Data Protection, Privacy and Electronic Communications (Amendments etc) (EU Exit) Regulations 2019
Debate between Baroness Kramer and Lord Ashton of Hyde(5 years, 2 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Ashton of Hyde
I agree with the noble Lord who is saying from a sedentary position that that is why he is here and why it is important. However, taking my personal experience of the telecoms SI, an hour and a half in the Moses Room and an hour in the Chamber seems to be pretty reasonable scrutiny. As for how the House in general and the Government are handling SIs—
Baroness Kramer
This is not just a matter of time; it is whether people have the appropriate information to be able to raise and challenge issues. That is the underlying issue that the Minister is running into in this House.
Lord Ashton of Hyde
I understand that point, and the noble Lord, Lord Adonis, made it to me forcefully in the Moses Room. This SI has been laid for some time and there have been opportunities for noble Lords to talk to and engage with anyone from the DCMS. I take the point that it is sometimes difficult for Back-Benchers to get information if they do not ask the department. However, I think that the Front Benches have been fairly open in exchanging information on any SI—that is certainly the case in my department. I offered the noble Lord, Lord Adonis, opportunities to ask questions well before the debate, as I think he acknowledged.
It is not for me to say how the House and its sifting committees behave and how the two committees have liaised with each other. However, I will take the noble Lord’s request back to the usual channels. I will not commit to there being a Statement tomorrow but I will certainly take back his point to make sure that the usual channels listen to what he has said. The making of Statements will be up to them—that is not for me; nor is it for me to comment on the work of the sifting committees of your Lordships’ House.
Lord Ashton of Hyde
I am sorry, but I do not agree with the noble Lord. When we have the UK GDPR, which these regulations will bring into place, there will be reciprocity in the need to have representatives in each other’s countries. I agree that this will be a change. We do not need them at the moment because we are in the EU, but this will be a result of leaving the EU.
Baroness Kramer
I want to get some clarity on this and perhaps the Minister will be able to help me. He is quite clear that, for a wide variety of companies, there will need to be one representative in the UK and, he seems to imply, one representative in the EEA. Is that correct, or does there need to be one in each country within the EEA—or does the individual in the EEA have to deal with different regimes because of the different local regulators and because it is representing a third country in its work? I am trying to work out how great the burden that he has indicated will be, even though he does not think that it will be part of the impact.
European Union: Regeneration Funding
Debate between Baroness Kramer and Lord Ashton of Hyde
Lord Ashton of Hyde
My Lords, I would not presume to educate anyone in this House, and certainly not my noble friend. I do not think it is a useful expenditure of time to rerun the arguments on the referendum debate.
Baroness Kramer (LD)
My Lords, in 2015, the European Investment Bank provided financing of €7.8 billion for infrastructure in the UK. As the Minister will know, that was long-term, patient money for which there is no alternative source. Can he give a guarantee to our local authorities that the UK will continue to participate in the European Investment Bank, or will they need to begin cancelling the various projects in development that require future EIB funding?
Lord Ashton of Hyde
My Lords, I have already said that we will provide clarity. However, these are complicated decisions. We have not announced them yet but we will do so shortly.
HMRC: Call Waiting Times
Debate between Baroness Kramer and Lord Ashton of Hyde
Lord Ashton of Hyde
That is a fair question. In April 2016, customers waited six minutes on average. Last year, it was 18 minutes. In May 2016, it was five minutes, compared with 19 minutes in May 2015. It has now gone down to two minutes 53 seconds, which is progress.
Baroness Kramer (LD)
My Lords, the NAO report also identified that HMRC is planning swingeing cost reductions in this area in upcoming years, relying on a shift to digital and online to pick up almost all the questions and requests that it gets in this category. Given the failure to deliver projects like that on time and in a way that works for customers, what is plan B? Is it something other than taking all the back office staff from PAYE and knocking that operation into disarray, which is what happened last time?
Lord Ashton of Hyde
The introduction of online services was one of the problems that caused the waiting times. That is now working well. We have the largest number of online self-assessment forms ever, at January this year, and the largest number of on-time assessments. Progress is being made. As far as the estate is concerned, the noble Baroness is absolutely right: HMRC intends to make savings in the order of £100 million per year by reducing the estate down to about 17 offices—I cannot quite remember how many there are now. That is well in progress and will provide a better opportunity for the staff, who will have more opportunities within one large area. Some of the offices before, it must be remembered, had only 10 staff in them.
European Union Migration: National Insurance
Debate between Baroness Kramer and Lord Ashton of Hyde
Baroness Kramer (LD)
My Lords, although born in Britain and British, I lived abroad for almost 20 years. I found on my return that my national insurance number was exactly the same as the one I had when I left. Does the Minister agree that national insurance numbers have never been intended to or used to define immigration or even current residency in this country, and that anybody attempting to use those numbers in that way is quite deliberately scaremongering?
Lord Ashton of Hyde
I agree with the noble Baroness about the use of national insurance numbers. I do not know whether people are using that information to scaremonger or not. She is absolutely right that national insurance numbers are not there to monitor migration. We want people to register for national insurance numbers so that when they come here to work, even on a short-term basis, they contribute to this country.
Health and Social Care: Funding
Debate between Baroness Kramer and Lord Ashton of Hyde
Lord Ashton of Hyde
I take issue with the noble Lord’s figures. In 2010, the percentage according to OECD figures of GDP was 8.6% and in 2013 it was 8.5%. As far as the hypothecation of taxes is concerned, it is generally an established principle that we do not like doing that because it restricts flexibility. Ultimately, the taxpayer has to pay for the NHS and I agree with the noble Lord that taxpayers are prepared and want to pay for the NHS. They think that it is worth while—we all do. But we do not agree with hypothecating taxes beyond the fact that, as I said in my first Answer, 20% of NIC does go to the NHS.
Baroness Kramer (LD)
My Lords, my right honourable colleague, the Member of Parliament for North Norfolk, Norman Lamb, has called for a cross-party commission to take a long-term view on the funding needed both for the National Health Service and for social care. As far as I understand, he has not yet had a response from the Government on his call for that completely cross-party, non-political commission. Will the Government reply on that today?
Lord Ashton of Hyde
As far I am aware, the right honourable Norman Lamb has a Private Member’s Bill in the House of Commons, where these issues can be fully debated. Obviously, I cannot give an answer to him today.
Taxpayer Confidentiality
Debate between Baroness Kramer and Lord Ashton of Hyde
Lord Ashton of Hyde
I do not think that it is true to say that the tax authorities are hiding behind the doctrine. The doctrine of confidentiality that the noble Lord mentioned was passed by a Labour Government under the 2005 Act. As for Google, which is not the subject of this Question, the noble Lord should know, if he does not know already, that the tax that Google paid was based on taxable profits, not on turnover.
Baroness Kramer (LD)
My Lords, I find transparency very attractive, but does the Minister agree that a company’s tax should not be determined by the attitude of its PR department or even by its charitable ethos and that HMRC needs to put in place tough standards? Will the Government review the structure of business taxes so that global businesses cannot use tax manipulation as a way to outcompete domestic businesses and small businesses as they do today?
Lord Ashton of Hyde
My Lords, the Budget is on Wednesday. I am not going to talk about tax policy.
Banks: Internet Banking
Debate between Baroness Kramer and Lord Ashton of Hyde
Lord Ashton of Hyde
I accept that old IT systems are more difficult to modernise than starting from scratch. That is why many challenger banks are now in the pipeline, ready to compete with the older banks. The Government support challenger banks and encourage customers who wish to change their banks to do so, and 2.1 million customers have done so under the CASS system.
Baroness Kramer (LD)
My Lords, the unmodernised IT systems that the noble Lord, Lord Flight, just described add to the cost of every transaction by every customer. Does the Minister believe that this is an issue of customer detriment that ought to be investigated by the FCA? Will he back long-term bank investors who have been calling for far more disclosure of how the banks spend their IT money so that they can identify risks and support the banks that are making the necessary long-term investment?
Lord Ashton of Hyde
I agree that disclosure should take place within market norms, and that commercial organisations should be encouraged to disclose. I completely accept that. As far as the expense is concerned, it is a bit difficult; either we want the banks with old IT systems to bring them up to date or we do not, and to do so will cost money.
Taxation: Avoidance and Evasion
Debate between Baroness Kramer and Lord Ashton of Hyde
Lord Ashton of Hyde
My noble friend is right that we expect all companies, large and small, to be treated equally and to pay the tax that is due. This Government have reduced corporation tax. The quid pro quo for that is that when it is due on taxable profits, it should be paid. We are also tackling this internationally, because with multinational companies it has to be taken worldwide. That is why we have led the efforts in the G20 on the base erosion and profit shifting project, and we are now leading the group of 94 countries in the OECD which are implementing that.
Baroness Kramer (LD)
My Lords, my heart rather goes out to the Minister, so let me ask him an easy question. Fifty-five per cent of calls by ordinary taxpayers and small businesses are not answered by HMRC. Will the Government consider spending their rather derisory settlement from Google on staffing its phones, so that the many people trying to pay their taxes actually can?
Lord Ashton of Hyde
I answered exactly that question a few weeks ago, and I am happy to point out that HMRC has recruited 3,000 new staff into customer service roles on flexible working patterns to address just that point. This will provide 1,800 additional people working on telephone helplines outside normal office hours, when many customers choose to call. More than 900 people from across HMRC have also been moved into these posts. I think everyone agrees that the previous service was substandard, but it is improving.
Bank of England and Financial Services Bill [HL]
Debate between Baroness Kramer and Lord Ashton of Hyde(8 years, 4 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Ashton of Hyde (Con)
My Lords, this amendment provides for the Treasury to issue remit letters to the FCA, a measure first announced in relation to both the PRA and FCA in the Government’s productivity plan in July. The Bill already makes provision for the Treasury to issue remit letters to the PRC and the amendment will enable Peers to consider provisions for the FCA and PRC remit letters together. As the House will know, the Bank of England and Financial Services Bill generally relates to the governance of the Bank, rather than the FCA. However, we have been considering the best legislative vehicle for the FCA remit letter provision and have decided that it would sit best alongside the PRC remit letter provision. As to the remit letter’s content, the productivity plan outlined that remit letters will provide information on the Government’s economic policy and will make recommendations about aspects of that policy to which the FCA should have regard. The recommendations in the letters will not be binding and will not compromise, modify, or override the FCA statutory objectives in any way; neither will they relate to individual firms or cases.
As to the timing and frequency of the publication of the letters, we are aiming to publish the first FCA remit letters following Royal Assent for the Bank of England and Financial Services Bill, after which they will be published at least once per Parliament. The letters will be used to provide a steer on the Government’s economic strategy over that period, but letters could be sent more frequently if particular issues arise.
Finally, the Treasury must publish its recommendations and lay a copy before Parliament. I beg to move.
Baroness Kramer
My Lords, our one concern with this amendment was that it could in some way compromise the statutory objectives of the FCA as laid down by Parliament. The Government wrote to us with an assurance that that was not their intention. Today, the Minister read into the record the text of the letter. He said that the recommendations would not compromise, modify or override the FCA’s statutory objectives in any way. Given that a Minister’s statement in Hansard is a weighty commitment, we are satisfied with the amendment.
Lord Ashton of Hyde
My Lords, I am grateful to both the noble Baroness, Lady Kramer, and my noble friend Lord Naseby for raising this important issue. I will take each of their amendments in turn.
The amendment in the name of the noble Baroness, Lady Kramer, would add diversity of provision, including diversity of ownership, geography, community and size, to the list of factors to which the Financial Conduct Authority may have regard as part of its competition objective. The Government agree that access to suitable and affordable banking services is important for communities across the UK. The Government want to see greater competition in our banking sector, with more banks challenging the large incumbents. If communities or entrepreneurs want to set up a bank, either to serve their local community or to compete nationally, and can do so responsibly, Government and regulators should not be an obstacle to this.
This is exactly why the FCA is already required to promote effective competition in the interests of consumers of regulated financial services. We would expect its consideration of competition already to involve not just the number of competitors but the diversity of approach, including geographical location and community. In advancing its competition objective, the FCA may take account of various factors including barriers to entry for new providers of financial services, the needs of different consumers and the differences of businesses.
Baroness Kramer
Can I just add one point for the Minister? The FCA has recently completed a review of its competition objective, and he may be surprised to find that the word “diverse” does not occur anywhere in that review.
Lord Ashton of Hyde
After this, it will be alert to the need to look at diversity. I will come to how we deal with mutuals in a minute. On the last point about the needs of consumers and the differences of businesses, the statute is also clear that the regulators should recognise the different features of a diverse range of business models when pursuing objectives. This is achieved by the principle of good regulation whereby the regulators must have regard to,
“the desirability where appropriate of each regulator exercising its functions in a way that recognises differences in the nature of, and objectives of, businesses carried on by different persons subject to requirements imposed … under this Act”.
As part of fulfilling the existing competition objective, the Government have worked with the regulators to lower barriers to entry. That is why the Government created the Payment Systems Regulator to ensure all banks can access the payments systems on fair and equal terms.
These reforms and others have already had a significant impact, which I hope answers, in part, the noble Lord, Lord Davies. Between May 2010 and May 2015, eight completely new UK banks, all of different sizes and locations, were authorised by the regulators, including two new banks during this Parliament, with several more in the pipeline. This compares to just one new authorisation of a UK bank in the preceding five-year period. The PRA and FCA will also launch their new bank start-up unit on 20 January next year.
Furthermore, to encourage banks to provide services across a broad range of geographical locations and improve access to finance for small businesses across the UK, a number of measures have been implemented, which I will briefly go through. There is now the SME appeals process and the Business Banking Insight survey. The Government have also established the British Business Bank. These improvements complement another initiative: the postcode lending policy, which has allowed for these alternative finance providers and challenger banks to target regional lending “black spots” through publishing lending data by geographical region. This makes the British banking industry the most transparent in the world.
Given all the activity already taking place in this field, it is the Government’s view that the amendment in the name of the noble Baroness, Lady Kramer, will not add to the existing work being conducted by the FCA. It is clear the regulators already take these factors into consideration when fulfilling their competition objective, so this amendment is unnecessary. I therefore respectfully ask the noble Baroness to withdraw it in due course.
Turning now to my noble friend Lord Naseby’s amendment, I indicated in Committee that the Government looked favourably on the intention behind his original amendment. I now welcome my noble friend’s current amendment, which we are delighted to accept. I am extremely grateful to him for raising this issue, and acknowledge the work he has undertaken in advancing the cause of mutuality. I hope that introducing the amendment, which puts consideration of mutuality and other types of business organisation into both regulators’ guiding principles, reassures noble Lords, including the noble Lord, Lord Davies, that the Government strongly support a diverse financial services sector and the part that mutuals play in achieving it.
Lastly, the noble Lord, Lord Davies, asked whether an amendment was needed to the FCA remit letter to reflect the amendment that we will accept. We do not agree, and I therefore cannot give that commitment, because the provision for the remit letter already allows the Government to make recommendations about aspects of their economic policy relevant to the application of the regulatory principles, which will apply to the principles as amended.
Financial Stability: Central Counterparties
Debate between Baroness Kramer and Lord Ashton of Hyde(8 years, 4 months ago)
Lords ChamberRead Full debate Read Hansard Text
Lord Ashton of Hyde (Con)
My Lords, I think I shall have to talk quickly. I, too, thank the noble Baroness, Lady Kramer, for securing this debate and other noble Lords who contributed. It has been an important and rather select debate on a fairly technical subject. That being so, I will try to pick up a number of points made by noble Lords, but if I do not cover them I will check to see whether I need to write with a more comprehensive answer. In particular, I might have to write to the noble Lord, Lord Sharkey, on some of his points.
As today’s discussion has highlighted, central counterparties, or CCPs, are critical parts of the financial infrastructure. Their purpose is to stand between the counterparties trading a financial instrument, guaranteeing that if one of those counterparties defaults on its obligations, the other will receive what it is due. They perform the function of a firewall, preventing contagion and increasing market confidence. They are more important than they have ever been, as has been noted. In 2009, the G20 agreed to mandate the use of CCPs in over-the-counter derivatives as appropriate. Fifty per cent of the global over-the-counter interest rate derivatives market—the largest segment of the OTC derivatives market—is now cleared through CCPs.
This is one of the key post-crisis reforms, which the Government fully supports. Its implication, as noble Lords have recognised, is that CCPs are increasingly systemically important. Therefore, I would like to set out the steps that have been taken here in the UK to ensure their resilience and that—in the unlikely event of a CCP’s failure—the authorities have the powers to step in to minimise the impact on financial stability.
As noble Lords will be aware, the coalition Government acted as soon as they came into office to overhaul the UK’s regulatory architecture, and a key part of this was to put the Bank of England in charge of the supervision of financial market infrastructures, including CCPs. The Bank of England has met this new responsibility by creating a special financial market infrastructures directorate that reports directly to the deputy governor for financial stability, and a dedicated decision-making committee. The FMI function reports annually to Parliament on its work.
In supervising CCPs, the Bank holds them to exacting requirements that are consistent with international standards, as implemented in the EU through the European Market Infrastructure Regulation. Each CCP must collect sufficient collateral from each user to ensure that if that user defaults the CCP has ready funding to cover its obligations to its counterparties. Over and above this, CCPs must maintain a pre-funded “default fund” to cover any losses due to a defaulting user which are not covered by the collateral that has been posted to the CCP by that user. They must hold enough own-capital, collateral and default fund assets to enable the CCP to withstand, under,
“extreme but plausible market conditions”,
the simultaneous default of the two users to which it is most heavily exposed.
That is already a tough requirement yet, as UK regulation requires, all UK CCPs go significantly further than this and have in place rules which ensure that if the default fund were ever exhausted, the CCP could require its users to make substantial cash contributions to ensure that the CCP continues to perform an uninterrupted service. A raft of other requirements covers CCPs’ risk management, operational capital, governance, liquidity and other arrangements. Noble Lords should understand that CCPs are regulated in this country to strict standards designed to ensure that they are highly resilient. For example, when Lehman Brothers failed, it went through only 35% of the margin held by its biggest CCP.
The chances of a CCP failure are reduced still further by the significant capital and other reforms that have been enacted here and elsewhere to enhance the robustness of global banks and to develop arrangements to resolve failed banks, the CCPs’ biggest users, in a way that avoids them defaulting on their obligations to a CCP.
However, it is, of course, not theoretically impossible that a CCP could fail and it is essential that the Government are prepared. For this reason, in 2012 the Government passed legislation to ensure that the Bank of England can intervene to resolve a failing CCP in a way similar to how it can intervene to resolve a failing bank by transferring a CCP or its property to either a private sector purchaser, a bridge CCP owned by the Bank of England or any other person. The UK moved ahead of the rest of the world in introducing this legislation. In answer to the question asked by the noble Lord, Lord Tunnicliffe, international work is seeking to ensure that the necessary powers and standards in this area are enhanced and adopted globally. The Government and the Bank of England are playing a leading role in these discussions at EU level, in the Financial Stability Board, of which the governor, Mark Carney, is the chairman, and through the CPMI-IOSCO group of global regulators. The EU Commission itself is represented on the relevant groups in the FSB.
International standards on recovery and resolution are critical to prevent UK banks being exposed when using overseas CCPs and to ensure a level international playing field for CCPs. There is also further work taking place in the areas of stress testing of financial resources, margin requirements, which I will say a bit about later in answer to the question asked by the noble Baroness, Lady Kramer, and liquidity requirements to enhance CCP resilience further.
Given London’s leadership in this area—we have globally significant CCPs here, such as LCH.Clearnet Ltd and ICE Clear Europe—noble Lords will understand that it is essential that these standards are developed in co-ordination with the other major jurisdictions to ensure that CCPs in the EU are not put at a competitive disadvantage to those located elsewhere. This is a key priority for the Government going forward.
The noble Baroness, Lady Kramer, asked about recovery and resolution on CCPs. UK CCPs are required to produce recovery plans. In addition, the UK has a resolution regime for CCPs allowing the Bank of England to transfer some or all of the business of a CCP to a private purchaser, as I mentioned, and to transfer ownership of the CCP to another person.
As far as international developments are concerned, in October 2014 international central banks and regulators published guidelines on CCP recovery and resolution: the CPMI-IOSCO report Recovery of Financial Market Infrastructures and the annexe on FMI resolution in the Financial Stability Board’s Key Attributes of Effective Resolution Regimes for Financial Institutions. The European Commission continues to work on the legislative proposal regarding CCP recovery and resolution, which has not yet been published. This will supplement the resolution tools already available to the Bank under the UK resolution regime.
The noble Baroness also asked about stress testing. In October, the Bank of England said that it is considering explicitly including CCPs in its wider stress testing of the financial system over the medium term. She mentioned dark pools, which are something that the Bank of England is thinking about. Previously, non-standardised OTC derivatives presented a significant potential risk to the financial system due to the leverage risk exposures they presented to market counterparties and to their opacity. International standards have been developed and are being implemented that require counterparties to derivative trades that are not subject to central clearing to exchange margin to cover those exposures. Uncleared derivative exposures are also considered in the higher capital leverage requirements European banks will be required to meet. With regard to the transparency of these products, all derivatives trades by EU counterparties have to be reported to regulated trade repositories.
As far as the use of block chain, which is an interesting new development, this distributed ledger technology may represent a change in how payment systems work—indeed, it does represent a change in how payment systems work—but the use of this technology is currently very small. The Bank of England as supervisor of payment systems would continue to monitor its application.
On risk of contagion and greater price volatility from CCPs’ actions, are the scale of risks and extent understood? Banks are now far more resilient and both they and their supervisors will assess the risk against the CCP, exercising its assessment rights in full. As far as price volatility is concerned, international policy developments on recovery and resolution in particular are considering the adequacy of tools, including the impact of these tools on clearing members and clients.
The noble Lord, Lord Sharkey, asked what progress we are making on reducing interconnectedness between CCPs. Of course the whole point is that they are interconnected, so the Financial Stability Board, a global body, is undertaking work on interconnectedness and how these risks may be mitigated. The FSB will report by the end of 2016.
The noble Lords, Lord Tunnicliffe and Lord Sharkey, asked whether there was sufficient co-ordination on international standards for CCPs. We think co-ordination at an international level is working well, which is obviously very important. It is important for both financial stability purposes and for the competitiveness of the EU that CCPs are able to operate on an international level playing field.
The noble Lord, Lord Tunnicliffe, asked about the Senior Managers and Certification Regime, which we are hoping to apply in the Bank of England Bill. This will not apply to CCPs because these bodies are not authorised persons under the Financial Services and Markets Act. They have always been subjected to a specialist regime. The SMCR will not apply to them, but governance is a key focus of the Bank of England in its supervision of CCPs to ensure that commercial objectives are not inappropriately prioritised over systemic risk management, building on the PRA’s work during 2014 on governance, banks and insurers. The Bank of England does have the right powers to hold CCP senior managers to account.
Lastly—I am running out of time—do we think that the concept of “too big to fail” applies to CCPs? Well, they can clearly be systemic. This is not only due to the significant exposures, but more importantly because of their critical role in the operation of markets. That is why we have introduced legislation to establish a resolution framework for CCPs, and why we support the international and EU reforms to enhance the resilience of CCPs.
I apologise for not answering all the different questions, and I will definitely write to all noble Lords who have participated. I would like to thank again the noble Baroness, Lady Kramer, for securing this debate. I hope that I have shown in the limited time available that we do have a robust regime in place, but that the Bank and the Government are not complacent and are still working to develop national and international standards.
Baroness Kramer
My Lords, I would like thank all the Members who took part in this—my noble friend Lord Sharkey and the noble Lord, Lord Tunnicliffe—and to say to the Minister that we appreciate the efforts that he made to respond and look forward to the further Written Answers.
Bank of England and Financial Services Bill [HL]
Debate between Baroness Kramer and Lord Ashton of Hyde(8 years, 5 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Ashton of Hyde (Con)
My Lords, I thank noble Lords who have participated in this short debate. The general theme has been that the Government have not put forward a sufficient case for reducing the number of non-executives. I hope that by the end of the debate, we will have been able to elaborate on that. The noble Lord, Lord Eatwell, said that there seemed to be a pervasive feeling through the Bill that non-execs are a nuisance. That could not be further from the truth—good ones are essential, but too many non-execs are not effective. It is crucial to have very high-quality non-execs. I will come on to that as far as the court is concerned.
I agree with the noble Lord, Lord Sharkey, that we have got the figures right in terms of what we have at the moment and what we are going to have, but I come to completely the opposite conclusions as a result of that. I will try my best to outline the Government’s feeling and will also refer, to a certain extent, to some of the points my noble friend made about the academic evidence and the experience of commercial firms, which show that sometimes reduced numbers are more effective.
As noble Lords are aware, the Bank of England Act 1998 states that the court can contain,
“not more than 9 non-executive directors”.
This Bill does not make any alteration to this provision. Before I dive into the detail, it may be helpful to remind the Committee what we are seeking to achieve: a court that is effective in scrutinising the actions of the Bank, holding executives to account, challenging their thinking and exercising its statutory functions. A number of noble Lords have cast this debate in terms of avoiding groupthink, which I agree is very important.
Given that, there are two important factors to bear in mind about the issue we are discussing here, both of which mitigate the risk of groupthink. The first is the number of non-executive directors on the court, which the noble Lord’s amendment focuses on. The second, but no less important, factor is the quality of non-execs on the court. Let me first address the issue of numbers. Within the terms of the current legislation as written, the Government plan to reduce the number of non-execs to two. This will not weaken the court; instead, it will strengthen it.
Lord Ashton of Hyde
Yes—by two, to seven. We think that will strengthen it, because the governance of the Bank will be enhanced by enabling the court to become a smaller, more focused unitary board, as several noble Lords have mentioned.
A smaller court is something the Treasury Select Committee advocated in its 2011 report, Accountability of the Bank of England. It recommended that the court’s membership be reduced to eight, emphasising that a smaller court would allow a diversity of views and expertise while still being an efficient decision-making body.
Our proposals exceed the size of court recommended by the Treasury Select Committee, but a court of 12 is significantly smaller than both the court’s original size of 24 and its size more recently, during the financial crisis, of 19.
Lord Ashton of Hyde
I fear I cannot. Can the noble Lord help us? The answer is, no, I cannot tell noble Lords that.
Baroness Kramer
Perhaps I could be helpful on that point. As the noble Lord will remember, this legislation is adding one more insider, so the balance with eight would have been five insiders versus three outsiders.
Lord Ashton of Hyde
The balance would change if we do what the Chancellor has decided to do—to reduce it to seven—but, as I will come on to, the flexibility is maintained to have nine. The legislation says “up to nine”, and nothing in the Bill changes that. We are still operating on the original number of “up to nine”. The amendment would make it exactly nine and reduce any flexibility.
My original point was that our suggestion is smaller than the Treasury Select Committee’s original number of 12, the court’s original size of 24 and its size during the crisis of 19. The size of the court was identified as a barrier to its effective functioning during the financial crisis. We think that a smaller board will better scrutinise the executive. With fewer non-executive directors, each member has greater opportunity to pose questions to executive members and to debate with them. A larger court can encourage a round table of individual speeches, rather than enabling back and forth discussions and challenge to the executive.
As Professor Capie, former official historian of the Bank of England, noted in his evidence to the Treasury Select Committee, historically, larger boards have often consisted of “simply observers or rubber-stampers”. This was supported by independent evidence from the Walker report, which suggested that the ideal size for a board tends towards 10 to 12 people. Our proposal for five executive and seven non-executive members sits within this range. The Walker report notes that boards larger than 12 people become less manageable and less effective.
The Bank itself has highlighted the benefits of reducing the size of the court. In its 2014 report, it said that,
“consistent with best practice in the private sector, the Bank sees the value of continuing to evolve towards a slightly smaller body, with a non-executive chair and majority”.
Undoubtedly, board sizes in the private sector are on average relatively small. For example, according to the Spencer Stuart board index, the average sizes of boards in 2014 in the US and UK were 10.8 and 10.5 respectively.
Our proposals therefore align the court with current best practice for a unitary board. However, I accept that best practice can, and often does, evolve over time. Therefore, as I said, the current wording provides flexibility, but no compulsion, to increase the number of non-executives up to nine if future evidence suggests that this would be beneficial. Similarly, and importantly, this flexibility will ensure continuity and transfer of knowledge during periods of flux between departing and joining non-executive directors, as the noble Baroness, Lady Kramer, mentioned. But that is not the only reason for the change. We will retain the flexibility, but the normal number will be seven. Specifying that the court must contain an exact number of non-executives, as the amendment does, would lose those benefits.
Let me now turn to the quality of non-execs on the court, which is critical and was mentioned by several noble Lords, including my noble friend Lord Flight. The court has been transformed over the last three years. The Chancellor sought to appoint the highest quality team with significant experience of running large organisations and expertise in matters relevant to the Bank. All non-execs are appointed by the Queen on the recommendation of the Prime Minister and the Chancellor of the Exchequer. The appointment process is run by the Treasury and regulated by the Office of the Commissioner of Public Appointments. It is in line with best practice, with open competitions held for all positions. The Government look far and wide for the best candidates, with roles advertised in the international press. The result is a board of the highest quality non-execs chaired by Anthony Habgood, one of the most experienced and respected company chairmen in the country.
I was asked by the noble Lord, Lord Davies, what consultation took place on reducing the number of non-executive directors. In its December 2014 publication, Transparency and Accountability at the Bank of the England, the Bank made the case for reducing the size of the court. The Government included the proposal to reduce the size of the court to seven in the July consultation paper, with the consultation closing in September. No respondents opposed the proposed reduction in the size of the court.
Baroness Kramer
Would the Minister remind us how many responses there were to that consultation?
Lord Ashton of Hyde
There were not that many, but I cannot tell the noble Baroness the exact number.
Lord Ashton of Hyde
So clearly it was not a burning issue. As my noble friend Lord Flight said, no member of the court is from a regulated firm—that is absolutely true—which ensures no conflicts of interest. We think that that is the correct way forward. Of course, they bring a wide amount of experience and there are many members of the court whose description is a “former” director of relevant parties, including banks.
Finally, who made the decision to reduce the number from nine to seven? That was made by the Chancellor, on the advice of the non-executive chairman of the Bank. The proposed composition of the court, as recommended by the Treasury Select Committee, was a total of eight: the governor, two deputy governors, an external chair and four other external members.
Bank of England and Financial Services Bill [HL]
Debate between Baroness Kramer and Lord Ashton of Hyde(8 years, 5 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Kramer (LD)
Although this has been a brief debate, it is an important one. Can the Minister describe why he takes the view that the chief executive of the FCA is not inherently different from a fully outside member of the FPC, particularly when prior legislation would indicate that there is a close family relationship?
Lord Ashton of Hyde
I am certainly able to do that; I was just coming to that very point, I assure the noble Baroness.
We think that the balance of membership is appropriate, as the work of the FPC is one of the key elements of the Bank’s strategy to meet the financial stability objective. It is therefore essential that the Bank can be held accountable for its performance against that objective. The effect of the amendment would be to place the committee outside the Bank’s control.
Baroness Kramer
I am sorry to interrupt the Minister again, but he said that the effect of this would be to place the committee outside the Bank’s control, so he is describing the chief executive of the FCA as part of the Bank family. That is the logic of that sentence.
Lord Ashton of Hyde
I am sorry, but I do not think it is. If we say that the CEO of the FCA is one of the external members, that places it outside. I am coming to the question of whether you can describe the non-executive member as also external; I promise that I will come to that in a minute.
We should also consider the overall size of the committee. The noble Lord’s amendment would bring the number of voting members on the FPC to 13. Setting aside any superstitious concerns, there is a risk that the committee could become unwieldy and cumbersome. This could be particularly problematic for the FPC, as it is required to seek to make decisions via consensus, which of course becomes more difficult as it grows in size. The amendment would make the FPC the largest of the Bank’s policy committees. The MPC has only nine voting members and the PRC is likely to have 12 members. I believe that the additions to the FPC will be a net benefit to the FPC, but further expansion risks tipping the scales toward a detrimental impact on the workings of the committee.
I come to the question of the CEO of the FCA, to which the noble Baroness, Lady Kramer, referred. We are in no doubt that the FCA CEO should be counted as an external member of the FPC. The CEO of the FCA is not an executive of the Bank, and the FCA is entirely separate from the Bank.
There is no doubt that having the FCA CEO on the FPC is of huge value to the committee. It is true that her membership of the FPC brings particular benefits in terms of regulatory co-ordination, but she also has extensive relevant expertise, and, crucially, she brings an independent viewpoint and external challenge from outside Threadneedle Street, because the FCA is a completely independent body with a different set of objectives. It is also worth noting that this reciprocates the arrangement on the FCA board, where the chief executive of the PRA is counted, alongside the Treasury-appointed chair and the other members, as a non-executive. The CEO of the FCA is therefore eminently qualified to operate as an external, non-executive member of the PRA board.
In summary, the Government believe that it is appropriate to have an equal number of internal and external members, as the committee has today. This will ensure sufficient input from the Bank of England as executive and internal Bank of England expertise, while supporting the external, non-executive members’ role of providing a challenge to members’ thinking.
With those explanations in mind, I should be grateful if the noble Lord would withdraw his amendment.
Financial Services: Competition
Debate between Baroness Kramer and Lord Ashton of Hyde
Lord Ashton of Hyde
My Lords, to support the development of diverse finance markets for smaller businesses, the Government have established the British Business Bank, which brings together new and existing schemes into a single, commercially minded institution. The Chancellor also announced the launch of the Business Banking Insight survey. This will help the UK’s SMEs to understand their options, make decisions about who they should bank with and plan how they will finance their growth. Lastly, the Federation of Small Businesses survey found that more SMEs reported that credit was affordable and available than at any time since 2012.
Baroness Kramer (LD)
My Lords, the phenomenal and brilliant success of peer-to-peer lending is a vindication of this House, which in 2012 effectively strong-armed the Treasury into recognising that the industry both wanted and needed regulation in order to grow. Now, with UK-based peer-to-peers expanding across the European Union and new peer-to-peers springing up there, will the Government commit to work with Governments of other EU countries and the Commission to avoid what is turning into regulatory chaos, so that this is a single market from the beginning?
Lord Ashton of Hyde
My Lords, the Government are certainly anxious to have a proper regulatory system and will of course do whatever they can to make sure that we do not have regulatory chaos.
Tax Credits: Impact of Cuts
Debate between Baroness Kramer and Lord Ashton of Hyde
Lord Ashton of Hyde
My Lords, this is a strategic change in how we deal with welfare in this country. It is worth bearing in mind the problem: we produce 4% of the world’s GDP and 7% of the welfare payments, and nine out of 10 families were on tax credits. I completely agree with my noble friend that we want to increase people’s pay and lower the amount of tax they pay so that all families benefit in this country.
Baroness Kramer (LD)
My Lords, despite the Minister’s disdain for statistics, he will be aware of the Institute for Fiscal Studies report last week that demonstrated that, among the 8.4 million working-age households currently eligible for benefits and tax credits but containing someone in work, the average loss from the cuts to benefits and tax credits is £750 per year. Among this same group, the average gain from the new minimum wage is estimated at only £200 per year. Does he accept that statistic?
Lord Ashton of Hyde
My Lords, I assure the House that I do not have any disdain for statistics. In fact, I have an enormous pack full of statistics that I have tried to learn. The problem with the IFS study is that the £12.5 billion of net cuts to benefits and tax credits and the estimated £4 billion increase in wages do not compare like with like for working families, because the reduction in benefits includes cuts to those families out of work.
Debt Management Advice
Debate between Baroness Kramer and Lord Ashton of Hyde
Lord Ashton of Hyde
My Lords, although lead generators are independent and not regulated, the FCA requires debt management firms accepting leads from lead generators to satisfy themselves that the business has been procured fairly and in accordance with data protection privacy in electronic communication laws. The FCA is going through the authorisation process at the moment, as I said, and that is one of the things that will be taken into account. It has to ensure that the lead generators do things such as signpost to consumers the availability of free debt advice. The FCA has committed to undertake a review of its rules on unsolicited marketing calls, emails and text messages from consumer credit firms. Lastly, of course I am always pleased to meet the noble Lord.
Baroness Kramer (LD)
My Lords, the House will remember that the Government dithered on tackling the abuses by payday lenders until the noble Lord, Lord Sassoon—the Minister in the Lords at the time—took personal action and drove the change. Will Ministers today consider doing the same, because cold calling is making victims of vulnerable people on a daily basis?
Lord Ashton of Hyde
As I just said to the House, the FCA is looking at this. We are not in a position to instruct the FCA on what to do, but there are actions that can be taken on unsolicited calls that I can go into if noble Lords want.
Royal Bank of Scotland
Debate between Baroness Kramer and Lord Ashton of Hyde(8 years, 10 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Ashton of Hyde
That is not the prospect. Since the policy was announced, the shares have actually gone up. The independent advice we received from Rothschild said that giving a strong signal that it was ready for sale would help the share price. By letting some shares go now, the free float would increase and the benefit to the taxpayer would be increased. The Governor of the Bank of England concurred.
Baroness Kramer
My Lords, the Parliamentary Commission on Banking Standards specifically recommended exactly the study that my noble friend Lord Sharkey described because of the lack of diversity in the UK’s banking system. Given that report after report has identified lack of diversity and lack of local banks as the biggest barriers to securing both economic growth and financial stability, why did the Government specifically ignore diversity in the review that they carried out?
Lord Ashton of Hyde
My Lords, we have not ignored diversity. We are committed to increasing competition in banking to improve outcomes for consumers. The Government have an ambitious programme of reforms to increase competition in banking. This includes, for example, divesting both Williams & Glyn and TSB from RBS and Lloyds, creating a seven-day current account switch service, and delivering more data to enable customers to compare which bank is best for them—I could go on.
Vehicle Excise Duty: Carbon Dioxide Emissions
Debate between Baroness Kramer and Lord Ashton of Hyde
Lord Ashton of Hyde
I was referring to vehicle excise duty which, under the system introduced in 2001, simply addresses the amount of carbon produced. It does not promote one form of car over another: it just incentivises less carbon.
Baroness Kramer (LD)
My Lords, given the goals of tackling climate change, getting clean air and developing an ultra-low-emission vehicle industry in this country, where we have a chance of becoming a leading manufacturer, would it not be wise to continue to make sure that VED benefits are targeted at the ULEV sector so that we do not lose the advantages we have gained, since we do not yet have a sustainable market?
Lord Ashton of Hyde
The noble Baroness is correct that we should encourage vehicles that produce low emissions. The Government are investing in a wide range of measures to help improve air quality. Since 2011, the Government have committed more than £2 billion in measures to reduce transport emissions. These measures will address both nitrous dioxide emissions and particulates.
Greece
Debate between Baroness Kramer and Lord Ashton of Hyde
Baroness Kramer (LD)
My Lords, watching the events in Greece is like watching a car crash in slow motion, and we on these Benches hope very much that steps will be taken over the coming days and weeks to avert what is undoubtedly a lose-lose outcome for essentially everyone involved. I have a few questions for the Minister.
Everyone in the House will be concerned for British citizens who are travelling in Greece. For tourists, the advice is to carry cash. I understand that that seems to be the most obvious solution, but I do not think that anyone would recommend it for themselves or their family because it exposes one to extraordinary risk. What conversations are taking place with our consular officials in Greece to see if they can provide some better advice, and if this continues beyond a few days, on looking to work with financial organisations? American Express and Thomas Cook are organisations that come to mind in terms of going back to some of the older methods of payment like travellers’ cheques, which were used before the days of credit cards.
Can the Minister give an assurance that the UK banks have passed stress tests which look not just at the immediate fall-out of the impact on the Greek banks, but on banks in other parts of the eurozone which might be the victims of knock-on effects by predatory financial traders, and indeed of the normal actions of the market looking for other weak spots? Can he also assure me that conversations have been held with the bank regulators? At times of volatility, and this crisis could lead to one, there is an obvious opportunity for misbehaviour in the financial system. We have another burgeoning crisis in the US swap market and one would hate to see those bad behaviours use the opportunity to take advantage of the volatility that may result from this crisis.
Does the Minister agree with the Financial Times that this,
“is a soluble problem merely cloaked in an aura of impossibility”?
Although the British Government have pointed out that they are not directly involved because they are not members of the eurozone, surely this is the time for the Government to make strenuous efforts and urge all parties back to the table. Does he not also agree that this crisis in Greece offers up some broader lessons, one of which is that EU Ministers and Governments will not put up with endless game playing? As a consequence, as he looks at the EU’s own negotiations on reform, will he ask the Government to make sure that they do not focus on synthetic issues—quite frankly, like whether there are phrases about ever-closer union—but on real issues such as the standing of non-eurozone countries and whether they are on a par with others? Perhaps he will speak to members of his own Cabinet who think that playing with a no vote in a referendum is a way to strengthen Britain’s negotiating hand. That is the kind of childish behaviour that we have just seen get Greece into extraordinary difficulties. This is a time when everyone needs to act like a grown-up.
Lord Ashton of Hyde
My Lords, I thank the noble Lord and the noble Baroness for their comments. I shall start with the initial remarks of the noble Lord, Lord Davies. I shall just refer back to what the Chancellor said, because I do not see any part of the Statement where he compared this country to Greece. He said:
“If ever we needed a reminder of why we need to continue working through our plan to deliver economic security at home”.
Economic security at home is extremely important to deal not only with the obvious problems in Greece, which are not the same as we have here, but the other, unexpected problems that occur in the worldwide economy.
The noble Lord and the noble Baroness asked about British citizens. Of course, that is one of the most important issues as far as we are concerned. Greece is a big tourist destination, with 150,000 tourists normally going there in July. The Foreign Office updated its information both last night and again, I think, within the last hour. All British citizens should look at the information from the Foreign Office on the GOV.UK website because the situation is developing fast and that is the best way to get up-to-date information. The Foreign Office has been dealing with the Greek authorities and I can answer the noble Lord opposite directly: it has undertaken contingency plans to make sure that if the situation gets worse, adequate support will be provided for UK citizens in Greece and it will ensure that adequate resources are available.
I was asked what structures are in place in this country to monitor the situation. The Bank of England has primary responsibility for stability and is looking at this on a daily basis. The number of firms that deal with Greece is relatively minimal. The financial sector has reduced dramatically over recent months, with the latest figures for March showing that exposure levels were approaching a quarter of what they were in December last year. By way of comparison, they comprise less than 2% of the UK’s financial exposure to France. Direct trade and investment links are also minimal, with only 0.6% of total UK goods and services exports going to Greece—worth around £2.8 billion in 2013—while only $1.1 billion of Greek foreign direct investment stock comes from the UK. In fact, of all the periphery euro area economies, Greece receives the smallest amount of UK outward foreign direct investment.
I agree with the noble Lord opposite that a negotiated settlement is preferable. I also agree that the Government here will do whatever they can to help in that. They have been in touch with European institutions, but, obviously, as we are not part of the eurozone, we have less influence in this matter. But I agree with him that a negotiated settlement would be best. I have to bear in mind what the president of the IMF said: it is time to have some adults in the room when they get to negotiations.
The noble Baroness, Lady Kramer, asked about cash, which obviously is a risk. I think that it is sensible to take more cash than you would normally take. One could also take more than one card, if one has them. Of course, the problem is that those cards are no good if the banking system is not working and the ATMs have run out of cash—and I think that they will run out of cash fairly soon. She mentioned travellers’ cheques. Again, they are only any good if the banking system is open and working. Hotels, I think, fairly rapidly run out of cash.
The noble Baroness asked about the stress tests and the banks in this country. I cannot answer directly whether they involved a specific reference to a situation like Greece, but all our banks have passed their stress tests. These take into account instability in the economy, which is one of the tests—and the banks passed. There is much less contagion risk in the periphery than there was a few years ago. Countries such as Spain and Italy have reduced their exposure to Greece as well—it is not just this country. As for the discussions with the bank regulator, the Bank of England—the regulator in this country—has talked to other European institutions.
The noble Baroness said that this was a soluble problem. I think it is soluble with good will on both sides, but it will be very difficult. The performance of some of the players has made that more difficult, to be frank. On reform generally and the effect that this will have on our negotiations with the EU, I do not agree that ever closer union is a synthetic issue. When you have a eurozone, ever closer union is an absolutely important part of that. That is a real issue we have to address, and the Prime Minister is determined to do so.
RBS
Debate between Baroness Kramer and Lord Ashton of Hyde
Baroness Kramer (LD)
My Lords, I have been away from the markets too long over the last two years, at the Department for Transport, to know whether this is the right time to be selling off either RBS or Royal Mail. However, first, although I only skimmed it, I did not find that Rothschild’s report to be terribly enlightening. Secondly, if this is a fire sale to fill holes in the budget because the Government are foundering on trying to find that impossible £12 billion in welfare cuts, and have handcuffed themselves in terms of raising taxes through their commitment to a law to prevent them from doing so, that is absolutely the wrong answer. This should not be used to fill other holes in the bucket unless we are getting the best possible value for these two assets.
I want to make a final try to persuade the Government to take a much more constructive approach to returning RBS to private hands. The Government should be breaking this bank up, into either regional or community banks, to begin to remedy a critical missing layer in our banking system. The Government carried out a half-hearted review—I know how much they resisted even doing that review—of alternatives to simply passing this back as is, as it were, to the public. They used an investment bank to do the review, which was exactly the wrong choice—an institution which cannot understand the dynamic. This should go out to the public: there should be a discussion with small businesses and a general consultation to try to decide how we can best return RBS to the private sector.
Small and medium-sized companies find it difficult still to access credit, and that credit is vital to economic growth and absolutely vital for productivity, which the noble Lord, Lord O’Neill, has often talked about. On Monday, we had the debate on trade and investment, and noble Lords brought out the difficulties for small and medium-sized companies in raising export finance. Leading economies that successfully grow their small businesses, such as Germany, the United States and Switzerland, have some form of regional and community banking. We are missing this layer, and here would be a great opportunity. Of course we have new players—challenger banks and peer-to-peer lending—but RBS, broken up, would really shift the landscape. Surely keeping RBS as it is continues the too-big-to-fail and too-big-to-manage problems that we all bemoan. Although it is guilty of plenty of scandals, RBS largely failed the old-fashioned way by making appalling loans.
The taxpayer is not going to make money on this sale, so why not use it to achieve something much more important than immediately money—a shift in the banking landscape that would underpin growing prosperity? Once this opportunity is lost, it will never return.
I will make one last comment, on the fair and effective markets review. I need time to go through that in detail, but the RBS losses are a reminder of the depth and the consequences of the banking crisis. We all always knew that when the crisis itself passed, the banks would begin their special pleading, sweetened with a little blackmail, to reverse both the penalties and levies that they faced and the regulation that has now been introduced. I ask the Government not to go wobbly on us. We need the Government to stand tall and carry through on the recommendations of the Parliamentary Commission on Banking Standards and others to give us a secure banking system.
Lord Ashton of Hyde
My Lords, I thank the noble Lord and the noble Baroness for their remarks. First, the noble Lord opposite commented on the mention in the Statement of the economic plan. The long-term economic plan is the reason we are able to make this sell-off at the moment and why we think that it is for the benefit of the nation to do this now. We make no apologies for mentioning the long-term economic plan, which has been so successful.
The noble Lord referred to a rush to sell. There is no rush to sell and there is no question of a fire sale. The Government—the nation and the taxpayer—own 79% of RBS, and there is no question of selling the whole lot as a fire sale. At the moment, we are going to sell bits of it in tranches, first to institutions: that is the way that is most suitable and the way recommended both by the Governor of the Bank of England and by independent advice. We have met the tests that the noble Lord, Lord Davies, mentioned. We will obviously get as much as we can for the sale and certainly intend to get value for the taxpayer. If all goes well, based on prices at 5 June, there will be £14 billion more than we paid to rescue the banks. It is not unreasonable to put those together, because this is part of the overall government strategy of returning these banks to private hands so that they can operate in a more effective way.
I completely agree with the noble Lord opposite that it is the Government’s judgment in the end to decide on the price. It is the Chancellor’s responsibility to get the best price for the Government, and he is perfectly prepared to take on that responsibility. In fact, he mentioned in his speech that it would be much easier for him to wait until the share price went up and not do the initial tranche at a loss. However, he is not going to do that, but is going to make the right decision for the country.
The noble Lord, Lord Davies, asked why we do not have a red line, as with Lloyds. We are going to allow the sale to happen in tranches, as I said, and the price will depend on what happens as those individual tranches go through. It is a bit rich for a party that sold gold at an all-time record low in government to complain about Royal Mail and getting the price wrong.
It is true that the Chancellor made his annual Mansion House speech to bankers. That is a perfectly normal place to talk about economic policy. I have some sympathy with the noble Lord’s last point, when he asked why the Chancellor did not make the Statement himself and why the Treasury Minister here did not repeat it. I have to be honest and say that I asked that question too, but of course the reason is that my noble friend the Minister is doing important government work elsewhere for the benefit of the nation.
The noble Baroness, Lady Kramer, was honest enough to admit that she has been away from the markets too long to quote the correct price, unlike the noble Lord opposite. She referred to a fire sale. We are not, as I said, selling this all at once. The pricing of these things is very difficult, and it is important to know that the loss that people are talking about is only if we sold all of our 79% share at the existing price that pertained on 5 June. The loss or profit may go up and may go down. That of course applies to the overall £14 billion profit that I quoted, which is dependent on the price that pertained on 5 June.
The noble Baroness referred to a lost opportunity to reorganise RBS before we sell it off. That is a slightly different theoretical question. It is an important one, but it is beyond today’s remit and the question of price. However, it is important to know that our strategy in selling banks and putting them back into the private sector is because we want them to do their job properly of supporting SMEs and British business. They will do that better in private hands. That is what our independent advice told us. The governor was very clear about that.