King’s Speech
Baroness Liddell of Coatdyke Excerpts(5 months, 2 weeks ago)
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Baroness Liddell of Coatdyke (Lab)
My Lords, this was a very lightweight gracious Speech, especially on critical aspects of the economy. I know we are in the run-up to the Chancellor’s Autumn Statement, but the Speech makes it look as if improving our economic performance is of secondary importance. My noble friend Lord Livermore was very precise on that. The Minister was very upbeat about the economy. He probably does not read the rebel magazine, the House, because the previous Chief Secretary to the Treasury pointed out in it how difficult the economic situation was. He said that the tax burden would rise to 37% next year and that debt interest spending in 2022-23 was £112 billion, more than 6% of GDP, which is higher than any other G7 nation. He stated:
“Those are the facts. They’re unpalatable facts, but they can’t be avoided”.
I think it was a missed opportunity not to have more in the King’s Speech, but I will move on and talk about energy now. I am sure the noble Baroness the Minister, who is to reply, wants this section to be about the annual licensing rounds in the North Sea. Well, it is—because it is a stunt, supposedly to trip up Labour. It fails to take into account that, just a fortnight ago, we had a major announcement on drilling for oil and gas in the North Sea. Labour will honour the licences that were granted at that time, but we will not issue any more, because of the climate change issues but also because it is a dwindling reserve.
I was a young economist for the trade union movement when it started, and the only claim to fame I have to put me with the Queen and Margaret Thatcher was that I could never go to a rig because they did not have any ladies’ toilets. I remember very well how difficult the environment is. But the way forward is about energy security. The new licences can achieve that, I suppose, but, as I pointed out, it is a dwindling reserve. The legislative stunt will do huge damage to the reputation of the UK in the run-up to the next COP. It is very unfortunate timing.
The noble Lord the Minister knows that I am president of the Carbon Capture and Storage Association. I will pay the Government a compliment: to thank them for the £20 billion that has been allocated to CCUS in the Spring Budget. It is much appreciated but, alongside the £20 billion, the industry has made a £1 billion capex investment and is ready to make substantial capex of £42 billion between now and 2035. My point to the Minister is that the Government need very rapidly to confirm the allocation of that funding as the funding envelope for future projects depends on it. The country’s future as a leader in the field is dependent on clarity. Without clarity, the project pipeline is at risk; so, if the Government want to ring-fence energy security, it is vital that these spending issues are addressed quickly. We have between six and 12 months to resolve these very difficult issues.
We have in the United Kingdom about one third of Europe’s storage capacity and we could develop a sector worth £30 billion in taxable revenues by 2050. Other countries are waiting in the wings. They are ready to move. A clear timetable of our own for driving the programme forward is absolutely essential if we are to realise this country’s true potential. Only today, the press was reporting on the progress being made in sustainable aviation fuel to protect developments such as this. The Government need to get a move on. CCUS will create 70,000 new jobs throughout the UK if the clusters model is realised and will protect 71,000 jobs in existing industry. There is no time to delay; this is an opportunity, and it would be a sin praying to heaven for vengeance if we did not get a move on and did something about it.
Queen’s Speech
Baroness Liddell of Coatdyke Excerpts(8 years, 10 months ago)
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Baroness Liddell of Coatdyke (Lab)
My Lords, sometimes when I wander the corridors of this building, I feel a bit like my namesake, Alice Liddell, and I have a sense that I have wandered through the looking glass. I feel that when I see names such as those of my noble friend Lord Desai and the noble Lord, Lord Skidelsky, on the speakers list, when I pass my noble friend Lord Peston in the corridor and when I come in and hear the maiden speeches of the noble Lords, Lord O’Neill and Lord King. I am enough of a geek that the only autograph I ever asked for in my life was that of John Kenneth Galbraith, but I have managed to get out a bit more since then.
Many of the areas that I wish to cover have already been touched on, but I want to talk about growth, innovation and productivity.
The existing growth industry that I want to talk about is tourism. I suspect that some colleagues are saying, “She got the day wrong. Tourism was yesterday; we did culture yesterday”. The noble Lord, Lord Lee of Trafford, in his excellent speech yesterday referred to tourism as the Cinderella industry. I think that it is time to bring Cinderella to the ball, which means bringing it to the Treasury and to BIS. For too long it has languished in the Department for Culture, Media and Sport, yet it is one of our most successful growth industries. Inbound tourism is worth £24 billion a year to the UK economy and, indeed, it is continuing to break records at a time when domestic demand is softening. It is growing faster than many sectors of the economy, including manufacturing, construction and retail, yet we consign it to a department where it does not appear in the title and it does not even have a Minister. The Minister for Sport is presumably to do tourism at half-time. That is not good enough.
In terms of employment generation, a third of all UK jobs generated between 2010 and 2012 were in tourism. For politicians—I say this with a bit of guilt myself—the generation of jobs is the easiest part of growing the economy. Things such as zero-hours contracts help to grow jobs, but the hard bit is growing productivity, and some of that in the service sector has been drifting. It is interesting to look at how competitive the marketplace is for tourism. Australia spends £90 million a year on tourism, and £20 million alone on tourism from China. VisitBritain’s grant in aid for everything that it does is less than that.
I have a proposal to put to the Ministers on the Treasury Bench. It does not involve legislation—one thing on which I agree with the noble Baroness, Lady Noakes, is that we do not need more legislation. I believe that we need a machinery-of-government change. Tourism should be recognised as the third-largest service sector and it should be moved to BIS, where it would work together with our major inward investors in UKTI. That would get proper recognition for the one industry that can generate jobs not just in the northern powerhouse but in Cornwall, Galloway, Orkney and Shetland. It has the Heineken effect and it is time that we allowed it to grow up.
The other area that I want to talk about—innovation —was touched on by a number of noble Lords, not the least of whom was the noble Lord, Lord Newby. I declare an interest as a non-executive director of the Offshore Renewable Energy Catapult. The catapults were brought into being largely because of an idea from my noble friend Lord Mandelson, who asked Hermann Hauser to look at how we harnessed research and innovation and to make it into something commercial. There are now a number of catapults and in many instances they are proving extremely successful. The High Value Manufacturing Catapult has galvanised that sector and is doing extremely well. However, if you wish to innovate, you have to be prepared to have long lead times.
The area that, unashamedly, I am particularly interested in is offshore renewable energy and particularly offshore renewable wind. I am a Scot. We have two former Secretaries of State for Scotland sitting on the Front Bench, and I bet that the Barons whose statues are up there are glad that we are not here to talk about Scotland. The decline in the North Sea means that a skill shift needs be addressed rapidly to prevent employment dipping and those skills being lost to other markets. Offshore renewable energy is a classic area where that can be done. I want to say something to the noble Lord, Lord O’Neill, that I think will shock him: he will be used to the short term of industry but the short term of government is even more pernicious. If we are to change this industry, we have to invest now and invest for the long term.
Finally, I turn to productivity in general, about which there have been quite a few remarks in our discussion this morning. There is a very interesting pattern in the productivity dip in the United Kingdom. Is it not bizarre that here, with particularly liberalised labour markets, our productivity has not risen as fast as that of France, where it has gone up 2% and where the labour markets are particularly illiberal? One part of productivity is investment. Indeed, if we look at vehicle manufacturing, we see a significant increase in productivity because there is investment in technology, techniques, training and skills. The Minister talked about the significance of education in that regard. The other side of the coin is that in chemicals and pharmaceuticals, many of which are in that northern powerhouse, there is a dip in productivity. We have also had a dip in productivity in the financial services sector. The Minister is very good on acronyms—he gave us BRIC and MINT—and I would like to ask him to give us an acronym for productivity. We need something that we can coalesce around.
Solving this productivity problem is not a short-term but a long-term game, and I think that we need to take party politics out of it. We need to work together for the good of this country on issues such as productivity. The Finns do it wonderfully. They have a “Committee for the Good of Finland”. I think that we need a “Committee for the Good of Britain”. I cannot think of anyone better to convene it than the noble Lord and the noble Baroness on the Treasury Bench, but I challenge the Minister to come up with an acronym for it.
Queen’s Speech
Baroness Liddell of Coatdyke Excerpts(9 years, 10 months ago)
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Baroness Liddell of Coatdyke (Lab)
My Lords, my noble friend Lord Grocott knows me only too well. I would love to put in my tuppenceworth on Ukraine and the EU but I have a distinct sense that my country needs me at the moment—but maybe it thinks otherwise.
In his excellent contribution, the noble Lord, Lord Hennessy, said that there was a sense of a creeping estrangement within the United Kingdom, largely because of what was happening in Scotland. He is absolutely right and I had intended to raise his concept of a constitutional convention in the course of my remarks today. We have a situation in Scotland where there are now proposals from the three main parties on further devolution. The time is right to re-establish the Scottish constitutional convention to bring in civic Scotland, secular Scotland, religious Scotland and political Scotland together to look at how we move to the next stage of devolution. However, there are many other issues that we have to address and this sense of estrangement really troubles me.
In his excellent speech, my noble friend Lord Reid referred to something that has happened in the past 24 hours—a vicious attack on a young woman, Clare Lally, who had the temerity to voice the arguments for Scotland remaining in the United Kingdom. Part of the campaign against Ms Lally came from someone who, it turns out, is a special adviser to the First Minister, Alex Salmond, someone paid for by the taxpayer. Mr Gunn, a former journalist, has now apologised to Ms Lally but we now know that the social media campaign against her has been so vicious that she has been reduced to tears. She is the mother of two, one of whom is disabled, and she is a carer of the year. Sometimes when you hold high office you have to show leadership. The First Minister has to show leadership—he needs to sack this man. It is a test not only of Mr Salmond as First Minister but of Mr Salmond the man.
Some of us learnt today that JK Rowling has made a donation of £1 million to the no campaign. Set that against the £5.5 million donated to the yes campaign by a couple who won £161 million in the Euro lottery. The reason I mention Ms Rowling is that if anyone looks at the Twitter feed today they will be appalled. I cannot repeat some of the things that have been said. It contains words that I have never used nor ever will use. The politest—and I apologise to your Lordships’ if I cause offence—is where what purports to be a Scottish charity tweets that JK Rowling is a bitch for her Better Together campaign donation. This is a shame on my country and I am appalled. I urge the First Minister to stand up for the decent people of Scotland who will have nothing to do with this.
Turning to some of the other issues, I am not used to buying men’s magazines but I did buy GQ—partly to see what Mr Salmond had said about Vladimir Putin. However, I came across something even more interesting. Mr Salmond has said that, apart from going into monetary union with sterling, there is no plan B. In the GQ article he says that not only does he have a plan B but a plan C, D, E and F. Why are we not being told what plans B, C, D, E and F are? He was challenged two weeks ago to give his figures for the costs of starting up a new machinery of government in Scotland. He plucked out of the air the figure of £200 million. Well, tell that to the Department for Work and Pensions, which spent that much just on the pilot for universal credit. We need answers. It is insulting to the people of Scotland not to give us answers to these questions.
It has already been said by the three main parties that there will be no sterling union. Of course there will be no sterling union. It would be absurd for the rest of the UK to be prepared to bail out a foreign country, which is what Scotland would become, with a liability in its banking sector that is 12.5 times its GDP. I do not mis-speak: it is 12.5 times GDP. That would be barking mad. What is more, it would not be independence. The truly independent way is to have our own currency with our own monetary and fiscal policy and our own exchange rate. We need the truth and we need answers.
I would love to go on for longer, but come 18 September, I will be delighted if I do not have to raise this issue in your Lordships’ House again. I believe that the antipathy, anger, venom and bile that we are experiencing in this campaign, largely but not exclusively from the cybernats and from those in the yes campaign, is a sign that the people of Scotland realise that we are proud Scots who can make our contribution to the United Kingdom, have made our contribution to the United Kingdom and will, please God, continue to do so.
Financial Services (Banking Reform) Bill
Baroness Liddell of Coatdyke Excerpts(10 years, 6 months ago)
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Lord Glasman (Lab)
My Lords, I should like to speak in favour of the amendment moved by the noble Lord, Lord Sharkey. It is very important that we recognise the severity of the situation relating to the banks and precisely what happened in 2008. I commend the localism agenda of the Government in terms of politics, but I wait to see how the localism agenda applies to banking institutions and their restructuring. It is very important to see the four root causes of the crash.
The first is that it is not only the state that centralises power; it is also capital that centralises. There is a consistent tendency to oligopoly and then to monopoly, unless there are constraints on that. What we have seen, and what we continue to see, is that 80% of our banking still goes through the same failed institutions, and what we have is more of the same, rather than something distinctly different. What we have is a collapse of regional business investment, which is extremely harmful and manifests itself in two ways: in constraints on productivity on one side and, on the other, the extraordinary growth of payday lenders, as the banks cannot deal with local needs. So centralisation is one aspect of the crash, and a lack of accountability in the structures of the bank is the other. This is where I am very much in favour of what my noble friend Lord Eatwell says, with one proviso.
Relationality is crucial and, when there is representation of interests in the corporate governance of banks, you have a greater degree of honesty. If you look at the story with the Spanish banks and the German local banks, you find that the constraints on them were eased and they were, in fact, acting like normal profit-maximising banks. They had lost their regional commitment and got themselves involved in series of overextended loans, very similar to ours. I say to the noble Lord, Lord Flight, that that is not a condemnation of regional banks; it is a condemnation of the fact that they ceased to be regional.
One anecdote that crystallises the problem is the example of Northern Counties Permanent Building Society, which was established in 1850 and flourished through 150 years. It went through four depressions, grew and merged as a mutual in 1965—noble Lords will see where this story is going—with the Rock Building Society. It then became the Northern Rock Building Society, which did well until 1997, when it was demutualised. It became the fourth largest mortgage lender in the country and sponsored Newcastle United but it also, by the maximisation of returns, completely lost its asset. We do not need any symbolism here; Newcastle United Football Club used to be sponsored by Northern Rock and now it is sponsored by Wonga. That is the reality of the circumstance that you confront, and there is no virtue in that; it is of no benefit to anybody. There is centralisation, lack of accountability, recklessness and deceit. They are all part of the same story of being unable to hold anybody to account. Without incentives to virtue, unfortunately, you get incentives to vice. That was the system, and it is the system that we still have.
I want to speak for the logic and the virtue of the amendments proposed here. The first element is regionality. As I say, all the cases that my noble friend Lord Eatwell and the noble Lord, Lord Flight, referred to, concerning Germany and Spain and their regional banks, were due to those banks no longer being regional. When there is a constraint on the bank to lend within a prescribed geographic area, banks will flourish. We can see how effective that has been from the Sparkassen in Germany. I remember the noble Lord, Lord Flight, a while ago referring to the stability of the German system being based on its currency, but it is also based on the fact that there is a regional banking system that sustains business through ups and downs, and where there is a genuine local knowledge of what is going on in those businesses as well as a vocational work scheme.
The third part of this is the most important—that is, the representation of the skills and knowledge of the workforce and stakeholders in the corporate governance of the firm. This leads to a balance of interests that holds people accountable. I completely agree with my noble friend Lord Eatwell about the stress on regionality and relationships in the second part of the amendment; relational banking is absolutely essential. However, that implies local knowledge and the restoration of what we have lost, which is trust. So this is not a quick fix. I commend the work of the most reverend Primate the Archbishop of Canterbury in talking about a 10 to 15-year structure of reconstituting credit and trust in the nation. There will have to be a coalition between different stakeholders in doing so. But it is a terrible missed opportunity when we have an asset that has not been regionalised and has not been subject to proper balance of power in corporate governance, with no regional accountability in it to look at bad practice and correct it before it reaches the taxpayer. Above all, as the story of Northern Rock teaches time and again, if you maximise immediate returns on investment, you will lose the asset. There have to be constraints on that which allow capital to maintain its presence in areas and be a partner to business and families. In terms of regionality, relationships, stakeholder accountability and non-maximisation, this amendment holds the key to the establishment of the banking system that must come now.
Baroness Liddell of Coatdyke (Lab)
My Lords, I apologise to the Committee that I was not able to speak in the Second Reading debate, but I have followed the debate on this legislation very closely. I support my noble friend Lord Eatwell’s amendment but also wish to speak in support of some of the things discussed by the noble Lord, Lord Sharkey.
Airdrie Savings Bank is unique in Britain as it is the last mutual trustee savings bank in the country. I declare an interest as I have had an account there since I was six and my father also had an account there from the age of six. The difference between Airdrie Savings Bank and other banks is that it cannot offer the gizmos offered by the big high street banks. However, it offers a localised service that is completely trustworthy. There are no two ways about it: it has had its difficulties throughout the crisis, as has every part of the financial services industry. However, because it is unique, sometimes there is a risk that its needs are forgotten about. I ask the Minister to ask officials to look specifically at how an institution such as Airdrie Savings Bank can be protected. It is, indeed, a very venerable bank; my noble friend Lord McFall addressed an event at its 150th anniversary some eight or nine years ago. The bank is completely rooted in its community. The only perk its directors get is a fish supper once a month. There is no question of any extreme expenditure or remuneration being given to the bank’s directors.
I say to the noble Lord, Lord Flight, whose passion for financial literacy is well known in this House, that having a bank that is so extremely local means that financial literacy is not something we necessarily have to worry about. Indeed, it is located in a community that is largely financially excluded. Without Airdrie Savings Bank, many people would not have a bank account.
I have known the bank for many years. When I was Economic Secretary to the Treasury and Airdrie Savings Bank staff came down for a fiduciary interview with staff at the Bank of England, which was then in charge of regulation, there was a threat of a bribe being offered as Airdrie staff brought with them tins of shortbread. I can be extremely proud of Airdrie Savings Bank. As someone who, in various guises, has had to promote financial services in this country, there are not many other banks that I can be proud of. It would be a pity if, through this legislation and, for example, capital adequacy requirements, difficulties were put in the way of this superb institution. It is an old-fashioned institution but, frankly, would it not be a good idea if banking became boring and old-fashioned again?
Lord Higgins (Con)
My Lords, both these amendments have much to commend them. The point that I would like to pick up regarding Amendment 43 is the position of the banks in which the taxpayer has a large holding. Having bailed out a number of banks, it is extraordinary that the Government have stood back completely from any involvement at all in what those banks are doing. In the context of competition, which we are now discussing, there is a strong case for them to set an example. This would enable at least a degree of competition to be introduced at this stage without much delay.
Amendment 102 also has much to commend it. It suggests that the inquiry should look into a series of aspects with regard to banks such as the level of competition, the obstacles to it, other actions and so on. One should add to that a careful study of what the economies of scale in banking actually are, because I suspect the reality is that they do not exist to anywhere near the extent that the size of the banks at present would suggest. On the other hand, we would find that there were major diseconomies of scale, not least the enormous risks to which we have been exposed as a result of banks being the size that they are. We frequently say that they are not only too big to fail but too big to manage. It is clear that they are too big to manage, and that is a major diseconomy of scale.
If we are going to set up the kind of inquiry that the Opposition are advocating, which I would support, it needs to look at economies of scale in this context and consider whether—given that the banks seem to have been motivated as much by megalomania as by anything else—they are of an appropriate size or whether some consideration ought to be given to whether competition would be increased if they were broken up. It is curious that competition in this area has been, as far as I can see, in no way affected by this or any previous Government’s overall competition policy, which has simply not been applied here. If, as the noble Lord said just now, the major banks have probably 80% of the market—given that normally anything over 30% would be appropriate for an investigation—we need to look at that carefully.
The lack of competition is affecting two things: the supply of loans to consumers and small businesses in particular, and the price. It is clear that there is a serious lack of supply for businesses that are trying to get finance for expansion. Despite all the Government’s efforts, of which there have been a number, to increase the supply of loans to small businesses and others, the loans do not seem to be getting through to the people whom the Government would like to help.
As for the price, one has only to look at the cost of capital to banks and then at the amount that they are charging consumers to realise that the situation is lunatic. I wish my noble friend Lord Flight well because there must surely be scope for something to be done on that issue. The difference between the cost and the amount being charged is totally disproportionate. This came up earlier in Question Time, when my noble friend on the Front Bench replied that there is concern about the amount being charged by banks when compared with what is charged on payday loans and so on. A helpful and illuminating article in the press in the past few days brought out this point. I hope that one can get something done about that.
We have some way to go and noble Lords will no doubt wish to return to this matter on Report. I hope that we will then take a definite decision or, even more, that the Government will respond to the proposal for a study. However, this is only a study, and a number of other measures to which I have referred go wider than this. These measures could be taken now and have some effect on the appalling oligopolistic situation in the market at the moment.
Baroness Liddell of Coatdyke
My Lords, I found that to be a very interesting speech from the noble Baroness, Lady Noakes. She took up a point that I had been thinking about, but we come at the prevention of terrorism from a different point of view. I believe that with this legislation the prevention of terrorism interface would be through money-laundering. Certainly it could be wider than that in relation to sanctions regimes and so on, but the specific area of prevention of terrorism relates quite directly to the ability of organisations such as al-Qaeda to put money through the system, apparently cleanly. They hope—and are able to be fairly confident—that there would not be the rigorous review and analysis that there should be by sufficiently senior people within the banking system.
I do not have the knowledge and expertise of some of the excellent speeches that we have heard this afternoon, but I have an interest in legislating to prevent terrorism. It is a critical part of our banking system, and I am grateful to the noble Baroness for raising that. I hope that this is something that the Minister will look at.
The noble Viscount, Lord Trenchard, who I regret is not in his place, said something which I must admit prompted me to speak in support of the amendments of my noble friends. He spoke about the fact that we would seek to attract the best bankers, because they would be lured to places such as Singapore and Hong Kong and even increasingly to Shanghai. If a banker is sufficiently venal that he or she would chase the biggest pound, when bankers are not exactly paid the national minimum wage, rather than seeking to operate in an environment of the utmost integrity, then frankly I am not all that sure that we would want them in the British banking system. We have the ability through this legislation to underline our position as the greatest financial services centre in the world. It is specifically because of the venal attitude that we have seen that this economy and economies around the world were almost brought down.
I hope that in looking at the anti money-laundering aspects which my noble friends have raised in their amendments, the Government will think again about this. I do not think that there is a vast chasm here, and I do not take the view of the noble Lord, Lord Flight, who I often agree with, that there is far too much anti money-laundering legislation. Yes, that legislation can be profoundly irritating when you come up against it. There are an awful lot of things in life now that are profoundly irritating, such as having to put your toothpaste into a plastic bag at the airport. However, we live with them because we know why we have to.
Financial Services Bill
Baroness Liddell of Coatdyke Excerpts(11 years, 9 months ago)
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Lord Flight
My Lords, everyone will be aware that the F:SMA included a key brief to the FSA to advance financial education. My observation is that pfeg and some of the other charities have done a reasonable job, and that certain banks such as RBS provide reasonable courses, but that still in our schools financial education is extremely mixed. If people have not had financial education at school, it is unrealistic to think that they will get it as adults when they need it. It is an absolute prerequisite of life today that children growing up should become what I will call financially literate. We all have to look after ourselves so much.
This amendment is not exactly what I would wish. I would like financial education to be part of the required curriculum in schools and I have asked a question on that matter in the past. However, I have put forward this probing amendment to see whether the Government have to offer rather more than we have at present in terms of making sure that there is universal financial education in our secondary schools.
Baroness Liddell of Coatdyke
My Lords, I have felt passionately about financial education for a long number of years and I support the probing amendment in the name of the noble Lord, Lord Flight. I first became interested in the issue in the late 1990s in the aftermath of the personal pensions mis-selling débâcle when many highly educated and sophisticated people were mis-sold products, largely because of the impenetrable nature of the language in the retail product being presented to them and, harking back to some of the issues raised in the previous debate, the less-than- adequate performance of some independent financial advisers.
Since then my concern has become even greater as we have seen more mis-selling scandals, such as payment protection insurance and inappropriate hedging instruments for small businesses against interest rate movements. Added to that, there is constant pressure on people to get involved in financial instruments at very great cost—everything from store cards through to payday loans. There should be a fundamental understanding on the part of people that when they take out something like a payday loan, it is not a printing error when the rate of interest is in four figures. It is there deliberately as a means of making money.
This issue comes up regularly. FSMA looked at it. Every time there is a debate on financial services, financial literacy is raised. It has become motherhood and apple pie. However, a point will come when we start to take this seriously. I was lucky enough to go to a school in an area that had a mutual bank, the Airdrie Savings Bank, which continues to exist as the last surviving mutual savings bank. It provided certain financial education in schools. I have to say that there was probably a subplot because I still have the little silver bank and I still retain a passbook for the Airdrie Savings Bank. I have no doubt that the Royal Bank of Scotland did exactly the same when it did its work in schools. That is laudable, but at the end of the day the issues are now too great to leave it to charitable and well meaning organisations. There is a need now, for the well-being of the citizenry as well as the well-being of our financial services sector, to put financial literacy firmly on the curriculum, and I would hope not just here in England but in Scotland as well. I support the amendment in the name of the noble Lord, Lord Flight.
Baroness Turner of Camden
My Lords, I support what my noble friend has just said. For a number of years, I was chair of the ombudsman council of the PIA, which later merged into the FSA. We used to discuss the reports from the ombudsman and one of the things which bothered us enormously was the level of illiteracy in financial services. We began to worry about this and to wonder what we could do about it. Eventually we set up a sort of panel of interested, qualified people who would talk to schools and so on to ensure that we were doing at least something to try to remedy what we saw was an enormous problem with regard to education. Therefore, I very much support what my noble friend has said. She is absolutely right. We did our best then, but we were taken over and I have no idea whether the FSA continued what we had begun. Certainly we wanted to do that and we did it and it was quite popular for quite a long time. I hope that this amendment is taken seriously by the Government because it is a very important issue.
Lord Northbrook
My Lords, I support the views of the noble Lord, Lord McFall, on split-level trusts. When I was a private client investment manager I came across these extraordinary products, which offered marvellous returns. Income shares were offering 8% and capital shares looked very exciting in the forecasts and prospectuses of what would happen if the market went up 5%, 10% or 20%. But the prospectuses did not say that if the market went down 5% or 10% your shares would be wiped out. It seems to me that, for all those vulnerable people, the FCA has to warn of the downside risks of these vehicles.
Baroness Liddell of Coatdyke
My Lords, I support my noble friend Lord McFall in this amendment but I greatly regret the fact that the amendment is necessary. One of the reasons for my regret is the appalling reputation that the financial services industry is earning now as a consequence of the events of the past few years. It is a vital industry for the United Kingdom. It was based initially on the probity of the United Kingdom, which now has to be seriously questioned. It should not be necessary to put into a Bill a duty of care on vulnerable people. It should be a matter of course.
When my noble friend Lady Hayter began this afternoon’s debate, she referred to the issues that have caused such convulsions in the past few months and have led to a serious loss of trust in financial services in general. It would come as no surprise that some particularly vulnerable people, especially the elderly, would nowadays prefer to put their money in a sock under the bed because it is about the only place where it is likely to be safe.
If we are going to restore the integrity of the financial services industry, we as a Parliament must be prepared to show that we are prepared to speak up for the vulnerable. Those of us whose careers have taken us into the other place have had to deal with constituency cases. Quite frankly, a number of times I have felt like sending for the police when I have had constituents in with instruments that they have been sold, which, in many cases, have taken their entire savings away from them. You get not just the City spivs who you see on television programmes but people who live in a community selling wholly unsuitable products.
I suspect that the Minister will say that this legislation is not necessary. I urge him to reconsider that. If we do not put the consumer back again at the heart of the financial services industry, we will lose the competitive advantage that I hope we still retain despite the events of the past few years. We have to overstate to convince people that their interests are at the heart of what this country stands for in terms of financial services regulation.
Lord Peston
I support my noble friends, particularly my noble friend Lady Liddell. This takes us back to our earlier remarks today on the need for a professional body for the financial intermediary. I was very disappointed at the way in which the Government did not seem to recognise that as a matter of great concern. As I understand it, doctors have a professional body in the first place and, secondly, they have a code of conduct. Therefore, this sort of thing is not necessary for them because they know that that is how they have to behave. This is true of a number of other professions.
However, one group of people who claim to be professional—the financial intermediaries—have nothing like this at all. I think I am right in saying that there is no professional body whatever. The Government seem perfectly happy with that. They do not seem to see that they should at least encourage them to set up a professional body with a code of conduct, et cetera.
My noble friend Lady Liddell puts her finger on it when she says that we really should not be discussing this issue and that it should be taken for granted that the sort of things referred to by my noble friend Lord McFall could not happen. In a decent society, that should be the case. However, it is not the case. One of the great things about this House, until we are all thrown out, is that your Lordships accept their responsibilities, although our successors may not. It is important to draw attention to what responsibilities should exist in society. I believe that the Government should respond positively to my noble friend’s amendment.
Lord Sassoon
My Lords, the debate on this group of amendments has been very interesting. However, it has some characteristics of straying into Second Reading territory because it has gone much wider, albeit over very important areas, into questions of broad mis-selling standards in the industry, which we have discussed already this afternoon. Therefore, I will not go over all the points that have been made but stick to the issues that are the focus of the specific amendment, subject only to one general point about the important questions raised by the noble Lord, Lord McFall of Alcluith, on proposed new Section 1C—on the consumer protection objective, which clearly goes to the heart of this—and his observations and questions on proposed new Section 1C(2)(e), which concerns the general principle of care.
One issue around the drafting that we should bear in mind is that the FCA will be responsible for the protection of retail consumers, but will also have a responsibility for wholesale markets, professional markets and counterparties. The reason behind the drafting of proposed new Section 1C(2)(e) is to make sure that it encompasses both the very strong duty of care that is due to individual consumers, on the one hand, and the fact that between professional counterparties the nature of the duty of care is very different. Indeed, in the terms of this particular principle, there may be no duty of care under this provision if the market is purely professional—it is very different from a consumer product market. It is important to understand that background to the discussion. However, these amendments are very much concerned with protection of the consumer.
Baroness Liddell of Coatdyke
There is some confusion in my mind about what the noble Lord is saying. He is talking about the responsibility and the environment of risk in wholesale markets as against retail markets. Even in wholesale markets, there is now a need for a duty of care. The noble Lord was managing director of financial regulation at the Treasury, so he will be aware that from the time of Barings onwards there has been an issue about the duty of care in the wholesale market, too. I am not saying that it should be equated across the board with the duty of care to consumers, but no one who has watched developments over the past few years can take a laissez-faire attitude to what is happening in wholesale markets.
Lord Sassoon
I am not suggesting for one moment that there should be a laissez-faire attitude. I am merely pointing out that a very different set of parameters has to be used by the FSA, and will have to be used by the FCA, when dealing with different parts of the financial services market. To those who argued earlier that we should not lose caveat emptor, I point out that in professional-to-professional markets, of course there has to be a high degree of integrity. Recently we saw exactly what appears to have been going on in what are fundamentally professional markets. However, that is very different from the duty of care owed in the case that we are talking about, which is of selling products to vulnerable, disabled consumers. Wholly different considerations apply from those that apply in professional markets. I point that out because the noble Lord, Lord McFall of Alcluith, got into this broader question, and as background to the question that we need to come on to, which is whether it is appropriate to include amendments to highlight important issues about disability, ability and vulnerability that address consumer product markets.
Financial Services Bill
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Lord Phillips of Sudbury
My Lords, I would like to make one comment on the amendment moved by the noble Lord, Lord Eatwell, and then make some comments on the remarks of the noble Lord, Lord Peston. On the way in which the amendment is drafted, I am not at all clear about how the notion of a supervisory committee fits with the language of new Section 9B of the Bank of England Act 1998 in Clause 3(1), which talks about the Financial Policy Committee being,
“a sub-committee of the court of directors of the Bank”.
I am a very long-in-the-tooth lawyer, and the normal language of sub-committees is to make them clearly subsidiary and subject to not just the oversight but the decision-making of the body of which they are a sub-committee. I put that to the Minister because we have enough confusion in the Bill already and, as has been mentioned, the name “supervisory committee” has many connotations from other jurisdictions that frustrate his desire to make this clearer.
Given that the issue of clarity and comprehensibility has been raised by the noble Lord, Lord Peston, and others, this is probably the only chance I have to add to that and ask my noble friend if he will take profoundly seriously the way in which the Bill is being put to us. I venture to suggest that not one Peer in 50, however learned or experienced they are, will be able to get their head around these 168 pages. It is not just those pages, of course, since they cross-refer to hundreds and hundreds of other pieces of statutory legislation and instruments.
I hope that my noble friend will take back the undertaking that I thought I got two years ago to the effect that where we had a Bill of this nature with, as I say, constant cross-references, those of us who wanted to get our heads around it would be given the legislation that was amended by the Bill, with the amendments shown on the face of that legislation so that we could relatively quickly—I use the word “relatively” advisedly—get our head around it. I have to tell noble Lords that if they go to the Library and pull down the 1998 statute, they will find that subsequent amendments have not been incorporated into it and they will have to go off elsewhere to find them. The whole thing is totally counterproductive to the work of this House. Most of us have neither secretaries nor research assistants of any sort. It really is scandalous—I use that word—that as legislators we are not assisted as far as possible to do our job effectively.
If the Minister is having sleepless nights, I urge him to look at subsections (1), (4) and (5) in new Section 9B, where the language is so—I nearly used an Anglo-Saxon expression, which would have been much more colourful—hyper-complicated. New Section 9B(1) says that this particular sub-committee is to be called,
“the ‘Financial Policy Committee’”.
However, new Section 9B(4) says,
“The court of directors must keep the procedures followed by the Committee under review”.
Given that the Bill has just said that the way to describe the new sub-committee is as the “Financial Policy Committee”, which committee is meant in subsection (4)? Then new Section 9B(5) says that:
“The court’s function under subsection (4) is to stand delegated to the sub-committee”,
which is not supposed to be referred to as that at all, so perhaps that is another sub-committee that we have not heard of and which is defined 63 pages later. And so it goes on. I do not know about anyone else, but I think that I have spent eight hours so far in trying to understand Clauses 5 and 6. I may be becoming an old f—no, I may be losing my sharpness, but I urge the Minister, not only with this Bill but with so many other Bills that we are called upon to deal with, to make the task for us legislators as readily accessible and easy as possibly can be.
Baroness Liddell of Coatdyke
My Lords, I am delighted that cleverer people than me have found this Bill incomprehensible, because I have real fears that we will get very lost in the detail of this Bill, and we will certainly get lost in the alphabet soup of acronyms contained within the Bill. However, I will return to the substantive issue.
The Bank of England is to be the pre-eminent financial services regulator. A regulator has to be transparent, consistent, and readily understood internationally. I would be delighted if, when the Minister replies, he will explain to us why it is necessary to vest such untrammelled power in the Governor of the Bank of England. The governor becomes much more powerful than the Prime Minister, who is, after all, only primus inter pares. The governor becomes completely unchallengeable. That is why the idea of a supervisory board in the amendment proposed by my noble friend is sensible.
I will not get tied up on titles. The court concept is anachronistic, and it is not readily understood by our main competitors. I am much more interested in the substance of supervision. One of the key elements of the work of the Bank of England as financial regulator will be to insist upon the best kind of corporate governance that we can get in our financial institutions. It should, therefore, be an example in itself in how it is governed. I have no confidence that that level of modern, transparent, corporate governance is in the model that is outlined in this Bill, as I understand it.
If people are tied up with the history of the Bank, which is long and distinguished, we can still have chaps running around in pink coats, and we can still have a wonderful collection of silver. However, at the end of the day, if we, as a nation, are to remain a leader in the financial services industry, we have to have a system of governance of our financial regulator that stands up to very tight scrutiny. I therefore urge the Minister, when he replies to this amendment, to give us some explanation as to why the Government have not come up with a model of corporate governance that gives that kind of confidence.
We will come to other elements when we talk about the role of the governor. I am extremely concerned about a repetition of what happened in the run-up to the run on Northern Rock. Some ill advised, perhaps unintentional, comments by the governor contributed to the run on that bank. We cannot allow ourselves to get into a situation where something like that could happen again.
Lord Stewartby
My Lords, I do not want at any length to add to what many noble Lords have said, except to record that this is one of the most incomprehensible Bills that I have had business with. Several times I started on what I thought was a trail of decisions, and at the end of it I could not work out who did what and how they knew what they should do.
I have one small technical question for my noble friend that is along those lines. I know that “macro” means “long” in Greek. I do not know what is meant by “micro”—which means small—so far as it is applicable to prudential regulation. Is the micro bit about the size of the body being investigated or about the scale of the activities of the regulator? I am not at all clear about this. Having come across these terms “macro” and “micro” regulation, I found myself unable to work out what quite a lot of these fundamental things mean.
Unfortunately, under the old regime there was a lack of clarity about who did what and who was responsible. However, I am not sure that we are getting away from that, as we ought to. It is a difficulty, and I hope that my noble friend can shed a little light on it. Many who have spoken in this short debate have pointed out that the Bill is not very easy to follow, to put it mildly. I would strongly welcome anything that would make it easier.
Lord Eatwell
My Lords, I beg to move Amendment 7, which as noble Lords will see from the Marshalled List refers to the experience and knowledge of individuals appointed to the court; that the Chancellor should be satisfied that they have appropriate experience and knowledge; and that their presence would enhance the diversity of the composition of the court.
The immediate reaction to this amendment might be yes, of course, it is unnecessary; anyone who makes sensible appointments would do that sort of thing. However, if it is accepted, a statutory responsibility to ensure that the supervisory board or the court, whichever we have, has a diverse range of appropriate talents will be a crucial guideline that Chancellors must follow and when necessary justify.
The importance of this amendment lies in its combination of expertise and diversity. The crisis should have taught us all of the dangers of conventional wisdom. Conventional wisdom underpinned the decision-making in central banks and treasury departments throughout the world and Mr Greenspan’s confession of the way in which his decisions were distorted by a conventional view of risk analysis has already been cited by my noble friend Lord McFall. In building a successful court or supervisory board, we need the contrary, the awkward and the different to be part of the debate. This will not guarantee that we get it right but at least we will be more likely to than if we appoint a committee of well intentioned sound thinkers who all think the same way.
Diversity here is a reference to diversity of view of analysis and of opinion. There is no doubt that often diversity of view is correlated with other aspects of diversity, maybe of gender or of ethnicity. This is not what I am trying to get at here, it is diversity of view that I would like to suggest. It would be pointless, for example, to appoint a racially diverse, gender-diverse board, all of whose members happened to share the same analysis and views. The degree to which diversities are correlated will perhaps provide some guidance and inspiration for a Chancellor. This amendment is designed to be a permanent challenge to the Chancellor in the very important task that he or she has of deciding on the composition of the court and particularly the non-executive members of the court.
Baroness Liddell of Coatdyke
My Lords, I support Amendment 7. Looking at this amendment the casual observer might wonder why it is necessary. It makes perfect sense that you would not leave governance of the Bank of England—and therefore governance of the economy and our financial institutions—to a bunch of interested amateurs. Frankly, however, we have occasionally seen that happen with some of our financial institutions—we need only look at the trails of chaos over the years from banks such as Barings and onwards to the catastrophe of Lehman Brothers. If noble Lords wish to read a horror story they should read Michael Lewis’s The Big Short. I confess that I did not understand some of the complex derivatives being talked about until I read The Big Short, and I have spent most of my life in and around the world of economics.
It is critically important that there is a balance of knowledge, experience and expertise on the supervisory board, or whatever we choose to call it. It will need people with a wide range of competence, with experience ranging from macroeconomics to prudential regulation. It is a wide mix to put together.
The other side of the coin—a matter to which my noble friend referred—is diversity of opinion. In this case, as he pointed out, we are not talking about gender or ethnic diversity, although that would be very good to have. We heard an exchange within the past hour between two distinguished economists—my noble friends Lord Peston and Lord Eatwell—and there will undoubtedly be differences of view among any number of economists. I would love to throw behaviouralists into the mix of any supervisory board of the Bank of England. Quite apart from behavioural economics, it is how people react that can bring economic chaos.
The amendment may seem unnecessary because it is a no-brainer that you would seek to do this anyway. We have learnt along the way, however, that it is better to get such things written down. Then you will have a wee bit more of a chance of achieving them. I therefore support Amendment 7.
Lord Phillips of Sudbury
My Lords, I am afraid to say that I agree with the final remarks of the noble Baroness—it is a no-brainer.
I speak as a weary lawyer who is tired unto death of our legislation getting more and more prescriptive and complex as well as longer. If we cannot trust the Chancellor of the Exchequer to exercise sensible judgment in a matter of this kind then, frankly, he or she should not be Chancellor of the Exchequer. If, as it says in the amendment, the member has to add to diversity, what about integrity and independence? You could go on and on adding to and subtracting from the characteristics. I know that that is reflected in other parts of the 1998 Act but the amendment, for all its good intentions, is unnecessary and potentially disruptive.
If you want to play legalistics with this, you might ask what will happen if you have a full diversity of opinion on your board or court. Do you still have to add further diversity when you have got a full hand of diversity? As the provision is drafted here, you would. It is unpoliceable. For all those reasons, and despite its excellent intentions, I am against the amendment.
Financial Services Bill
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Lord McFall of Alcluith
My Lords, perhaps I may remind the House that Finance Bills in the other place are accorded the greatest status by being debated on the Floor of the House. If we are going to have equal status in terms of the scrutiny and examination of this Bill, the least we can do is send a message to the other place that we take this seriously, and that it has to be done on the Floor of the House.
Baroness Liddell of Coatdyke
My Lords, this should not go into Grand Committee, not least because of the historic significance of the past four years and what has happened to financial services—against the background of financial services as a major industry for this country—but also because this is a classic opportunity to showcase the wide range of expertise that is available in your Lordships’ House. This is not a Bill to be put into a corner and forgotten about. It deserves—and the public deserve to see us give—the kind of detailed scrutiny that legislation of this importance merits.
Lord Sassoon
My Lords, I am a little surprised by this discussion, not because I do not think it is an important debate but there have been one or two interventions from noble Lords who unfortunately were not here to hear this point addressed during the debate.
First, this was not a decision of mine. I will do whatever the House wants. I was not asked whether I wanted to do it one way or another and I see arguments for doing it either in Grand Committee or on the Floor of the House. This was discussed through the usual channels. I have not seen this sort of discussion in anything I have been involved in. I believe that the usual channels go through these things very carefully, and they came up with an agreement on this that I certainly am prepared to accept.
I also heard the noble Lord, Lord Eatwell, and the noble Lord, Lord Barnett, who is not in his place at the moment, arguing during the debate that the Grand Committee was a better place to take this legislation. I think the noble Lord, Lord Eatwell, referred to the detailed scrutiny of the Bill establishing the Office for Budget Responsibility, on which I had the pleasure and the responsibility of leading. Indeed, that Bill was given very thorough, detailed scrutiny. It was a Bill of great importance—not as big as this Bill but it showed in a related area how effective the Grand Committee can be.
The Welfare Reform Bill can hardly be said to have been an unimportant Bill. What Bill of greater importance has this House considered in the past two years? Everything I have heard suggests that the scrutiny it got in Grand Committee actually worked extremely well, notwithstanding the understandable doubts there were about it.
I do not want to withdraw the Motion. It has been agreed by the usual channels, in which all these matters will have been debated, and I believe that we should stick with what the usual channels have agreed.
Scotland Bill
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Baroness Liddell of Coatdyke
The noble Lord, Lord Forsyth, has raised the issue of the legislative consent Motion and my noble friend Lord Foulkes has raised the issue of the timetable. We have also had within the process a consultation which concluded at the end of last week. At Second Reading we were told that one of the reasons for the truncated consultation process was to allow amendments to be brought forward at Report stage. However, there is a very short period of time between the Committee stage and the Report stage. I echo the points made by the noble Lord, Lord Forsyth, and my noble friend Lord Foulkes about this debate taking place on a Thursday and the final day of the Report stage taking place on the Wednesday before the Easter Recess
The whole process is in a muddle, and that is not the way to deal with a serious constitutional issue. I have the greatest respect for the noble and learned Lord, Lord Wallace of Tankerness, and I know that he would wish to be as straightforward with the House as he can be. I hope, too, that the Leader of the House, as the leader of the whole House, will not see this as some source of mischief but as an attempt to get to the bottom of what is happening.
Lord Browne of Ladyton
My Lords, it is with some reluctance that I rise to speak but I think that my contribution will substantially meet the criteria that the Leader of the House has laid down for this debate.
I addressed the House at some length on the first day in Committee setting out the reasons why I thought it was important that we should conclude our scrutiny of the Bill and present it back to the other place ready to become legislation. That was on 26 January and I do not intend to repeat all the points I made on that occasion. Those who are interested can read for themselves that 45 minute contribution in the Official Report. However, I do wish to make one or two important points.
First, I rebut the suggestion that we are meeting on this Thursday to discuss this part of the Bill at the request of this part of the Opposition. I cannot speak for all of the Opposition, of course, but I have been privy to many conversations, getting uncomfortably close to the usual channels in your Lordships’ House, and never at any time in these discussions did I ask, or was I party to a request from the Opposition, that we should meet on a Thursday.
Noble Lords ought to remind themselves of the somewhat chequered history of the management of the Committee stage in this House. It was the great plan that this day would be devoted to a debate about referendums. It was broadly agreed because the consultation would be over and it was expected that the Government would be able to come to the Dispatch Box and indicate what their response to the consultation would be. There was a degree of consensus that went beyond the Front Benches that it was appropriate to handle the matter in that fashion. However, as has consistently happened with the Committee days of the Bill, we have been subject to other items of business being imposed on them. We have just had the same thing today. In fact, we lost a whole Committee day for this Bill because it was seized from us for ping- pong on the Welfare Reform Bill. I was assured that that would take only a couple of hours—at the time I laughed uproariously at that idea—but it took all day and we lost a whole day in Committee.
There was an attempt, to which I was a party, by those who want to see this matter proceed appropriately to manage the business in such a way that we would conclude it within the appropriate time. However, there was no agreement that we would sit on Thursdays. A lot of what has happened has been imposed on me and other Members of the House by the circumstances of the business of the House. I understand that it has to be managed and I do not want to be part of that process, but any suggestion that the Opposition requested Thursdays is not correct to my knowledge.
Scotland Bill
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Lord Browne of Ladyton
Taking my own advice, I am utterly reluctant to express any opinion that is even marginally related to any football club in Scotland. Most people in Scotland know where my allegiances lie, and engaging in this debate would make it even worse for me. I apologise to my noble friend Lord Foulkes, who has been engaged in Scottish football. His support for Heart of Midlothian Football Club is well known and he has made an important contribution to Scottish football over the years. However, I think that he probably has more scars on his back from that time than he has from any political confrontations in Scotland. I just give the Minister a bit of gratuitous advice: he would be wise to take these matters away and perhaps write some very carefully worded letters to my noble friend and his noble friend if he thinks that these questions need answering.
I want to raise a point that I mentioned in my contribution to the debate on the previous group of amendments. I do this by reference to my contribution to the Second Reading of this Bill, which took place on 6 September 2011. During my contribution to that debate, I asked about the progress of the high-level implementation group and the joint Exchequer committee, which are complementary elements. The joint Exchequer committee, led by Ministers, and the high-level group of civil servants—from both the Civil Service that supports the Scottish Executive and the UK Civil Service—are to work out the process and deal with the challenges and issues in preparation for the implementation of the provisions that we have been debating when this Bill becomes an Act, as I hope it will.
I raise this because I have a suspicion—and I put it no higher than that as I share my motivation with the Committee—that perhaps from the Scotland side of this process of engagement there is less willingness to engage, and less capacity to engage, in the preparation for these issues than we will need if we are to meet the expectations that we all share that these devolved powers will be available to be used for the benefit of the Scottish people, broadly by about 2015. I do not expect the Minister to make any comments at the Dispatch Box about willingness, but I would be able to deduce from the detail of his answers whether there has been that willingness.
I raise this issue for one very good reason. There is an impression in Scotland that the Scottish Government are anxious to get their hands on these additional powers. In fact, they want more. It is not sufficient to say to the Scottish people that you want these powers; you have to explain to them what you are going to do with them when you get them and you have to convince the Scottish people that you are preparing yourself for these powers and for the use of them. I went on at some length at the beginning of this Committee about what I thought was happening in Scotland, and there was convincing evidence that the Scottish Government were falling down in all of those respects.
Therefore, can the Minister tell the Committee not just how many times the high-level implementation group has met but what progress is actually being made? Even if it has to be described generically, I will be satisfied by that, but I will keep pressing as long as this Bill is before this House to get more detail. What progress is being made to prepare the structure in Scotland to receive these powers or any powers that relate to the raising of taxation?
Baroness Liddell of Coatdyke
I apologise to the Committee that I was not present through the earlier parts of the discussion of Clause 29, but my noble friend is making one of the most critical and crucial points in relation to these tax-raising powers. I would be interested if, when the noble Lord, Lord Sassoon, replies to him, he could put some figures on to the costs of implementation. He will know well that one of the essential ingredients of analysing the effectiveness of any taxation is the cost of collection. In this case, it is not just the cost of collection that we need to know about; it is also the cost of disaggregation of HM Revenue and Customs and the cost to the overall UK taxpayer, not just the Scottish taxpayer. If the noble Lord does not have those figures available at the moment, I would be grateful if he could give them to us in due course.
Lord Browne of Ladyton
My noble friend Lady Liddell—through me as a conduit—raises some very interesting questions for the noble Lord. I expect that, because of the nature of the amendments in further groups, we may get an opportunity to explore in more detail the issue of the cost of implementation of these provisions and of who should bear that cost. I will be interested to hear the Minister’s response to my noble friend’s very pertinent question.
I have dealt with the high-level implementation group. I am interested not only in how often it meets but in what it does and in whether we are making genuine progress toward creating the infrastructure that will be necessary for Scotland to receive these powers. I have said before that almost all members of the Scottish Government voted in the Scottish Parliament for these tax-raising powers. Therefore, I expect them to be at least beginning the process of consultation with the people of Scotland on how they intend to use them. If they are to be ready to use them by about 2015, and if they are to give the people of Scotland a level of consultation that devolution has conditioned them to expect, they should be beginning to draft the documentation to put before the Scottish people that explains how they intend to use the powers.
It does not matter whether this is devo-plus or devo-max. Whatever powers the Scottish Government have in relation to tax, they should be getting ready to implement them. As I said earlier, there is an extraordinarily interesting debate and discussion to be had in Scotland about how stamp duty land tax could be used to help to inject energy into the economy in different parts of Scotland. I am not an expert in these areas, but I know from representing for many years a constituency in Scotland that using taxation revenue in a more localised way at least has the potential to generate economic activity. I would like this explored further. If the debate and discussion reveal that it cannot be used in this way, at least that would be a conclusion.
There are two aspects to this. First, there is the engagement between the UK and Scottish Governments and their respective civil servants on planning for this. Secondly, there is the question of fitness and preparation, and the condition that the Scottish Government are putting themselves in to exercise any devolved taxation powers. I see no evidence of any of this in Scotland.
I turn to the joint Exchequer committee, about which the noble Lord and I have already had an exchange. I asked about the committee at Second Reading and was told that it was anticipated that it would meet for the first time on 27 September. My earlier intervention implied that I thought that that was a bit late when one considered how long the process had been in gestation and how long the Bill spent in the other place and here—but I had to live with that. The committee met on 27 September. The noble Lord implied that when it met it made progress on some issues that were aired in the debate on the previous group of amendments, which dealt with some of the challenges that people had identified.
My information, which was provided very graciously by the Scotland Office, is that the committee met and there appeared to be some agreement on a set of principles on the block grant adjustment mechanism. Apparently, three principles were agreed that will apply to the mechanism for the adjustment. The first is fairness. It is not defined, but we all know what it means. The second is resilience in different fiscal circumstances. The third is the avoidance of unintended consequences, including the transfer of resources one way or another. It may be my fault, but the principles do not tell me very much about the nature of the agreement. They smack a little of motherhood and apple pie and do not seem to engage with some of the difficult and challenging issues that the devolution of tax powers to Scotland will inevitably generate, some of which we have already debated.
Certainly, if the committee is not to meet again for another six months, unless the high-level implementation group is drilling down into some of these difficult issues and starting to display a level of competence and ability in dealing with the infrastructure that is necessary for implementing this, these meetings of the joint Exchequer committee are not going to make very much progress. Before this House gives its approval to this Bill and it becomes an Act—I fervently hope that it will and I will do everything in my power to achieve that—I ask of the Minister that at least we spend some time getting some sense and some idea of whether Scotland, its Government and its Civil Service will be in any shape to actually use these powers if and when we pass them.
Lord Sassoon
We have a Bill; it is important that we press on, and the legislative consent Motion could come at any time. This is idle speculation. It is important that the Motion gets passed, and we look forward to it, but it is in the hands of the Scottish Parliament. There is really nothing more I can usefully say. I certainly do not believe for one minute that we are wasting our time considering the important provisions in this Bill.
Let me move on to the question asked by the noble Baroness, Lady Liddell of Coatdyke, about the cost of all of this. The major cost will be to the systems that would support the tax changes and the possible new tax rate in Scotland. It is all set out in the impact assessment that is published alongside the Bill. However, for the Scottish rate of income tax, HMRC’s initial estimate is of £40 million to £45 million over a period of years up to the introduction in 2016-17. Clearly the final cost will be dependent on a number of decisions to be made at the implementation stage; and HMRC, HM Treasury, the Scotland Office, with the Scottish Government, will continue to work to determine the optimal implementation approach. The costs may vary in some way as those decisions are taken, but the indicative estimate at the moment is £40 million to £45 million.
Baroness Liddell of Coatdyke
I thank the noble Lord for giving us that figure. Does that figure include the 31,000 civil servants in reserve departments who operate in Scotland, and the impact of the HMRC element of those 31,000? Will they continue to be in Scotland? Could he also perhaps give an indication of where that cost will be levied? Will Scottish taxpayers or UK-wide taxpayers take up the cost of disaggregation?
Lord Sassoon
My Lords, on the first point, this will be the cost in isolation of the changes necessary to enable the introduction of the Scottish income tax provision. Of course, for fully devolved taxes, the cost will depend on decisions taken by Scottish Parliaments on the design of those taxes, and of course who should administer them. It is therefore a cost estimate that relates essentially to income tax. It assumes that nothing changes in the deployment of other people. It is the necessary cost related to the introduction of the new Scottish income tax regime. As the noble Baroness will know, it is a principle of devolution that costs that are to the benefit of the devolved Administration fall on the devolved Administration, so that is where these costs will fall.
The noble Lord, Lord Browne of Ladyton, asked important questions relating to the Scottish Government’s readiness for implementation, the high-level implementation group and the joint Exchequer committee. I very much agree with him that these are important issues about the capacity of all sides, particularly the Scottish Government, to carry out what is necessary. I have already addressed the mechanics of the processes. We have the high-level implementation group, as the noble Lord has set out, and below that the technical groups established by HMRC to work out the detail.
The Scottish Government have focused on pressing for further powers in the Bill. Of course, while one respects their different views on other matters that they might want in the Bill, we would welcome greater attention on implementation from them. I appreciate the point that the noble Lord is making. Close attention has been shown to issues, such as the block grant adjustment mechanism. There is work to do and we should like to see the Scottish Government set out how they will use the powers provided to them in the Bill. My right honourable friend the Secretary of State for Scotland yesterday called for clarification in particular of the stamp duty land tax, and I very much agree with him on that point.
The high-level implementation group was established by the UK Government. It is chaired jointly by the Secretary of State for Scotland and the Exchequer Secretary to the Treasury. It has met four times since July 2010 and the role of the group is to oversee the implementation of the financial provisions of the Bill. As I have just said, the technical groups established by HMRC report to the high-level implementation group, and they provide detailed consideration and advice to inform implementation.
On the progress that has been made, the high-level implementation group is a UK Government group. It is entirely within the capacity and the direction of Ministers in London to press on with the work of that group. It is clear that the Scottish Government want their powers increased. To do that, clearly we would welcome more progress to begin setting out how the powers will be used. From that, many more questions will flow about implementation. That is where things stand at the moment.
Lord Foulkes of Cumnock
As I explained about six hours ago, I have put down a series of amendments to put “devolved” in front of Government. That is in no way to denigrate the functions of the devolved Government, or to devalue them or say that they are in any way less important by putting that word in front. It is meant to indicate that we are talking about devolution and not independence. As I said previously, Alex Salmond and his Ministers and colleagues in the Scottish Parliament, all of them in the SNP group, are going around in this great big pretence that they are already independent and acting as if they are an independent Government. They are doing things that they think they have the right to do. As we will come to in other debates, the chief civil servant in Scotland has made some amazing and unbelievable outpourings. In some of the statements made by Ministers, they clearly do not comprehend what is meant by devolution.
Devolution means that they remain part of the United Kingdom and that the United Kingdom Government and Parliament are sovereign. Ultimately, the UK institutions can make decisions affecting Scotland on a whole range of things, although by convention and out of courtesy we do not do that. The word is put in there just to remind people that we are talking about devolution; a very important concept that, as noble friends know, I have fought for since I was a young man—and that was not yesterday. I spent a long time helping to persuade the Labour Party—along with John Mackintosh, Donald Dewar and a lot of noble Lords here—to come round in favour of devolution. One or two of my colleagues were not so enthusiastic about it, but we managed to persuade the party to do it. Devolution is very important. We should be proud of it and say how important it is, and how Scotland, by having a devolved Administration, can get the benefits of both worlds. There is the benefit of being part of a strong, powerful United Kingdom—one of the most important powers in the world, with a permanent seat on the Security Council, and membership of the European Union and NATO—but also that of having a Scottish Government, with power over their own affairs in a whole range of important matters such as education, social work, law and order, health and all these areas. This is not to minimise those in any way, but to make sure that that is clearly understood.
Baroness Liddell of Coatdyke
The noble Lord, Lord Foulkes, makes a very important point. We have spent a lot of time in the debate today talking about the problems that surround devolution, but devolution in itself has been a very considerable achievement. It may not have gone as far as my noble friend Lord Robertson of Port Ellen suggested, to kill nationalism stone dead, but it has put in place a system of government that has rectified some of the inequities that have existed for something like 300 years. Because of the nature of the debate that we have had as part of this legislation, we are missing out on making the case that devolution was a very considerable achievement. I do not think that anyone—and I am looking at the noble Lord, Lord Forsyth—would try to put the genie back in the bottle and go back to the previous status quo. Although what the noble Lord, Lord Foulkes, is talking about is in essence a gesture, it is an opportunity for us to celebrate the fact that a transfer of powers was made very peacefully to the Scottish Parliament after the election of the Labour Government in 1997.
Many people misunderstand devolution, which has existed in Scotland for 300 years because of the nature of the Act of Union. The Scotland Act merely transferred that legislation, which often took place in this House in the middle of the night, and put it into a proper parliamentary context. By the time I became Secretary of State for Scotland, the Scotland Office was one department. When the noble Lord, Lord Forsyth, was Secretary of State for Scotland, he oversaw an empire of something like 13 different government departments. The model that we have now is the right one, and I support the noble Lord, Lord Foulkes, in his argument for celebrating the cause of devolution rather than trying to hide it.
Lord Maxton
My Lords, I rise as somebody else who supported devolution. There have been one or two occasions during this evening when I have had my doubts, I must say—but in the main I have supported it, because in my view it is about democracy. That is what distinguishes it from independence, which almost certainly under the SNP would be democratic but does not have to be. It is not a prerequisite of an independent Scotland that it has to be a democratic state, but the fact is that devolution is about democracy. The noble Lord, Lord Forsyth, may sit there and pull faces, but he is one of the reasons why many of us argued strongly for the democratic process of devolution. What we had developed in Scotland was a Secretary of State for Scotland of a Conservative Government who, of course, increasingly had fewer and fewer Members in support in Scotland. Legislation which affected the whole of the people of Scotland was being put through this place with no democratic validity whatever.
There was an alternative, which was to abolish the Scotland Office and do away with separate Scottish legislation altogether. That was not seriously a political option in Scotland. The reason why we argued so strongly for devolution was because we felt that the only way you could get democratic legitimacy in Scotland was to give democratic powers to a Scottish Parliament to make legislation in Scotland for—
Air Passenger Duty
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Lord Sassoon
I am grateful to my noble friend for drawing attention to the Caribbean. The Caribbean Tourism Organisation has produced a very helpful report as a contribution to the debate. I have met the Heads of Government of the dependent territories in the Caribbean, so I have heard first hand their strength of feeling in respect of this issue. However, under the Chicago Convention we have to have an objective basis for distinguishing between one country and another.
Baroness Liddell of Coatdyke
My Lords, I declare an interest as a board member of VisitBritain. I take this opportunity to congratulate the Prime Minister on the very helpful speech that he made last week in which he recognised tourism as an engine of growth in the economy. However, will the Minister prevail on his officials to set up a monitoring committee with the Department for Culture, Media and Sport as APD will prove a significant challenge to the tourism industry at a time of huge opportunity, with everything from a royal wedding to the Olympics? Mitigating measures might well be introduced but only if there is a sufficiently adequate early warning system.
Lord Sassoon
I absolutely hear the point and I am sure that my right honourable friend the Prime Minister will be pleased that his commitment to the tourist industry has been noted. I say again that the previous Government increased the rates to where they are now, with the burden falling on tourists and all other passengers, but we are looking at the whole construct.