Financial Services (Banking Reform) Bill

Lord Barnett Excerpts

Wednesday 24th July 2013 Lords Chamber

[Lord Barnett]

My Lords, I noted that the noble Lord, Lord Deighton, in opening the debate told us again that the Government were committed to all the recommendations of the commission. Forgive me, but it does not seem to me, as far as the ring-fencing side of this Bill is concerned, that the Government have totally accepted what the commission said. The commission did not go as far as separation, which, like the noble Lord, Lord Lawson, I would very much like to have seen, but the Minister has ruled out separation under any description, and the commission did not do that. So they have not totally accepted ring-fencing—I will come in a moment to what I want to say about ring-fencing.

I know that the Minister is new to Parliament, but he talked about there being “full scrutiny” of this Bill in the House of Commons. Anybody with any recent experience, let alone going back to my time in the House of Commons, knows that under successive Governments, all Bills have been guillotined all the way through. They may have spent so many days in debate, but I do not know how many people were seriously looking at the Bill when they did so. They certainly did not look seriously at this one.

The noble Lord, Lord Deighton, called this a Bill of the highest importance. It may be when we have finished with it and when we see the government amendments. He should understand that it is very important, as my noble friend Lord Eatwell said, that we see those amendments at an early stage, because we may wish to amend them. We cannot do that without even seeing them, although we might guess and have a chance at doing so.

I turn to ring-fencing, which is all I wish to speak about this evening. On pages 4, 5 and 6, we are told time after time where the real power lies in this Bill. On page 4, subsection (3) says:

“An order under subsection 2(b) may be made … only if the Treasury are of the opinion that”,

and then, subsection (6) says:

“An order under subsection (2)(b) may provide for the exemption to be subject to conditions”.

Lower down that page, subsection (3) of proposed new Section 142B says:

“An order under subsection (2) may be made only if the Treasury are of the opinion that”,

and then there is a whole list. Lower down again, under proposed new subsection (5), it says:

“The Treasury may by order”,

while subsection (6) refers to,

“An order under subsection (5)”.

The whole way through, everything that has to be done under this section of the Bill can be done only by order of the Treasury, not by Parliament. It does not surprise me too much that the Treasury wants all these powers. In my experience, that is what it wanted and it seems to have got it. That is because a Bill does not really go through the House of Commons as fully as it does here in the House of Lords, so our job on this Bill—to go through it with great care—will be even more important.

We are told by the commission that on ring-fencing, if I read the report correctly, it does not want full separation as the noble Lord, Lord Lawson, and I might like to see. However, it would in certain circumstances be prepared to go to it. As I understand it, that has been ruled out under any circumstances by the noble Lord, Lord Deighton, and by the Government. The whole question of Glass-Steagall is very important and an important article was written by John Authers on it recently, on 15 July. His very interesting article spoke of the amount of bank assets as a percentage of GDP. In the United States in 2010, that amount was 81%, but here in Europe it is ginormous. In Germany, France and Spain respectively, the figures were 294%, 416% and 325% of assets as a percentage of GDP. That is because the banks have grown substantially, which is why they need separating. In the UK, for example, the most recent figures on 19 May showed that we had 492% of GDP as bank assets.

Merger after merger after merger has led to precisely the problem we are now seeing. That is why the banks were led to near failure in some circumstances and almost had to be bailed out in others. However, the Government are not prepared to consider that separation or even to debate it. It should be debated fully. It cannot just be dismissed; the issue is too important for that. I hope that during Committee and certainly later on the Bill, we will have an opportunity to consider it and whether it should remain as it is, with things being able to be done just by Treasury order.

Unlike some, I am not always of a suspicious mind, but on the lobbying question, I cannot help feeling that there might have been just a little lobbying by the banks of the Government. I would be glad if the Minister could tell us whether the banks were responsible in any way for the drafting of parts of the Bill. It would not surprise me if they were—it does happen. It could save a lot of work by giving them drafts. Did they discuss the drafting and were they finally happy with it as it stands? Those banks are a very powerful body. They were even more powerful when Angela Knight did the PR work for them, but we certainly know that they are a powerful group. It would be interesting to know what lobbying the banks did of the Government because it is very important that the banks should not be too happy about what we are proposing here, as the current situation is simply unacceptable.

I am not sure whether the Bill will not still be unacceptable when we finish with it. Of course, we are told that all these amendments will be tabled. I very much hope that we will have them at an early stage but, for now, we are left high and dry. I hope that we will see them quickly and before we get to Committee. We have from now until October, so there is plenty of time for the Government to draft amendments—or get them drafted for them.

The Explanatory Notes are very interesting as well. Paragraphs 11 to 17 make it clear where the real power lies. It lies with the Treasury, as I suppose was always intended. It has the powers to do just about everything and anything. It has given some powers to the Bank of England, and the Bank of England in turn has got the PRA and the FCA, renamed from the FSA—no doubt so they can have a lot of the staff from the FSA doing the job that they were doing before. It does not really help us very much to be told that, from the start, the Government simply do not accept any kind of separation.

It would be helpful—indeed, it might be useful—if the Minister could point out in a list where the Government have disagreed with the commission. I know that there have been various statements by the Treasury but before we start, perhaps we could have a list of where the Government do not quite agree with the commission—certainly on the area of ring-fencing. That is the essential part of the Bill and if we do not get it right, we will be back where we were and we will have failures again before too long. I hope that we will see that list before too long.

Meanwhile, when the Glass-Steagall case was referred to in that article—I did not finish citing it—it talked about “seven decades” of total peace. I know that that was a different era when the banks had not started to merge to the degree they have today, but it was a peaceful era. There were no risks to banks because the banks were totally separated. The Government are not prepared to consider that, but that does not mean to say that we should not be prepared to consider it. I hope that we will have an opportunity to do so. It may sound it, but I am not being party political here, I hasten to add. Indeed, the noble Lord, Lord Lawson, knows that I am not.

I certainly hope that our Committee will be looking at this for as long as we want. We cannot be guillotined like the House of Commons. We can take our time over these matters, although we do not need to rush tonight. I will finish now in the hope that the noble Lord, Lord Deighton, will at least give us those Government’s amendments before we come back in October.