Banking: Parliamentary Commission on Banking Standards

Lord Brennan Excerpts

Thursday 5th December 2013 Lords Chamber

[Lord Brennan (Lab)]

My Lords, the most reverend Primate has spoken with great force and clarity about matters of considerable moment to our society in a speech that will no doubt inspire the noble Lord, Lord Carrington, in his maiden speech.

We owe a deep sense of gratitude here in Parliament, here from the Government and outside from the public for the work of this Parliamentary Commission on Banking Standards, first, for its impartiality—the 10 members, nine of them politicians, could not be accused by any fair observer of having put party interest above public interest in the work that has been done here. The fact that the most reverend Primate has been described throughout the reports as “unaffiliated” is politically accurate but a graceless way of describing a Minister of religion. No doubt in future some other term can be found for that. Impartiality is exceptionally important. A great commission of this kind should be seen and respected at the end of its work, as this one is, because it represents the best standards of parliamentary behaviour.

The second reason for gratitude is the extent of the investigation, which is remarkable. There were many witnesses, yards of documents, innumerable meetings, specialist advisers and expert staff, all working together in a most effective way.

Thirdly, there is the speed of the commission’s deliberations, which is commendable. To examine the banking system of our nation after a disaster in July of one year and then by June of the following to have delivered five comprehensive reports is a real achievement.

Lastly, the quality of the commission’s analysis and conclusions is convincing. For all those reasons, gratitude, yes, but let us look at the process that produced its conclusion. First, there is the parliamentary power given to it to send for persons, papers and records: “You will come to Parliament to explain”. Secondly, there is the quality of inquiry of those who came to Parliament to explain. Fortunately, it was thought unnecessary to take evidence on oath, but the very threat that you might have to is an extremely good instigator of honesty by witnesses before the commission. Lastly, there was the use of specialist advisers; I understand that there were about 20 of them. That provides an administrative and process base of high quality. Most important is the fact that this was an evidence-based inquiry, it was in public, society knew what was going on and the conclusions have been regularly debated.

Such an inquiry has a continuum over 10 or 11 months, where the participants have a quality of intellectual dynamism lacking in those who subsequently, in Parliament, in government or in the public criticise or debate the contents of their conclusions. That work fully vindicates the view of the Commons Public Administration Select Committee when in 2008 it called for parliamentary commissions of inquiry in these terms:

“Proper parliamentary scrutiny should include the ability to undertake inquiries into significant matters of public concern. Parliament has, in the past, conducting investigations of this kind—and, as the great forum of the nation, should be expected to do so”—

not often, but when it does, to speak as part of the great forum of the nation. Indeed, only a few months ago the same committee asked for a parliamentary inquiry to be commissioned into the Civil Service.

The importance of that is not to be underestimated. Select Committees serve a purpose, which is basically to keep up with the regular, day-to-day activities of Parliament and the Executive. Joint Committees—there are five permanent ones—have specific objectives. Ad hoc Select Committees, such as the one that I sat on about the Chinook helicopter inquiry, are almost quasi-judicial. None of them performs the function that this commission has performed. Parliament challenged its membership through this commission to meet the concerns about the banking world. The commission has met that challenge. By its title, it has confirmed that the challenge is not just for Parliament; it is for banking and the community.

Einstein said:

“Not everything that counts can be counted. Not everything that can be counted counts”.

That elementary proposition should be the opening remarks in every inaugural lecture at the beginning of an MBA course at any university in the world. We should start with education. A couple of years ago the Yale Business School demolished its traditional mathematics-led, behaviour-ignorant course in business administration. It changed the title to “Honesty, The Value of Labour, Profit: Service to the Community”. Applications to the Yale Business School doubled in the first year. If you prescribe for greed, you will incentivise greed. This kind of course changes that at the beginning. Afterwards it is for bankers themselves to meet that challenge—the cultural challenge.

This commission has been a model of its kind, for the following reasons. First, it has been generally accepted by the public. Secondly, a great many of its recommendations have been accepted by the Government. Thirdly, it has given Parliament confidence in its own processes. Lastly, it provides a basis, as the most reverend Primate has reminded us, for a continuing challenge and for cultural change for the future. Changing banking for good is a challenge for us, not a conclusion for Parliament.