Financial Services and Markets Act 2000 (Exemption) (Amendment No. 2) Order 2011

Lord Myners Excerpts

Monday 17th October 2011 Grand Committee

[Lord Newby]

My Lords, there seems to be a muddle over the consultation. The Explanatory Memorandum said that the summary of responses to the March 2010 consultation will be published shortly. I think the Minister said that it was published today. I do not know when the March 2010 consultation formally finished, but it was presumably quite a long time ago. It is indeed unsatisfactory that we do not have the results of that consultation.

However, I think it is appropriate to look at what the order says. It is an extraordinarily short order, and it says nothing, as the Minister said, about the detail of how this change will be effected. All it says is that the change will be effected and that Northern Irish credit unions will be brought under the ambit of the FSA. I do not know, but I would be surprised if there was a single, solitary soul in Northern Ireland who would oppose that change, particularly if they look at what has been happening south of the border in recent weeks. Only a couple of weeks ago, the Irish Finance Minister was called upon to inject €1 billion into the credit union sector south of the border, because many of those credit unions—and we are talking about a sector that is as predominant as it is north of the border—found themselves, as a result of rising unemployment and declining income, in some difficulties. Of the 407 credit unions in the Republic of Ireland, some 79 are now in need of this injection of capital. It seems likely not only that that will need to happen but that there will have to be some consolidation in the sector and smaller credit unions will need to merge.

My question to the Minister is, in a completely different sense to that of the noble Lord, Lord Eatwell, why it has taken the Government so long to bring this legislation forward, given that the majority of the population of Northern Ireland would be affected if their credit union got into difficulty. Even if we approve this order in due course, it does not come into effect until 31 March next year. My question to the Minister was going to be, and remains, whether he has any evidence that the travails that afflict the Republic of Ireland credit union sector are spreading north. Does he envisage that any individual credit unions north of the border will get into difficulties over the coming weeks and months? In the absence of any covering FSA jurisdiction, what would the Government’s response be were they to find themselves in the same position of the Government south of the border, where a significant number—in their case about 15 per cent of credit unions—required short-term capital support?

[Lord Myners]

My Lords, I broadly welcome the intention of this order, but I find myself wanting to ask the Minister why it has taken such a long time to bring it forward when it was self-evident that it was necessary and had been agreed by the previous Government and endorsed by the coalition parties when previously discussed. It seems lamentable that the Government have allowed the situation to go on for as long as it has without taking any necessary action.

When it comes to this particular order, we do not have sight of the evidence that we were assured would be available to us in informing our discussion and agreement. What harm would be done if the Government withdrew the order and brought it back after we have had an opportunity to consider the evidence that is so clearly necessary to inform our decision on this matter? It simply cannot be acceptable that the evidence has been published only this morning. As far as I am aware, no effort has been made to make it available to those who are likely to attend this session and discuss this matter. That is an inexcusable failure by the Minister and the Treasury, for which the Minister owes us a full and proper account. The right approach would be to withdraw this order until we have had adequate opportunity to discuss the evidence.

In the mean time, I support the question that the noble Lord, Lord Newby, asked. Can the Minister give us clarity, given that the Government have been so slow in bringing this matter forward, as to the position of people with accounts and business relationships with Northern Ireland credit unions that have experienced difficulty? Do the Government stand behind them until such time as the Financial Services Compensation Scheme becomes an eligible right of those with relationships with credit unions? Will the Minister also assure us that to the best of the knowledge of the Treasury and the FSA credit unions are not currently offering products in Northern Ireland to which they are not entitled by virtue of their authorities? The Minister at the end of his speech listed some of the products that credit unions would be able to offer once this order was implemented, but which they are not currently able to.

Finally—I ask this having dealt with these matters myself—can the Minister tell us whether any further action is intended with respect of the failure of the Presbyterian Mutual Society, and in particular the directors?

[Lord Sassoon]

My Lords, notwithstanding the welcome rare appearance of the noble Lord, Lord Myners, as a former Treasury Minister in this Committee, it is a bit rich of the Opposition to talk about delay in this order. The Northern Ireland credit unions were left out of FSA regulation from the time that the Financial Services and Markets Act was enacted in 2000 until the previous Government left office 18 months ago. So for members of the Opposition to talk about the delay of this Government in not getting the order through earlier while on the other hand asking for evidence of a decision that they had taken before the election—seemingly without waiting for the evidence that they are now asking for—is indeed a bit rich. If noble Lords on the other side really want to persist with this line, this order will not get through, as it has to in the next few days and weeks, in order to give the people of Northern Ireland proper protection of their money in mutuals from the proposed transfer date to FSA regulation of March 2012.

What does the noble Lord, Lord Eatwell, who has come along with all kinds of clever procedural tricks this afternoon, have to say to the people of Northern Ireland if he is to deprive them yet further of proper protection under the Financial Services Compensation scheme? We need to get this order through if the people of Northern Ireland are to be protected from March of next year.

[Lord Eatwell]

My Lords, to refer to the fact that the Government have apparently published only this morning the evidence of the consultation and the raising of the objection of not having had access to it as a clever procedural trick is an abuse of language.

The point we are making is that the Government should take seriously the consultation with the people of Northern Ireland and make the results of the consultation available to the Opposition so that they can properly scrutinise and assess the impacts of the change. That is all that I asked for. I also pointed out that on 13 October the Merits Committee wrote to the Treasury requesting that the material be published, and it was not published until this morning.

As my noble friends and I have made clear, we are entirely supportive of this legislation. We want to get it through as soon as possible, but we want proper due process. This is an abuse of due process. I think it would be best if we let the Minister proceed with his Motion, because he is not interested in actually debating the issues.

[Lord Myners]

I would always defer to the advice and conclusion of my noble friend Lord Eatwell, but the petulant language used by the Minister is a sign of how rattled he is by this subject. I invite the Minister to clarify. He has said that if this order is not approved today it would deny the people of Northern Ireland certainty and protection in due course, with effect from the end of March next year. Can the Minister confirm that delaying the approval of this order for another week so that the necessary information can be reviewed by Parliament would mean that that certainty could not be delivered and that this is, therefore, the last chance for us to discuss it? In the absence of a clear answer I think that the should withdraw this order and re-present it to the Committee in a week or so.

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[Lord Myners]

My Lords, it is an extraordinary protocol whereby the evidence will be given only if we ask for it, otherwise it will not be volunteered, which is what the Minister appears to be saying. However, I shall support the order on the basis of the assurances that the Minister has given that the evidence is strongly in support of it. I shall support the order also on the basis that the Minister has assured us that failure to approve it would therefore slow the four consequential negative orders and could lead to the FSA delaying by up to six months taking on the responsibilities contemplated by this order. If the Minister’s assurances on that point are not as clear as I interpret them, I would continue to be of the view that the right and proper process is for Parliament to have examined the evidence before reaching a decision. However, I believe that the Minister has given us a very clear indication that it is absolutely critical that the order be approved in the next few days or weeks—I hope that by “weeks” he does not mean several weeks, but a week or two at the maximum.

Motion agreed.