executive appointments is a very different role?

[John McDonnell]

The roles are different, as I will mention later, but the Chancellor did give the Treasury Committee responsibility, in the way it is asking for here, for the appointment of senior members of the Office for Budget Responsibility. Obviously, then, he had sufficient confidence in the Committee to involve it in appointments.

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

Of course, there is a distinction between the chairman of the OBR and the Governor of the Bank of England. The former does not have an Executive role; their role is more akin to that of the Comptroller and Auditor General.

[John McDonnell]

I shall come to that almost Jesuitical distinction between Executive roles.

It is critical that the right person be appointed to the crucial role of Governor of the Bank of England in this coming period. The new Governor will need to demonstrate not only that he or she is professionally competent, but that they can exercise sound ethical judgment. They must be able to convince the public and the markets that they can turn the liner that is financial services around. To have any credibility they will need to demonstrate that they have the confidence of not only the Chancellor of the Exchequer but of Parliament as a whole, and that they are independent—no crony, no place person, no political appointee—and able and willing to give robust independent advice. Given the scale of the task facing the new Governor and the heightened political atmosphere and context in which the banking reforms are to be developed, now, more than ever, this critical appointment cannot be left in the hands of a single Minister.

[Dr Thérèse Coffey (Suffolk Coastal) (Con)]

I understand what the hon. Gentleman is saying, but there is a significant difference between having confidence in the Treasury Committee and having its consent. At the moment, Select Committees have the power to suggest changes, but I am not aware that they have a veto.

[John McDonnell]

The hon. Lady needs to recognise that the Treasury Committee has a veto over the appointment of senior members of the OBR, but I will come to that point, because it is a valid one and was also raised by the hon. Member for Watford (Richard Harrington).

[Katy Clark (North Ayrshire and Arran) (Lab)]

I am a member of the Business, Innovation and Skills Committee, where recently there was a political divide over whether to approve the appointment of the director of the Office for Fair Access for higher education. Does he agree that ideally we would have a political consensus over the appointment of the Governor, so that the person knows they have the full backing of Parliament, at least when they are appointed?

[John McDonnell]

If Members keep on intervening and reading parts of my speech, I will not get very far. I fully concur. It is exactly as my hon. Friend describes it; she makes an important point.

Let me press on. I want to return to the question of probity, because there are issues outside the House this morning that we need to take into account. Given the scale of the task facing the new Governor, the heightened political atmosphere and the banking reforms, now, more than ever, this appointment cannot be left in the hands of one Minister. Leaving it solely in the gift of the Executive in what is, unfortunately, a tense political context, runs the risk of allegations of a political appointment, a lack of independence and even cronyism.

In the cold light of day, after yesterday’s ferocious party political knockabout and, at times, unfortunately very personal debate, it is important that calmer judgments now prevail and that we seek a consensus, as far as possible, over the key decisions, such as this one, that the House needs to take in reforming our financial system. This is a time for consensus building and a display of magnanimous behaviour on all sides, if we are to get through this crisis and restore confidence in our financial system. Sharing responsibility for the appointment of the new Governor and seeking consensus on this appointment would ensure the credibility of the appointment process and the appointee themselves.

[Mr Hoban]

In seeking that consensus, how would we avoid the risk highlighted by the hon. Member for North Ayrshire and Arran (Katy Clark) of the politicisation of an appointment, as happened in the situation to which she referred?

[John McDonnell]

I suggest that people listen to my speech. I will get to that point, but if I miss it out, perhaps the Minister can intervene again.

The wider engagement of Parliament in the appointment process is more likely to result in the appointment of a talented and competent professional whose independence is demonstrable and protected, and who will therefore have the authority to drive through the reforms and change of culture in our banking system for which we are all calling.

This is not a revolutionary proposal. To allow Parliament, via the Treasury Committee, to have a decisive say in the appointment of key posts is nothing new. If Members read the Institute for Government’s excellent report “Balancing Act”, by Akash Paun and David Atkinson, which the Committee recommended, they will see that the Bill stands in an evolutionary line on the growing role of Parliament in public appointments. In the past 30 years, there has been an evolution from all public posts historically being appointed by prerogative of the Executive through to pre-appointment hearings, confirmation hearings for the Monetary Policy Committee, to the current Chancellor granting the Treasury Committee a veto over the senior posts in the OBR. That was enshrined in the Budget Responsibility and National Audit Act 2011, the wording which I have simply transferred into my Bill.

The OBR is not the only area where appointments are made subject to the approval of a Select Committee. For example, last year the Ministry of Justice announced that the appointment of the Information Commissioner would not be made if the Justice Select Committee opposed it. The proposal in today’s Bill, then, is nothing new or revolutionary but simply part of the evolving relationship between Parliament and the Executive.

In line with the evolutionary progress in that relationship, when the Treasury Committee undertook its investigation into the accountability of the Bank of England, the report of which was published in October 2011, it examined parliamentary involvement in the appointment and dismissal of the Governor and concluded:

“The power of veto with respect to the OBR was given to ensure the independence and accountability of that body. The Governor of the Bank’s independence from Government is crucial for his or her credibility. Given the vast responsibilities of the Governor, the case for this Committee to have a power of veto over the appointment or dismissal of the Governor is even stronger than it is with respect to the OBR.”

The Committee recommended, therefore, that it be given a

“statutory power of veto over the appointment and dismissal of the Governor”.

That was a fair, appropriate and responsible submission from the Committee.

[Neil Carmichael (Stroud) (Con)]

I wonder whether the Bill is really necessary, given that the process, which we discussed yesterday—oddly enough—in the Enterprise and Regulatory Reform Public Bill Committee, for decisions on public body appointments vis-à-vis Select Committee endorsement is already well enshrined. There is a list, which was last reviewed by the previous Labour Government in 2009, to which we can add or subtract.

[John McDonnell]

If there was a way of moving forward by that process, I would use it, but the problem is that we have now debated this matter in the Financial Services Bill, both in this House and the other place, and the Government have refused to accept the Treasury Committee’s recommendation. I hope that once I have sent this message today, the Government will shift their position and use whatever device is possible—either an amendment to the Financial Services Bill, the route the hon. Gentleman suggests, other routes that the Chair of the Treasury Committee has suggested exploring or the acceptance of this Bill.

At the time of the Treasury Committee’s recommendation and the debates on the amendments here and in the other place, the Government set their face against the proposal. I shall deal with the five basic objections and arguments that Treasury Ministers have put forward. First, there is the argument made by the Chancellor to the Committee that the Governor must be independent. He said:

“I think it is proper that the Government of the day chooses the Bank Governor, is held accountable for that choice, but also that the Governor is given some protection, some independence, so it is quite difficult, to put it mildly, or extremely difficult, to get rid of them.”

Ironically, the Committee fully agreed that the Governor should be independent and that this independence should be protected, but concluded that the best way of securing that independence was to ensure that the appointment was not solely in the hands of the Executive or one single politician. It further concluded that dismissal should also be determined more widely. Logically, then, the Governor is more likely to be seen as a creature of the Executive if he or she is solely appointed by the Executive. Making appointments and dismissals subject to the Committee’s approval must logically increase a post’s independence from Government and free the appointee from any charge of being a political appointee.

The second issue, which the Minister raised, was potential politicisation.

[Stephen Hammond (Wimbledon) (Con)]

The hon. Gentleman is making the point that the Bill would make the Governor more independent of the Executive. However, one of the things that I am sure several of my hon. Friends will be exploring in their speeches is that it may, in fact, interfere with his independence from the Treasury Committee.

[John McDonnell]

It is a matter of striking a balance and, at the moment, the Governor’s independence is undermined by association with appointment by one Minister and the Executive. My Bill would spread the burden of accountability and responsibility for the appointment.

On the issue of politicisation, the argument was that the Committee veto would politicise the post of the Governor. However, spreading the decision, to include all parties in determining the appointment, would avoid the charge that the person had been appointed by one party or one coalition grouping and was therefore a party political appointee. The charge of politicisation also neglects to acknowledge that our Select Committees have, over decades, developed a good culture of cross-party working. Where there have been disputes over a ministerial appointment in the past, they have not been on political lines. There have been only two rejections of a Minister’s recommendation, and they were cross-party rejections. Having to secure the approval of the Treasury Committee would override any charge of a single-party or party political fix.

[Mr Hoban]

Will the hon. Gentleman explain what would happen, then, if a Committee voted on party lines and a minority party opposed the appointment? Would it not impair the Governor’s credibility if a bloc was against him?

[John McDonnell]

That charge was laid before, but when the Institute for Government examined it in detail, it found no example of that happening, because the Select Committee system—

[Mr Hoban]

indicated dissent.

[John McDonnell]

The decision in the case that my hon. Friend the Member for North Ayrshire and Arran (Katy Clark) raised was not accepted. The Select Committee system has worked remarkably well, and when people have served on them, they have done so on a cross-party basis. However, the point the Minister makes still does not undermine the argument that it is better to have a group examining, interviewing and then coming to a decision about an appointment on a cross-party basis than to leave it in the hands of a single, party politician.

[Mr Sam Gyimah (East Surrey) (Con)]

rose—

[Mr Graham Brady (Altrincham and Sale West) (Con)]

rose—

[John McDonnell]

I have allowed large numbers of interventions. If I can press on, I will see whether I can allow further interventions later.

Let me go through the other arguments that the Chancellor has made. He also argued that involving the Treasury Committee in determining the appointment of the Governor would blur the lines of accountability, saying that

“it is proper that the Government of the day chooses the Bank Governor,”

and

“is held accountable for that choice”.

However, the reality is that the Governor’s term of office rarely coincides with a Government’s term of office. Many Governments inherit the Governor appointed by the previous Government and can therefore barely be held accountable for that appointment. The involvement of Parliament in the appointment would simply mean that both the Executive and Parliament would be held accountable for it. That is perfectly proper and appropriate.

Let me turn to Executive functions. When challenged over his decision to allow the Treasury Committee a veto over an appointment to the OBR, but to refuse it one over the appointment of the Governor, the Chancellor argued that

“the Governor…is carrying out executive functions on behalf of the State,”

such as setting monetary policy and monitoring financial stability. In the evidence session on 5 July 2011, the Chair of the Treasury Committee pointed out to him the contradiction between that argument and the argument that the Committee should have a veto over the OBR appointment precisely because it would be carrying out Executive functions. The Chancellor then made a rather bizarre distinction between different Executive functions, which was beyond the Committee’s comprehension.

The other argument, which was raised in the other place, concerned market sensitivity. The argument was that the appointment of the Governor was market sensitive and that involving the Committee in the process could have a detrimental impact on the markets by creating uncertainty over the appointment. It could just as easily be argued that OBR appointments are extremely market sensitive. However, whether the appointment of the new Governor is undertaken behind the closed doors of the Treasury or openly and transparently in the Committee, there will still be speculation in the markets about which candidate will be appointed and what the impact will be. If the post is so market sensitive, it is even more important that the appointee is seen to have the approval and confidence of both the Executive and Parliament.

[Mr Gyimah]

Let me take the hon. Gentleman back to his point about the Governor’s term of office, which would be a single, eight-year term. In other words, once appointed, the Governor does not have to seek reappointment and so can act independently. Therefore, we do not really need the Treasury Committee to be involved to ensure that independence.

[John McDonnell]

The key aspect is independence at the point at which that person is appointed, so it is critical that the new Governor, when they are appointed, is seen to be completely independent, and also carries the House as well as the Executive. That is the point I am making.

I have spoken long enough and many other Members wish to speak, so let me conclude. Over the coming period a new Governor of the Bank of England will be appointed. The new Governor will not only have more powers and responsibilities than any Governor before him or her, but will face the immense challenges of reforming and restoring confidence in our banking system and financial services. My view—and, I think, the view of others—is that it is therefore critical that the person appointed to this vital post has the credibility, independence and authority to meet those challenges. Engaging Parliament in determining the appointment, along with the Executive, will ensure that the new Governor has that credibility, independence and authority.

Those are the arguments, but let me say this to the House. I hear that there has been organising among Back Benchers to filibuster today and talk this Bill out. We have been here before, so let me say this to hon. Members. That is an extremely short-sighted approach, and it is not in the interests of the Government or good governance. If we get into the puerile antics that we have seen before, it just brings Parliament into disrepute and increasingly encourages people to judge this House to be degenerating into an irrelevant farce, especially on today of all days, when, outside this House, there are flood warnings across the country. Many hon. Members will want to return to their homes and their constituencies to be with their constituents. I therefore urge Members to take this matter seriously and ensure that their speeches are as brief as possible—I apologise for speaking too long myself—to enable the House to come to a decision that the Government can then consider. If the Bill gets talked out today, I will deeply regret that, but let me say this to the Government and to the House. This issue will not go away; it will return at a later date. I ask the Government and the House to seize this opportunity to make this reform. I hope that wiser counsels will prevail. I therefore commend this Bill to the House.

[Stephen Hammond]

(Wimbledon) (Con): I commend the hon. Member for Hayes and Harlington (John McDonnell) for the way he has introduced his Bill. He has made some thought-provoking remarks, but I would gently say to him that I am sure that Members on both sides of the House have been asked whether they would like to make a contribution today. I have cancelled a lot of things in my constituency to be here today, and I am now being called puerile and unprincipled, yet had I been speaking from the Opposition Benches or supporting his Bill from the Government Benches, I would now be principled and upstanding. Let me gently say to him that that is not entirely fair.

[John McDonnell]

The hon. Gentleman has never engaged in filibustering that I have been aware of, but he knows that last year it occurred on several occasions, and was publicly and roundly condemned for bringing the House into disrepute.

[Stephen Hammond]

I am grateful to the hon. Gentleman.

The Bill is supported by large numbers of Members from both sides of the House, including many right hon. and hon. Friends whose judgment and intellect I respect and admire. However, let me start by setting out the four points on which there are internal contradictions in the hon. Gentleman’s argument or where there are reasons to oppose the Bill. First, the role is unique, and its extension increases that uniqueness. Secondly, the Government are already putting safeguards in place through the Financial Services Bill. Thirdly, despite what the hon. Gentleman has argued, a lot of people would accept that what he proposes is a fairly major constitutional change. Moreover, an underlying point he made is that this Bill somehow fits with the principle “for the people, by the people” so that anything other than that would be unacceptable.

I recently participated in a transport debate and gave what I thought was a fairly good detailed speech; indeed, one or two people were kind enough to say it was useful. I was pleased to note that my hon. Friend the Member for Preseli Pembrokeshire (Stephen Crabb) who was the duty Whip at the time, said something like, “That was one of the dullest speeches I have ever heard; more time limits, please”! I hope the Whips will find my speech today to be equally dull; perhaps there is a case for time limits in debates such as this.

It might bring a little colour to the debate as well as a sense of purpose if we look at one or two of the Governors of the Bank of England over the last century who have been extremely powerful figures on the economy and powerful figures in respect of their independence from Government. We could reflect on how their appointments were made. Montagu Norman, for example, the Governor of the Bank of England from 1920 to 1944 was described by many as more of a bohemian artist than a banker. He liked to wear Sherlock Holmes-type clothing, was prone to nervous breakdown, regarded politicians as asses and openly said so. I just wonder what the Treasury Select Committee might have said to him when he was appointed.

--- Later in debate ---

[Stephen Hammond]

My hon. Friend is absolutely right, and that is one of my concerns. I have tried to lay out some arguments suggesting that giving a veto to the Treasury Committee does not necessarily enhance the independence of the position of Governor.

Moving on now to my concluding remarks—my hon. Friend the Member for Altrincham and Sale West (Mr Brady), the chairman of the 1922 committee, will be pleased to hear that—I just want to bring the hon. Member for Hayes and Harlington back to his contention that this would not be a major change to our constitution. The Bill would put in place a legislative requirement for the Treasury Committee to have a veto over this appointment. The hon. Gentleman talked about the evolution of this role, but if he truly believed that, why does the Bill not seek to give Select Committees the power to veto all appointments—for there might be a number of Members of this House who would like to have parliamentary control of the appointment of the governor of the BBC, or the chief executive of Network Rail, or, closer to our hearts, the chief executive of the Independent Parliamentary Standards Authority? The hon. Gentleman said that private Members’ Bills give Members an opportunity to suggest changes to the Government. He might have had even wider support than he already has if he had introduced a Bill giving Select Committees the power of veto over appointments, so we could have had that more general discussion. To give that power of veto over this one appointment gives rise to considerable concerns, however, and it would create a major change in the constitutional position.

[John McDonnell]

I think that is the ideal argument for giving the Bill a Second Reading, so it can be amended appropriately.

[Stephen Hammond]

The hon. Gentleman and I disagree on that. I think it is the ideal reason why we should not give this Bill a Second Reading. We should be giving a Second Reading to the principle. We should be discussing the principle, not this specific case.

In my short speech this morning, I have tried to draw out a few reasons why it is absolutely right for there to be increased accountability and parliamentary scrutiny of the operation of the Bank of England and of its Governor. Although the Bill might appear to guarantee the independence of the Governor, it does not necessarily do so, and it would create a major extension of the constitutional position of Select Committees. Therefore, I hope Members will decline to give it a Second Reading.

--- Later in debate ---

[John McDonnell]

As extremely entertaining as the hon. Gentleman’s speech is, may I suggest that it is an example of the filibustering that, in the eyes of the general public, demeans the House? May I suggest that he addresses the Bill instead of using this mechanism in this way to embarrass himself and degrade the proceedings of the House?

[Madam Deputy Speaker (Dawn Primarolo)]

Order. That might be the hon. Gentleman’s opinion and the opinion of people outside the House, but the hon. Member for Finchley and Golders Green (Mike Freer) is in order. If he was not, I would prevent him from speaking. I appreciate that that is the view of the hon. Member for Hayes and Harlington (John McDonnell), and that he has now put it on the record, but the hon. Member for Finchley and Golders Green will be in order if he wishes to advance this argument.

--- Later in debate ---

[Matthew Hancock]

I certainly agree. The private consultation, for instance, would be a far better process to ensure that there is consensus and the strength of a broad agreement behind the incumbent, who has to rise above party politics once appointed.

There have been some great central banking success stories over even the last decade. The Reserve Bank of Australia has an appointments process similar to that of the UK, yet no Australian bank needed a bail-out—so far—or suffered a downgrade, and Australia avoided recession. The Governor of the Bank of Canada is nominated by independent directors of the bank and confirmed by the Government. During the global recession, Canada’s GDP declined by 3.4%, compared with 4% in the US and more here. Not a single Canadian bank failed or required an emergency capital injection from the Government. Today, employment and economic activity in Canada are back at their pre-crisis levels, whereas here they languish below those levels because of the depth of difficulties that we got into when a Government did not listen to the Governor of the Bank of England. In addition the Bank of Canada had regulatory control over their banks, as proposed in the new Financial Services Bill.

This Bill is no magic bullet. It brings in risks without rewards, it is of a deeply constitutional nature, it deserves all the scrutiny that it is getting, and I oppose it.

[John McDonnell]

On a point of order, Mr Deputy Speaker. Whatever Members might think of the Bill, I think that it is worth putting on the record the abundant criticism on Twitter and elsewhere about what is happening in the House today. In normal circumstances there would be an opportunity to claim to move that the question be now put—a closure motion—but that is not possible today because many Members have returned to their constituencies because of the flooding. It is completely understandable that they should do so to look after their constituents’ interests, but it is worth putting it on the record that that is one of the procedural issues we have had to face today.

[Mr Deputy Speaker (Mr Nigel Evans)]

I do not think I really need to comment on the hon. Gentleman’s statement.

--- Later in debate ---

[Mr Hoban]

I hate to say it, but I thought my hon. Friend was uncharacteristically uncharitable about our hon. Friends the Liberal Democrats. Perhaps they did not get the three e-mails that I got from the hon. Member for Hayes and Harlington imploring me to be here today. I answered that call, and I am sorry that more Members on his side of the argument did not do so.

[John McDonnell]

Will the Financial Secretary give way?

[Mr Hoban]

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

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

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

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

Financial Services Bill

John McDonnell Excerpts

Tuesday 22nd May 2012 Commons Chamber

[Lisa Nandy (Wigan) (Lab)]

After that exchange, I rise to speak to amendment 45, which stands in my name and that of other Members, with some trepidation. I shall try to keep to the point.

The amendment places a duty on the Financial Conduct Authority, in its role as the UK listing authority, to require all applicants to the stock exchange to report on the human rights and sustainable development impacts of their operations. The Minister has said that the FCA needs to be a single-minded regulator. The amendment would not distract the FCA from its strategic objective, but would serve to uphold the integrity of the market and the London Stock Exchange in the fullest sense of that term. As the hon. Member for Hereford and South Herefordshire (Jesse Norman) has said, we must uphold honour and morality in the markets, but we must also maintain Britain’s international competitiveness. The amendment will achieve both objectives.

Conveniently, the amendment is also in line with the Government’s policy commitments. In June last year, the UK, along with every other member of the United Nations Human Rights Council, endorsed the UN framework on human rights and transnational corporations, which for the first time provides a framework for business and human rights. It was an historic agreement, and the Government are very supportive of it. The Foreign and Commonwealth Office has been particularly enthusiastic in its support for its principles, but so far the Government have not spelled out how they intend to fulfil them. Listing requirements specifically relating to human rights and sustainable development will be a very strong first step. As some Members may be aware, the LSE is currently host to a number of companies that have been found guilty of gross violations of human rights, particularly in countries that are in conflict or deemed high risk, yet very few companies have been held properly to account for such actions.

Last June, Richard Lambert, former director general of the CBI, wrote an opinion piece for the Financial Times. He said:

“It never occurred to those of us who helped launch the FTSE 100 index 27 years ago that one day it would be providing a cloak of respectability and lots of passive investors for companies that challenge the canons of corporate governance such as Vedanta…Perhaps it is time for those responsible for the index to rethink its purpose.”

Our amendment would clarify rather than rethink the purpose of the stock exchange, allowing the FCA to take into account an applicant’s respect for human rights and sustainable development, in protecting the integrity and respectability of the exchange. That has been done elsewhere, such as in Hong Kong, and Istanbul, Brazil, Indonesia, Shanghai, Egypt, Korea and South Africa have all taken steps in that direction.

Such regulation would not be burdensome on applicants. Publicly listed companies already report on their social and environmental impacts as part of the requirements under the Companies Act 2006. This amendment would simply make explicit the requirement to include human rights and sustainable development in their reports and demonstrate to applicants that the Government do not tolerate or accept failure to respect human rights.

Apart from the moral argument, there is a strong business case for such requirements. There is increasing recognition that environmental and social factors can have a material impact on business returns and a wider impact on reputation. The gulf of Mexico oil spill—which forced BP to cancel its dividend for the first time since the second world war and to report its first annual loss in 19 years—should have removed any doubt that environmental and social issues can be vital to company success.

One of the virtues of London’s financial services sector is its sustainability, security and stability, yet we are falling behind other countries in our commitment to sustainability. The Bill provides a great opportunity for Ministers to get on the front foot in respect of this agenda. The FCA’s purpose is to uphold the integrity of the markets. I ask Ministers to consider that term in its fullest sense in respect of companies’ environmental and social impacts.

This is a probing amendment, so I shall not press it to a Division, but I will listen very carefully to the Minister’s response.

[John McDonnell (Hayes and Harlington) (Lab)]

I apologise, Madam Deputy Speaker, for coming and going from the Chamber during the debate; I have been chairing another meeting.

I congratulate my hon. Friend the Member for Wigan (Lisa Nandy) on the way in which she has promoted the debate on the issue and on her amendment. She has approached the matter articulately and with considerable compassion. She has demonstrated that ability to the House on a number of issues, and I congratulate her on her promotion to the Labour Front Bench.

--- Later in debate ---

[Steve Baker (Wycombe) (Con)]

The hon. Gentleman makes a compelling case, but are not directors already responsible under the Companies Act 2006 for many of the matters he raises? Would it not be more expedient to pursue directors?

[John McDonnell]

I understand where the hon. Gentleman is coming from but we have tried that and it has not worked. We sought under the recent Companies Act to increase the responsibilities on directors, but unfortunately we were unsuccessful. The evidence that came to the London Mining Network report, which I shall send to the hon. Gentleman, clearly shows that the existing system is not working, and this Bill provides an opportunity to enhance the powers of the regulatory authorities in this country.

My hon. Friend the Member for Wigan will not push the amendment to a vote. I understand why, although I am a bit more proactive on these matters. May I suggest to the Minister that the Government usefully look at the report and bring together the relevant representatives, including the existing authorities and the new individuals who will sit on the various authorities when the Bill has gone through, to discuss where we go from here? How do we ensure that we have an effective mechanism that includes the monitoring of corporate ethical behaviour within companies that are listed in this country and that gain all the advantages from that, such as reputational advantage, but that are doing our country a disservice through their operations in the developing world?

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

I am grateful for the opportunity to reply to this debate. The hon. Members for Wigan (Lisa Nandy) and for Hayes and Harlington (John McDonnell) have raised some very important issues and there is a lot of truth in what they say. The reputation of the UK listing regime depends partly on the behaviour of companies, and we need to think about that quite carefully. However, there are other forums in which these issues should be explored—I do not believe that the Financial Services Bill is the place for it. In the regulatory reforms we have brought forward, we have tried to be very clear about the responsibilities and focus of the new regulators, the Financial Conduct Authority, the Prudential Regulation Authority, and the macro-prudential body the Financial Policy Committee.

Matters of stewardship and corporate behaviour are predominantly the responsibility of the Financial Reporting Council, which is responsible for the stewardship code and corporate governance issues. I encourage both hon. Members to engage with the FRC on this issue. Of course, it is not only the FRC that is relevant. The hon. Member for Hayes and Harlington talked about the mining sector, and the Government are engaged in that debate. We are a strong supporter of transparency in the extractive sector and we are pressing for requirements to be placed on EU extractive companies to disclose the payments they make to Governments. That is flowing from the accounting and transparency directives. We are also very supportive of the extractive industries transparency initiative, under which companies publish the payments they make to companies in resource-rich countries, so we are aware of the need to increase transparency.

--- Later in debate ---

[Mr Hoban]

As my hon. Friend the Member for Wycombe (Steve Baker) highlighted, there is a responsibility on directors and there are criminal sanctions for criminal behaviour. We need to be very careful that we do not duplicate powers that already exist elsewhere and that we do not confuse the role of the regulators. It was the Treasury Committee that highlighted some of the problems in the existing regulatory system with the confusion of roles and remits. We want to be very clear in these reforms about what we seek to achieve.

The FSA—and in future the FCA—has a role to play. The FSA supports the FRC’s stewardship code through mandatory requirements on asset managers to disclose the nature of their commitment to the stewardship code or to explain their alternative investment strategy. Those powers will transfer to the FCA.

[John McDonnell]

I hope that what the Minister just said was helpful. Is he saying that the stewardship role that he envisages for the FCA will include an element whereby judgments can be made about behaviour in terms of corporate ethics?

[Mr Hoban]

I am saying that what we need to ensure in terms of the stewardship code, and what the FCA does, is to require asset managers to disclose the nature of their commitment to the stewardship code or to explain their alternative investment strategy, so the obligation is on asset managers rather than necessarily on companies themselves to disclose their adherence to stewardship matters.

[John McDonnell]

Will the Minister give way?

[Mr Hoban]

Yes, but I want to make some progress.

[John McDonnell]

All right, I will not be a pain any further. To be frank, that does not move the matter on. The Minister need not give an answer on this tonight, but it would be incredibly helpful if he or one of his colleagues met my hon. Friend the Member for Wigan (Lisa Nandy), me and representatives from the London Mining Network to talk this issue through because there is clearly a gap between the different institutions, which corporate ethics seem to fall down when it comes to their being pragmatically adhered to.

[Mr Hoban]

I am always loth to offer meetings on behalf of colleagues, because it has happened to me, but the hon. Gentleman may wish to approach the Minister with responsibility for consumer affairs, who is also responsible for corporate governance and the role of the FRC. That might be the most productive furrow to plough.

On amendment 38, the hon. Member for Nottingham East (Chris Leslie) is absolutely right that we have heard it before. It is identical to amendment 150, which we discussed at some length in Committee before rejecting it. I do not think his arguments today were any more persuasive than they were a few months ago. I know that he will find that personally disappointing but I am sure he will get over it. In short, the objectives of each authority are broad enough to enable them to make the rules suggested in the amendment.

More generally, these issues are better considered in other forums, including those concerned with governance across the corporate sector. I also point out gently to the hon. Member for Nottingham East that the Department for Business, Innovation and Skills recently consulted quite widely on executive remuneration and that it included in that consultation both the suggestions that have been made, neither of which received significant support. [Interruption.] The hon. Member for Nottingham East says that it depends whom we consulted but it was an open consultation. Views were encouraged from across a wide range of bodies, including investor organisations, and I am sure that institutions such as the TUC and others would have taken part. I know that the Treasury Committee is also looking into this matter, so perhaps the hon. Member for Edmonton (Mr Love) can illuminate us about the conversations he has had this afternoon with Baroness Hogg.

Financial Services Bill

John McDonnell Excerpts

Monday 23rd April 2012 Commons Chamber

[Mr Hoban]

The hon. Lady makes an important point. It is my understanding that some of these prepayment schemes get their income from being able to negotiate a discount with the supplier of the goods, as well as, perhaps, from the interest they earn on the prepayments. The question then arises whether the revenue the prepayment scheme gets is sufficient to outweigh the cost of enhancing customer protection. Some of these schemes are administratively expensive, and the cost of protection may exceed the income generated, which would lead to that service being withdrawn from the consumer.

As this exchange demonstrates, some complex issues are involved. The hon. Lady is right to raise them, and it is right that the Government should continue to address them. Many people rely on these schemes and it is important that they are well protected. We should make sure that there are alternative sources of information for them, in order to enable them to judge where they might get best protection and, perhaps, earn some interest themselves on the prepayment they are making, rather than the supplier making that money.

[John McDonnell (Hayes and Harlington) (Lab)]

Both of the issues under discussion have cross-party support. There is a consumer affairs element in them, and this kind of legislation comes around very rarely. Indeed, I doubt whether we will see such an all-encompassing Bill for another decade. There does not appear to be any consumer legislation in the planned Queen’s Speech, other than the proposed groceries adjudicator Bill. Will the Minister therefore reconsider these two matters, and meet the relevant Members to see whether there is any way they could be better addressed in this Bill before it goes to the other place or before the final vote on it?

[Mr Hoban]

I think that there is adequate provision in the Bill on consumer credit; the FCA has the powers to tackle that issue and I am confident that it will be able to make appropriate use of the remedies available to it. A different issue about pre-payment schemes has been raised, but that does not fall within the scope of the Bill. Of course there is a mechanism in the Bill to move the regulatory perimeter if appropriate, but I think that it is the Minister with responsibility for consumer affairs who needs to respond on that point.

I know that we want to move on to deal with the next group of amendments, but before concluding I just wish to say that there is support across the House for new clause 4, which enables us to complete the transfer of regulation from the OFT to the FCA. That does yield important benefits for our constituents. We need to get that regime right if we are to ensure that there is a reasonable supply of affordable credit to our constituents and that they are well protected—that is the goal we are all aiming at. The Bill contains the powers to do that, and I commend new clause 4 to the House.

Question put and agreed to.

New clause 4 accordingly read a Second time, and added to the Bill.



New Clause 1

Retrospective reviews of Bank performance by court of directors and publication of court minutes

‘(1) Section 2 of the Bank of England Act 1998 (Functions of court of directors) is amended as follows.

(2) After subsection (5) add—

“(6) The court shall conduct retrospective reviews of the performance of the Bank with respect to its functions and objectives.

(7) The court shall determine the particular matters to be reviewed under subsection (6).

(8) The court must publish a report on each review carried out under subsections (6) and (7) unless the court decides that all or part of such a report should not be published for reasons of confidentiality or because it would endanger financial stability.

(9) When all or part of a report of a review is not published under the provisions of subsection (8), the court must—

(a) publish as much as possible of the report,

(b) send a copy of the full report to the Chairman of the Treasury Committee of the House of Commons or, in exceptional circumstances, inform the Chairman of the Treasury Committee of the reasons for not sending it, and

(c) publish the report or part of the report as soon as possible after the court decides that the considerations in subsection (8) no longer apply.

(10) After each meeting of the court, the Bank shall publish minutes of the meeting before the end of the period of two weeks beginning with the day of the meeting.

(11) Subsection (10) shall not apply to minutes of any proceedings where the court has decided that publication should be delayed for reasons of confidentiality or because publication would endanger financial stability.

(12) Where any part of the court’s minutes is not published under the provisions of subsection (11), the Chairman of the court shall inform the Chairman of the Treasury Committee of the House of Commons of the reasons.

(13) Any part of the minutes of a meeting of the court must be published as soon as the court has decided that the considerations in subsection (11) no longer apply.”.’.—(Mr Tyrie.)

Brought up, and read the First time.

--- Later in debate ---

[Mark Garnier]

I am grateful for my hon. Friend’s intervention, because that is exactly the point I am coming to. What is the accountability of the FPC? Ultimately, it has to come down, in some way, to the court of the Bank of England making an intervention to assess what is going on.

As we have discussed, the FPC will have far-reaching powers to intervene, some of which we may never know about. Some might be restricted to a 30-year rule, so we might hear about them in the future, although an awful lot may well be published. However, it is incredibly important that we look at what the Bank of England does to supervise. Currently, the court of the Bank of England is responsible for administrative matters, as we have heard—it is responsible for pay and rations. What we on the Treasury Committee want is the Bank to have a proper board—probably with a new name that reflects its updated role, although I do not think that will happen. We recommended that it should have a majority of external members who must have the relevant skills and experience, and the Treasury Committee wants the court of the Bank to be able to conduct—this is an important point—retrospective internal reviews of policy decisions of the Bank. The Bank’s response envisages limiting that to commissioning external reviews or conducting internal reviews only of the decision-making process of the Bank.

The creation of the FPC—on which my hon. Friend the Member for Beckenham (Bob Stewart) intervened on me—makes this governance issue incredibly important. As we have heard, the Monetary Policy Committee has just two tools: quantitative easing and interest rates, which it uses openly and publicly. We see detailed minutes of the meetings, followed up by evidence sessions by the Treasury Committee, which is also part of an incredibly important scrutiny process, which is fully transparent and very simple. However, as we have heard, the FPC has a large range of tools at its disposal, which means that it might not be able to give a full and open account to the Treasury Committee or publish entirely transparent minutes. Moreover, as I have said, it might be years before we know what intervention has been made. That is why we need an organisation that can intervene to look at what the FPC is doing and take on a strong governance responsibility.

That is why the court of the Bank of England needs to be able to look at the merits of the FPC’s policies and not just the method. The Bank’s board must not be restricted to finding out whether the wrong decisions were made but in the right way. That is why I would be incredibly grateful if the Minister gave serious consideration to new clause 1.

[John McDonnell]

I am not part of the charmed circle of the Treasury Committee, but I wish to add my congratulations to the hon. Member for Chichester (Mr Tyrie) and the members of the Committee on the work they have undertaken in examining the Bill as it has gone through the House.

I have tabled amendments 46, 47, 49 and 50, which seek to enhance the Treasury Committee’s role in the appointments of the Governor and deputy Governors of the Bank of England, and the chair and chief executive of the Financial Conduct Authority. I have done so because the background to this legislation is perhaps the most catastrophic failure of the Bank of England and the financial regulatory authorities that we have seen in 70 years. Their failure to predict or intervene effectively to ensure that the financial crisis was averted or dealt with adequately, speedily and effectively is there for all to behold. It has brought this country to its financial knees and into a recession that is turning into a depression, which is something we have not seen since the 1930s. The reasons for that have been evidenced today. New clause 1 would address part of the issue—namely, the lack of transparency of the old regime—but another element was the lack of accountability.

This legislation will create, in the Governor of the Bank of England, one of the most important roles in the country. The Financial Times editorial of Thursday 19 April stated:

“The central bank governor is not just some technocrat, but the most powerful unelected official in the country. His role has become more political since the crisis, not less, and will be even more sensitive when the BoE acquires new powers to avert financial crises. The next governor must win public acceptance and possess sharply honed political antennas. This might be harder for a foreigner.”

That last comment refers to the speculation about some of the candidates that the Government are considering.

In today’s Financial Times, the shadow Chancellor sets out his concerns about the range of powers and responsibilities that the new Governor will have, stating that only a superman or superwoman need apply, because the job will be so influential and will have such a wide range of roles and responsibilities. The Treasury Committee appreciated that fact very early on in the game, in its consideration of the new legislation. That is why, way back in November, it recommended that it should have a role in the appointment of this significant post. The Chancellor of the Exchequer argued against that proposition. I find it extraordinary that the Treasury Committee won the right to have a veto over the appointment of the chair of the Office for Budget Responsibility, yet failed to win a role in the appointment of the much more significant post of the Governor of the Bank of England. Indeed, it has no role in the appointment of the deputy governors, and no effective role in the appointment of the Financial Conduct Authority proposed in the Bill.

I genuinely thought that the Government were about to shift their stance on this matter, because, back in November 2011, the Treasury Committee stated strongly that it was not persuaded by the Chancellor’s refusal to grant it a role in the appointment. It went on:

“The power of veto with respect to the OBR was given to ensure the independence and accountability of that body. The Governor of the Bank’s independence from Government is crucial for his or her credibility. Given the vast responsibilities of the Governor, the case for this Committee to have a power of veto over the appointment or dismissal of the Governor is even stronger than it is with respect to the OBR. We therefore recommend that, in order to safeguard his or her independence, the Treasury Committee is given a statutory power of veto over the appointment and dismissal of the Governor of the Bank of England.”

I wholeheartedly supported that view. The Chancellor’s argument was that the Treasury Committee could not have such a role because the Governor was exercising an Executive function and should therefore be a Government appointee. That is an absolutely specious argument.

The legislation to give independence to the Bank of England went through the House, although I never supported it. That means that the Governor has more than an Executive function. The Bank is not an Executive arm of the Government. The Chancellor of the Exchequer and the Government cannot have it both ways. If they support the independence of the Bank of England from the Government, they must establish some other form of accountability to Parliament. If they do not believe that it is independent, and that it is simply an Executive arm of the Government, the Governor will be appointed directly by the Chancellor of the Exchequer. Even if that is the Government’s argument, the Chancellor of the Exchequer is still accountable to the House, so there must be some role that the House can play in advising him on the appointment of this important post.

My amendments would simply reassert the role of the Treasury Committee and thus Parliament itself in this vital range of decisions about appointments to key elements of the new structure proposed by the Government. Let me be frank. I agree with everything said about the role of the Treasury Committee Chairman and I agree that he needs to be called “right honourable” and the all the rest of it, but sometimes people are born great and sometimes people avoid greatness being thrust upon them. I do not know what negotiations went on, and it might well be that the negotiations were along the lines of, “We will not push for a veto on appointment as long as we can get some transparency and thus at least some element of accountability for that post to the Committee itself.” If that was the tenor of the negotiations with the Government—I happily allow the Treasury Committee Chairman to intervene to clarify it—I am afraid that the deal is not good enough.

What needs to be said very clearly by this House is that these are such significant appointments—particularly the Governor of the Bank of England but also the head of the Financial Services Authority in view of its key role in seeking to avoid further crises and in regulating this country’s financial services—that this House must have at least some say over the calibre of these persons.

[Mr Tyrie]

I can reassure the hon. Gentleman that the report does not reflect any back-room deals, but I would like to ask him a question. I am strongly sympathetic to the approach set out in his amendments. He needs to know that the Treasury Committee intends to hold pre-appointment hearings for these jobs in any case, including for the very senior jobs like that of the Governor, when he is identified. In the unlikely event that a nomination were challenged by the Committee, many would argue that the position of the person, even at nomination stage before he or she took up the appointment, would be untenable. In that case, does the hon. Gentleman not agree that the sensible thing for the Government to do is to engage with Parliament and with the Treasury Committee a little earlier in the appointments process?

[John McDonnell]

I wholeheartedly agree, but sometimes in relationships with the Government a line is drawn in the sand, which makes the right of veto sometimes crucial, particularly if there is a bloody-mindedness in the direction of policy making by the Chancellor when it comes to appointments to key posts. Although I take the gist of the hon. Gentleman’s argument and can see how the Treasury Committee could create a climate of opinion or produce a report that influences the appointment in a way that makes it impossible for a person to take it up because of the lack of credibility, I think there needs to be an even stronger role for the Treasury Committee and therefore Parliament in all these matters.

This is a crucial opportunity missed in respect of the Treasury Committee’s ability to influence the Government; in respect of the Government’s ability to demonstrate to this House a greater openness when it comes to the transparency of the operation of the Bank of England and of the new regulatory authorities; and in respect of the Government themselves in how they make appointments to these crucial positions.

[Ms Diane Abbott (Hackney North and Stoke Newington) (Lab)]

Does my hon. Friend agree that this is not just a matter of the relationship between the Government and this House, as it also relates to the relationship between the Government and the public? As we move into a period of austerity, if there is not sufficient accountability for the sorts of measures the Government view as necessary, it creates political instability. People do not see where the accountability lies for some of the austerity measures that are coming—not just in this country, but across Europe.

[John McDonnell]

That is exactly the point I am seeking to make. This post will have wide responsibilities and the decisions taken will have immense ramifications for the country as a whole and for all our constituents. Because of the unique role of the Governor of the Bank of England, the individual will be subject to public scrutiny in a way that a Bank of England Governor has never been under scrutiny before. I think he will become an individual in whom people must have confidence. I have to say that I have some anxieties about some of the names being bandied about at the moment, such as the appointment of a former member of Goldman Sachs, a company that does not have a particularly distinguished record in relation to the operation of economies throughout the world before and after the financial crisis.

--- Later in debate ---

Bill to be further considered tomorrow.

[John McDonnell]

On a point of order, Mr Speaker. The main purpose of the Financial Services Bill—

[Mr Speaker]

Order. May I appeal to Members who are planning to leave the Chamber to do so quickly and quietly, so that the House can do the hon. Member for Hayes and Harlington (John McDonnell) the courtesy of listening to his point of order?

[John McDonnell]

Thank you, Mr Speaker.

The main purpose of the Financial Services Bill was to secure corporate responsibility in the financial sector, and the batch of amendments that were not reached dealt specifically with corporate responsibility. May I, through you, Mr Speaker, convey a message to the Leader of the House, who is present? There will be a second day of debate on the Bill, and he may well wish to look at the programme motion again to establish whether we can debate the important elements of those amendments on that second day.

[Mr Speaker]

I am grateful to the hon. Gentleman for his point of order. Let me say two things to him in response to it. First, as he can see with his own eyes, the Leader of the House is present, and will have heard what he has said. Secondly, business questions on Thursday will provide a good opportunity for him to pursue the matter further—and, knowing his indefatigability, I expect to see him in his place on that occasion.

Public Service Pensions

John McDonnell Excerpts

Tuesday 20th December 2011 Commons Chamber

[Danny Alexander]

I hesitate to enter into any specific diplomatic disagreements of recent weeks, but my hon. Friend makes an essential point. The ability to negotiate such changes strengthens our fiscal credibility as a country, as well as the long-term sustainability of our public finances. To those who want to see that this Government are capable of making changes that reassure the markets and build confidence—not just in the short term, but in the medium term—this agreement is an essential building block. It is one that other European countries have not always been able to achieve—and again, it goes to show that this Government are making the right decisions in the national interest.

[John McDonnell (Hayes and Harlington) (Lab)]

Is not the truth of the matter that even with this settlement, public sector workers will pay more, work longer and receive less, that the Government have bullied into submission a number of trade unions, and that those that refused to submit have not walked away from the talks but have been refused access to them? Does the Chief Secretary not accept that his role in all this is to destroy the industrial relations climate in this country, possibly for a generation?

Prevention of Nuclear Proliferation

John McDonnell Excerpts

Tuesday 13th December 2011 Commons Chamber

[John McDonnell (Hayes and Harlington) (Lab)]

I, too, preface my remarks by stating that I have been a consistent opponent of the regime in Iran. I founded the Hands Off the People of Iran organisation in this country to campaign for the restoration of democracy in Iran and, with my hon. Friend the Member for Islington North (Jeremy Corbyn) and the hon. Member for Northampton South (Mr Binley), have signed a number of early-day motions in support of human rights in Iran. I have focused on the persecution of trade unionists, particularly those in the Tehran bus workers union, but I also led the campaign in this country to free Jafar Panahi, the film director.

Having said all that, I am extremely fearful of the statutory instrument under consideration, because I fear that it will take us into the cul-de-sac of war, which is an all too familiar path for us in this country: we seem to find an opponent, which is usually associated with minerals or oil; we then find that it is a threat to world safety; and we then find or concoct evidence of that threat. The International Atomic Energy Agency’s recent report failed to find any conclusive evidence of nuclear weapons production and, in fact, found no evidence of Iran’s

“diversion of declared nuclear material”

to weapons production.

The report relies on past evidence, which we have debated in the House before: a laptop computer, originating we believe from the Israeli or US intelligence services and referring to the development of a nuclear weapons programme by a certain scientist, Vyacheslav Danilenko. We were told at one point that this Ukrainian was a nuclear science expert, but we now discover that he was an expert in nanotechnology and had no real expertise in nuclear weapons. We were told also that there was a technique, supposedly being developed by the Iranians, involving a test explosion chamber, but we now know from the evidence of Robert Kelly, the chief of the IAEA for eight years in Iraq, that the chamber could never be used in a test.

[Mr Binley]

Will the hon. Gentleman give way?

--- Later in debate ---

[John McDonnell]

I would, but we are short of time, so if the hon. Gentleman does not mind, I will not. I am sure that he understands.

All that evidence led to the conclusion by Mr Mohamed el-Baradei, the former head of the IAEA, that he had “no confidence” in the allegations based upon it, but it has convinced the new head of the IAEA, Mr Yukiya Amano. WikiLeaks has, unfortunately, exposed comments from the US on Mr Amano, however, whom it describes as

“solidly in the US court”

and “ready for prime time”.

So I begin to doubt the independence of his judgment on the matter.

It seems that we are being drawn into an atmosphere of war, and sanctions lead to war. Recent research by Professor Robert Pape of the university of Chicago demonstrates that 95.7% of cases of sanctions since world war one have led to military conflict, but who suffers? I agree with my hon. Friend the Member for Islington North that it is not the elite, but the poorest. The reaction is usually for the ruling elite to blame the ills of the country on foreign forces, and sometimes it even unites the country against a foreign foe, but the tragedy is that sanctions often motivate a regime to seek to protect itself by acquiring the very weapons that we seek to rid ourselves of.

There has been military action on the ground already. We have evidence of that from various reports—not just the drone, but intelligence assets on the ground relating to assassinations. The chair of our own parliamentary Intelligence and Security Committee could not rule out such assassinations having been undertaken by Israelis, and he confirmed that on occasions the US and Israeli Governments have given authority for assassinations.

I just want to get on the record my fear that we have trodden this path before, and that after sanctions come the bombs, then invasion, then loss of life, destabilisation and a growth in terrorism, then usually the installation of a puppet regime and the privatisation and exploitation by western countries of the mineral and oil resources. I hope against hope that we are not embarking on that tonight with this statutory instrument, but I have this dreadful fear of “Here we go again”.

Autumn Statement

John McDonnell Excerpts

Tuesday 29th November 2011 Commons Chamber

[Mr Osborne]

We are addressing the problem of basic need, which was ignored by the previous Government. I know in places such as my hon. Friend’s constituency, the problem is acute. Let me write to her about the specific impact on her constituency and how many additional places the investment will create in the surrounding area.

[John McDonnell (Hayes and Harlington) (Lab)]

In my constituency, religious and community organisations are now providing food parcels to poor families. At the same time, we are seeing executive pay and remuneration soar. There was nothing in the Budget statement that addressed executive pay or remuneration. Are the Government going to bring forward some controls to tackle that obscene inequality?

[Mr Osborne]

I know that the previous Government were

“intensely relaxed about people getting filthy rich”.

We are introducing transparency in pay. We are bringing regulations before the House to force banks to disclose the incomes of their eight highest paid employees. We are also consulting on high pay more generally. We have introduced the bank levy, which the previous Government failed to introduce in 13 years and which the shadow Chancellor could have introduced when he was City Minister, but never did.

Public Service Pensions

John McDonnell Excerpts

Wednesday 2nd November 2011 Commons Chamber

[Danny Alexander]

My hon. Friend is absolutely right to celebrate Lord Hutton’s independence in this matter. It is a measure of the Opposition’s lack of interest in the subject that they have not even asked for the statement to be repeated in the House of Lords, so that Members there can hear directly from Lord Hutton. He did not recommend a level of adequacy, but he did say that the floor threshold should be the adequacy rates set out by Adair Turner. The offer that I am announcing today is 40% more generous than those floor adequacy rates.

[John McDonnell (Hayes and Harlington) (Lab)]

Is it not true that the vast majority of public servants will still be paying more and working longer, and that a significant number will still lose out? The protections for the lower-paid will not affect trained firefighters, trained teachers or trained doctors, or many other public servants. The accrued rights that the right hon. Gentleman has offered are actually a legal duty, and he will exacerbate the industrial relations climate by making an offer, but at the same time threatening to take it off the table.

[Danny Alexander]

I know that the hon. Gentleman has taken a long interest in these matters, but he is wrong in his characterisation. He is of course right that we are asking public sector workers to work longer, to set the normal pension age in line with the state pension age, but frankly that is happening to every single person in this country. Public sector workers cannot be immune from that trend any more than anyone else. He mentioned firefighters. Let me say that good discussions are taking place on the firefighters’ pension scheme. We have delayed setting a cost ceiling to take account of all the factors in the firefighters’ pension scheme, particularly the double accrual.

Sovereign Grant Bill

John McDonnell Excerpts

Thursday 14th July 2011 Commons Chamber

[Mr Osborne]

I agree that it is all about effectiveness and dignity, and I think that the Bill strikes the right balance between those who say that the monarchy is spending too much and those who say that it is not getting enough money for its official duties. The Bill has been discussed with the royal household, and it is content with it, which is why the whole process began with a Gracious message.

I want to clear up a misunderstanding. There will be a real-terms increase in the annual sums that Parliament provides, but that is because the royal household has been relying on a reserve of public money that has built up over time. That reserve has come to an end, and as I said a couple of weeks ago, the previous Chancellor of the Exchequer, perfectly reasonably when confronted with this issue before the general election, said, “I think we’ll wait until after the general election and let whoever are the Government then deal with it.” We are here because we have been relying on a reserve of public money that has run out. However, with the mechanism we are putting in place there will be a real-terms reduction of up to 9%—on our estimates—in public support for the royal household.

The shadow Chancellor and others, including the hon. Member for Glasgow South West (Mr Davidson), asked what would happen if there was a windfall from, for example, the offshore marine estate. At the moment, that constitutes a very small part of the revenues of the Crown Estate—about 1%, as I understand it. It is perfectly possible that, in the latter part of the decade or in the next decade, there will be a big increase, but, because I have accepted the spirit of the Opposition amendment, we will now have a review in 2016 and will be in a much better place to assess whether there will be such a windfall. However, I think that it is highly unlikely. No one is predicting a massive windfall in the next three or four years leading up to that review.

The reserve provides a check. The expenditure of the royal household is audited by the National Audit Office and if the money is not being spent for purposes for which it is provided by Parliament, it will come out in the audit. If there is an excess—in other words, if the sovereign grant is more than it needs—it goes into a reserve. That is a long-established principle. There is now a check on that reserve so that it cannot rise above 50% or thereabouts of the money from the sovereign grant, which was not the case before the Bill was presented to the House. The trustees—the Prime Minister, the Chancellor and the Keeper of the Privy Purse—have to provide an annual report to the Treasury, and through the Treasury to Parliament, on that reserve.

A couple of specific points were made about Marlborough house. The hon. Member for North Durham (Mr Jones) raised this point a couple of times. Marlborough house will remain the Government’s responsibility and is currently used by the Commonwealth Secretariat, as I am sure he knows. It will be up to the royal household to decide what premises it needs. It would, for example, be able to rent premises if it needed to, but I do not think that that is relevant to the support that we are providing.

The hon. Member for Bristol West (Stephen Williams), who is no longer in his place, asked about the mausoleum. It will stay on the English Heritage buildings at risk register until it is repaired in five to eight years’ time. My hon. Friend the Member for Gainsborough asked about the governance of the Duchies of Lancaster and Cornwall. I did not think it appropriate to open up that issue in this Bill, which is more narrowly focused on the official support that Parliament provides to Her Majesty.

I hope that I have now answered all the questions that have been raised, and that clause 1 can now proceed to stand part of the Bill.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2

Accounts of the Royal Household

[John McDonnell (Hayes and Harlington) (Lab)]

I rise to speak to amendment 1, page 2, line 31, at end add—

“(4A) The statement must be accompanied by information showing the numbers of directly or indirectly employed hourly-paid staff of the Royal Household working in or in connection with the Royal Palaces in London who in the financial year in question were paid at or below £8.30 an hour.”.

I shall be as brief as possible, given the time constraints. The amendment is straightforward. Clause 2 proposes that the royal household’s accounts are to be reported. I am asking that a statement be included in that report to show the number of employees who are directly or indirectly employed by the royal household and who are being paid at or below £8.30 an hour. The reason that I have arrived at the figure of £8.30 is that that is the London living wage, as set by the Mayor of London, who has described it as the wage level designed to provide a

“minimum acceptable quality of life”

for people working in the capital.

The London living wage was started by a group of religious organisations, churches and trade unions 10 years ago, as part of a campaign by London Citizens. They came together to try to tackle poverty, and recognised that the national minimum wage did not allow people to avoid living in poverty in the capital city. They have campaigned over the past decade to press employers to pay the London living wage. They have targeted cleaners, in particular, who are living in poverty. They campaigned and they won. First, they won in a number of banks at Canary Wharf, then they came to Parliament and ensured that we paid our cleaners the London living wage. The campaign continued right through the capital, and more than 200 major companies have now signed up to the London living wage campaign. The Prime Minister himself described it as

“an idea whose time had come”.

The Leader of the Opposition appeared with him on a platform before the general election with members of London Citizens to sign up to the London living wage. Every mayoral candidate has supported it. Why? They did so because all of us want to see people living out of poverty. Yet in the royal household, which is only a mile and a half away from here, the workers who are employed by contracting companies including KGB—

[Chris Ruane]

The Russians!

[John McDonnell]

It is an unfortunate name, but there we are.

People working in the royal household for companies such as KGB and GreenZone are being paid £6.45 an hour, maximum. We have discovered that many of them are organised by the Public and Commercial Services Union, which is not recognised by the companies. Many of those people do not even have written contracts, which is an illegal practice. The number of jobs there has just been cut, and the work load has increased. Some people have had their hours increased, but they are still living on poverty wages.

The amendment would simply ask the royal household to publish the information on how many people working for the royal family, cleaning their rooms and corridors and serving them in different ways, are being paid below the London minimum wage. In this way, I want to recruit the royal household to support the London Citizens campaign. I want it to lead the campaign. As the Mayor of London himself has said, no company in London should be paying less than the London living wage. The Prime Minister, the Leader of the Opposition and, I believe, the Chancellor and the shadow Chancellor have signed up to the campaign in the past. The amendment simply seeks to tackle poverty wages in London. On that basis, I hope that we can expect the unanimous support of the House.

--- Later in debate ---

[Hon. Members]

No.

[John McDonnell]

On a point of order, Mr Evans. I do not wish to move the amendment at this stage. Having made my statement, I do not wish to delay the Committee, as there are more important amendments to consider.

Clause 2 ordered to stand part of the Bill.

Clauses 3 to 6 ordered to stand part of the Bill.

Clause 7

Review by Royal Trustees of Sovereign Grant

Manuscript amendment proposed: A, page 6, line 7, leave out ‘7’ and insert ‘4’.—(Mr George Osborne.)

[The First Deputy Chairman of Ways and Means (Mr Nigel Evans)]

With this it will be convenient to discuss the following:

Amendment 6, page 6, line 7, leave out ‘7 years’ and insert ‘3 years’.

Government manuscript amendment B.

Amendment 7, page 6, line 8, leave out ‘7 years’ and insert ‘5 years’.

Amendment 8, page 6, line 8, at end add—

‘(6) The Trustees shall also review the percentage for the time being specified in Step 1 of section 6(1) as soon as practicable if, over the financial year immediately preceding the base year, the income account net surplus of the Crown Estate increased by more than the trend rate of GDP growth.

(7) In subsection (6), “the trend rate of GDP growth” means the estimate of the trend rate of GDP growth most recently published by the Office for Budget Responsibility which is applicable to that year.

(8) Subsections (2) to (4) shall also apply to a review carried out under subsection (6).’.