National Health Service: Pensions

Lord Naseby Excerpts

Monday 10th June 2019 Lords Chamber

Asked by

[Lord Naseby]

To ask Her Majesty's Government what steps they are taking to review the tax rules relating to National Health Service pensions; and whether they intend to have a public consultation on the issue.

[Lord Naseby (Con)]

My Lords, I beg leave to ask the Question standing in my name on the Order Paper. In doing so, I declare an interest as a trustee of the Parliamentary Contributory Pension Fund.

[Lord Young of Cookham (Con)]

My Lords, I am aware of concerns raised by NHS doctors about the impact of annual allowance tax charges. Although there are no plans to have a public consultation on the tax rules, on 3 June the Secretary of State for Health and Social Care announced his intention to consult on introducing a new pension flexibility for high-earning NHS clinicians affected by annual allowance tax charges.

[Lord Naseby]

The Answer that my noble friend has just given is most welcome, but it is perhaps a little tardy in the sense that this problem has existed for some time. The people who suffer are NHS patients, as consultants do not feel able to take on extra work. Is it not time that there was a total review of NHS pensions, as a whole lot of anomalies have developed over time? I now declare a second interest, as my wife is a retired GP. Prior to 1988, there was equality of contributions for men and women and equality for the beneficiaries, whether they were widows or widowers. However, for 24 years, despite having paid equal amounts, the future beneficiaries of female doctors—their husbands or partners—have had no benefit. Against that background—there are other examples—instead of a short-term review, is it not time that the NHS looked at all the anomalies that have arisen over time and tried to put them right?

Elections: Personation

Lord Naseby Excerpts

Tuesday 4th September 2018 Lords Chamber

[Lord Young of Cookham]

The noble Lord is quite correct to say that there are relatively few convictions. According to the Electoral Commission report for the past year there were 200 allegations of personation in the past four years. He asks the good question: why is it difficult to prosecute? If you think about it, if you go to a polling station and try to vote and you find that somebody else has already voted in your name and you are disfranchised, it is quite difficult to find out who voted in your place. That may be one reason why there are relatively few prosecutions in the case of personation. The introduction of voter ID would of course reduce the risk to a minimum.

[Lord Naseby (Con)]

Is my noble friend aware that there is still one weakness on the register, namely that of students who are on the register both at their university and at home? Should this not be looked at? I talk as a former honourable Member for a university town who at the time had a majority of 142.

[Lord Young of Cookham]

I remember that election well: my majority was 808. My noble friend raises the important issue of students. There were many allegations that some students at the last election voted twice. This issue was raised by Ministers with the appropriate body within the National Police Council, which is pursuing it. There is, I think, a small number of issues outstanding. In many cases, where a student voted twice, on one occasion it would have been as a proxy for another student.

Revised Draft Airports National Policy Statement

Lord Naseby Excerpts

Thursday 15th March 2018 Lords Chamber

[Lord Naseby (Con)]

My Lords, I declare an interest as a former pilot who has taken a detailed interest in aviation matters, in the UK in particular.

Fifty-one years ago, my noble friend Lord Vinson and I produced a pamphlet entitled Helping the Exporter. I looked at it again last night and it re-emphasised the need, even then, for Heathrow Airport to expand, with, in particular, the building of a special exhibition centre adjacent to it to help our exporters. That was a long time ago and a lot has happened since. The people who really suffer from a lack of expansion are the whole of our nation which is, is by and large, a manufacturing and trading nation. I represented the largest industrial town in Europe—Northampton. The manufacturers there need to export, and we need them to export to provide livelihoods for the people of our nation. However, they are desperately constrained in that regard.

I welcome what has been done at Luton Airport. Indeed, I live on the flightpath of that airport and have done so for close on 50 years. I have no objections to the expansion of Luton Airport. As I take a wider interest in this issue, I am consistently asked by my former constituents, “Why is it that we in this country seem totally incapable of ever making a decision on almost any major infrastructure project, but particularly on London airports?” My noble friend Lord Spicer tried hard to make a major contribution on aviation, but we have fallen behind Schiphol, Frankfurt, Amsterdam, Dubai, Doha, Istanbul, and a couple of others. Why can we not get a grip on these things? We are losing out.

I thank my noble friend on the Front Bench for the fact that the report has arrived today. It has taken 18 months to produce but it is here. On behalf of my former constituents and all those who have an interest in exporting, I say to my noble friend and his colleague, who understandably is not present, “Please get on with this”. Of course, we understand that there has to be consultation and noise is one of the key determinants of the problem. However, nobody ever mentions that by the time the third runway is built, the average commercial aircraft that will fly in and out using the third runway will be 50% less noisy on take-off and 20% less noisy on landing.

The other afternoon I went to Twickenham to see England, for once, beat the Welsh. Aircraft came over and you could hardly hear them, so if that noise is reduced by 20% for landings you will hardly hear them. Of course, those who live directly underneath the flightpath will be affected. That is why it is vital to pay compensation to the close on 800 homes that will be affected. At last, the pleas a number of us have made that when anybody’s home is compulsorily purchased to benefit the rest of society, they should get not the market price for their property but the market price plus 25%, have been heeded. That is the way the French have done it for decades, and it works. Of course, those people should be helped and, of course, help should be given in the other areas referred to in the report.

This has gone on for far too long. I recognise the skills of certain local MPs, who have built up a plethora of reasons why this should not happen and that should not happen. One of them resigned and did not succeed very well after that. Certainly, he was not successful in becoming the London mayor. Others are vociferous too. My noble friend said that there had been 80,000 responses to the consultation, and that the relevant staff are still looking through some of these responses. Of course, I have no objection to consultations but I ask the Government to please remember that the people of this country took a decision on Brexit. That means that we have to export, which requires us to have the ability to export. Given the financial and manufacturing dimensions of that decision, it is vital that our means of exporting abroad are lined up and ready to go.

I wish to cite four of the conclusions reached by Her Majesty’s Government in this very good, if rather long, report. There are four short but absolutely key conclusions. The report states:

“Expansion via the Heathrow Northwest Runway scheme would provide the biggest boost to connectivity, particularly in terms of long haul flights”.


It continues:

“Expansion via the Heathrow Northwest Runway … would provide benefits to passengers and to the wider economy sooner”,


than any other scheme, and that:

“Heathrow Airport is better connected to the rest of the UK by road and rail. Heathrow … already has good road links via the M25, M4, M40 and M3, and rail links via the London Underground … and Heathrow Express”,


and, in future, Crossrail and HS2. The report also concludes:

“The Heathrow Northwest Runway scheme delivers the greatest support for freight”,


in other words, manufactured goods.

Therefore, my plea to my noble friend on the Front Bench is that within 12 months both he and my noble friend who is unable to be with us today come back to this House and tell us that they have consulted fully, have come to a decision and are putting a proposal before both Houses. That would bring joy to all our manufacturers up and down the country, wherever they may be located.

--- Later in debate ---

[Baroness Kramer (LD)]

My Lords, obviously the draft airports NPS will be the basis for the Government’s decision on the development consent application for a north-west runway at Heathrow Airport. I confess that I live under the flight path, so I suffer daily—I was woken this morning at 5.30, which has been very frustrating after the late hours that we have been here. I have long opposed expansion at Heathrow, well before ever becoming engaged in politics, on national as well as local issues.

It is often taken as given that there is a strong economic case for expansion at Heathrow, but that is exceedingly questionable. I am sure the Minister will be aware that the Davies commission agreed that it was clearly stated that the case for a third runway at Heathrow depended on a hub model of aviation prevailing over point-to-point. However, the shift in the industry is clearly towards point-to-point because, frankly, passengers hate changing planes. I say to the noble Lord, Lord Spicer, that his Chinese tenant is the exact example. People put up with this problematic hubbing, having to change planes and wait for hours in terminals for a second flight, until there is the opportunity to fly direct.

We are in an era where flying direct is becoming dominant. That is one reason for the rise of airports all across the various continents, and for a very fundamental change in the pattern of aviation that passengers themselves are demanding. What we have is a hub airport at Heathrow that is primarily and almost solely functioning on an outdated concept. The passenger forecast for the third runway is that there will be 41 million additional passengers a year, but that 22 million of them will simply be changing planes at Heathrow. I pick up the point made by the noble Baroness, Lady Jones: those 22 million contribute absolutely nothing to our national economy. A large part of the investment and the cost that we are carrying is to support literally half the passengers, who bring no specific benefit.

The economic case is also based on an assumption of a direct correlation between GDP growth and an increase in passenger numbers, particularly at Heathrow. That is very simplistic. We got a glimpse into how simplistic it was during the work of the Davies commission when it released the technical documents. I give credit to Justine Greening MP, who, at that time, through a number of FOIs, was able to get more information on the cost-benefit analysis, and it was clear that there really was nothing. Many people think that somehow there had been work with businesses in London to work out what the future demand would be; there was none. They thought that there had been a look at historical correlations; there were none. It is simply meant to be a given that as GDP goes up, there is a corresponding increase in demand for flights out of Heathrow. I say this with a warning, because the rail industry has had to cope with the fact that what it assumed was an unbreakable link between GDP growth and passenger demand for rail has now been clearly broken. For example, in London, the Tube has seen its passenger numbers this year down by almost 4 million. So the economic case is extremely simplistic and very unreliable.

None of the analyses ever included the negative impact on businesses from noise, poor air quality and, above all, traffic congestion, so the work has been inadequate. But, interestingly, even in that inadequate work, the latest piece of work done by the Government shows that a second runway at Gatwick is a better generator of long-term economic benefit than a third runway at Heathrow—a point made by the noble Lord, Lord McKenzie of Luton.

A number of key airlines, including BA—Willie Walsh’s name was quoted just now by the noble Lord, Lord Berkeley—have turned against the project because of the charges which they know they will have to pay and then have to pass on in ticket prices. No-one I talk to believes the cost of £17 million, which is often thrown around as the right number for this project. That number completely fails to include any realistic costing of the plans to move and then reinstate the M25 or, alternatively, to tunnel it. Until we get some reasonable costings, it is going to be very difficult to assess this, but £17 million is way too low, and any contractor will tell you that. To break even—even on that understated price—Heathrow will need to require the new runway to operate at 38% capacity from day one. The only way to achieve that kind of increase in flights at Heathrow is to lure flights—especially high-value flights by US airlines—away from Gatwick, Stansted and Birmingham, and possibly even farther afield, which would seriously compromise the viability of those other airports. This issue has never been properly examined and it bodes very ill for regional development.

Heathrow will incur a huge debt load as a result of building the third runway, and the pressure to service that debt means that Heathrow will inevitably focus its new capacity on long-haul popular destinations, where planes can be filled very quickly. That means New York and other near-US destinations, not flights to new developing markets in Africa and Asia. Even the NPS forecasts that the airport will reduce its network of domestic flights to serve, at best, only five domestic airports, compared with the eight that it serves today.

The noble Baroness, Lady Jones, talked extensively and so well on climate change. To meet the carbon targets in the Climate Change Act 2008, the third runway would require off-setting cuts across our regional airports. Passenger numbers would need to be cut by 36% in the south-west, by 11% in Scotland, by 14% in the north-west and by 55% in the West Midlands. Without that, carbon emissions from aviation would constitute 25% of our carbon emissions allowance by 2050. Again, the noble Baroness, Lady Jones, described that far more effectively than I can.

Of course, there are local issues. Getting passengers to and from the airport is a nightmare, both because of the impact on air quality and because of road and rail congestion. NOx emissions and particulates are severe around Heathrow even today, and legal limits are regularly breached. All the local access roads are heavily congested, so dispersal is not even possible. Even the London mayor’s plans for ultra-low emission zones does not solve the problem. In fact, this basically destroys the effectiveness of any of those plans, as the noble Baroness, Lady Jones, described. She talked about the health impacts of poor air quality, something we are becoming more and more aware of. So there are serious consequences to the air quality impact of a third runway.

The Government have promised that a third runway will lead to no more cars on the road—they do not say that about freight; we will have freight on the road but no more cars. Frankly, that is impossible. Every scheme to provide more rail access from London to Heathrow falls to pieces either because it requires tunnelling on a major scale at a huge cost or because it triggers the level-crossing problem. I will explain the level-crossing problem. In my former constituency of Richmond Park, the position of the River Thames, Richmond Park and the railway lines means that several thousand people can get in or out of the area only by using one of four roads that have level crossings. The rail lines are so busy that the level crossings are often down for 50 minutes out of the hour. A train service to Heathrow, which all agree—if passengers were willing to use it —would have to be a fast train running every 15 minutes with no more than one stop, would in effect close those level crossings completely, trapping the local population.

Transport for London has estimated that providing surface transport to support a third runway would cost £18 million, of which Heathrow has said it would pay £1 million, with the rest to fall on the taxpayer. That includes not a penny for resolving the level crossing problem. No engineer has found any solution to that, so we are talking about the impossible.

Last but not least, noise is a fundamental issue. I was astonished to hear praise for a six-and-a-half hour night flight ban. That ends at 5.30 am, and the traffic between 6 am and 7 am is what drives the community most insane. Also, the airlines constantly fly exceptions, created by some circumstance of weather or another, that always breach their current limits, and that will undoubtedly continue. It is an ongoing problem.

The noble Lord, Lord Naseby, talked about much quieter planes, but the problem is flights coming over in a constant stream so that there is never any relief from the level of noise, so even making planes quieter does not necessarily deal with that problem. There is an additional problem: Heathrow with a third runway will be running planes on two parallel runways. As the noble Lord knows, noise fans, so in the area between those two runways, the fan effect of two planes flying at the same time will be extraordinary. The operation of those two runways at the same time means that areas once affected only by take-off will now have take-off and landing.

[Lord Naseby]

I am not sure where the noble Baroness gets her information from. If one got the information for, let us say, two fighter jets taking off together, one would see that the increase in incremental noise is very small. Surely, since those are fair noisier than the aircraft that I was talking about, her facts are totally wrong.

[Baroness Kramer]

I will ask the Richmond Society to forward to the noble Lord the detailed modelling that has been done to show the impact of double noise on a significant section of the population. He may find that rather interesting.

Opposition to Heathrow comes from the overwhelming majority of residents in south-west London living under the flight path, four local councils and MPs of all political colours that represent that area. My party, the Liberal Democrats, and the Greens have consistently opposed expansion. When any of us hear of the mitigations, we apply that against our own experience. I lived in the area when Heathrow applied for the fourth terminal and we were assured there would be nothing more. Then came the fifth terminal, and we were assured again that anyone was foolish to suggest there would be a third runway. Then came a third runway and we were told, of course, there would be no sixth terminal. Now we hear of a sixth terminal to go with the third runway. This pattern continues regularly. In the same way, the mitigations—noise is a good example —never live up to their billing. Sitting outside—most people have the right to sit in their garden—is not helped by noise insulation inside a house; that works only provided all the windows and doors are closed, with the consequence that quality of life is severely affected.

Carillion

Lord Naseby Excerpts

Monday 15th January 2018 Lords Chamber

[Lord Young of Cookham]

I think I said a few moments ago that the Financial Reporting Council had taken an interest. Again, if I am wrong I will correct myself, but I think that is the body that looks at whether auditors have correctly discharged their responsibilities. I am sure that they will be taking an interest in this case.

[Lord Naseby (Con)]

My Lords, is my noble friend aware that the depth of his response is greatly welcomed by your Lordships’ House? I re-emphasise the importance of reminding the official receiver that the payment of subcontractors is vital, because this is not the first time this happened. I have worked in the construction industry, and it was fairly common knowledge 12 months ago that Carillion was in considerable difficulty. Will my noble friend look at who in Her Majesty’s Government keeps a watch on these major contracts across departments? That question needs to be asked.

[Lord Young of Cookham]

On my noble friend’s first point, the Government subscribe to the Prompt Payment Code. Indeed, we honour that in our payments to Carillion. We would expect the official receiver to abide by the same terms in making payments on the Government’s behalf. Was his second point about the robustness of the assessment?

[Lord Naseby]

If I may help my noble friend, many of us in the industry were well aware 12 months ago that this particular company was in considerable difficulty.

[Lord Young of Cookham]

Again, that underlines a point made by a number of noble Lords, which I certainly take to heart. We should see whether the method of assessing the financial viability that we have to undertake when we award a tender needs to be reviewed in the light of what has happened to Carillion.

Parliamentary Voting System and Constituencies Act 2011

Lord Naseby Excerpts

Tuesday 24th October 2017 Lords Chamber

[Lord Young of Cookham]

Yet again, we have a plea from the Liberal Democrat Benches to go back on an agreement which they were party to. When we passed the legislation in this House, the date of 2018 was endorsed by members of the noble Lord’s party. Basically, this is special pleading to revisit a measure that, if everyone was sensible, they would put their minds behind this and just get on with it.

[Lord Naseby (Con)]

My Lords, is my noble friend aware that when I stood for a marginal seat, despite the efforts of Mr Callaghan to postpone a review of the boundaries, nevertheless I won my seat? Later, there was another review and I lost my seat. Against that background, it is not vital for all of us who believe in democracy to try to hit the target of each voter’s vote being of equal weight?

[Lord Young of Cookham]

My noble friend came into the other place on the same day as me. My majority that year was 808—I am not sure whether that was more or less than his—and my seat was also subsequently abolished. My noble friend has put far more eloquently than I did a few moments ago the imperative of getting on with legislation that has been through both places to ensure that the next election is fought on up-to-date boundaries, not on boundaries that date back to the year 2000.

Civil Service Fast Stream

Lord Naseby Excerpts

Monday 11th July 2016 Lords Chamber

Asked by

[Lord Naseby]

To ask Her Majesty’s Government whether they plan to make socioeconomic diversity reflecting the nation the primary criterion for future recruitment into the Civil Service Fast Stream.

[The Parliamentary Secretary, Cabinet Office (Lord Bridges of Headley) (Con)]

My Lords, we have no plans to make socioeconomic diversity part of the Civil Service Fast Stream selection criteria. Selection must always be based strictly on merit, which is why we anonymise applications. Any data collected will be done on a voluntary basis and used anonymously to help improve overall recruitment efforts. Diversity data would not form the basis of any individual recruitment decision.

[Lord Naseby (Con)]

Is my noble friend aware that his Answer is enormously welcome? Is it not true that, as far as gender equality is concerned, 54% of the fast stream are now female and therefore that dimension has been addressed? Is there not still an overriding need for the fast stream for our country to recruit young men and women, without discrimination, who have leadership qualities to take our great Civil Service forward?

[Lord Bridges of Headley]

I entirely agree with my noble friend. It is obviously a good day to be discussing how we appoint leaders. There is more to be done, as my noble friend rightly says, on various aspects of improving diversity, but it is crucial that we abide by the principles of Civil Service recruitment as set out in the Constitutional Reform and Governance Act 2010, namely that selection must be on merit on the basis of fair and open competition.

Bank of England and Financial Services Bill [HL]

Lord Naseby Excerpts

Tuesday 3rd May 2016 Lords Chamber

[Lord Ashton of Hyde]

The consultation will be conducted under the Cabinet Office rules for consultations—so it will be more than three weeks. I cannot today tell noble Lords when it is going to start. The Treasury accepts that this is an important issue and has accepted the amendment. It wants people to contribute to the consultation—so, although I cannot give an exact date for when it will start, it will be a proper consultation.

[Lord Naseby (Con)]

My noble friend says that he is not in a position to indicate when the consultation shall start—but we are in May 2016, nearly half way through the year. That suggests that, if we are not very careful, it will be the back end of 2017 before anything happens. The noble Baroness, Lady Kramer, raised a particular family issue; and the noble Lord, Lord Wright, who is not in his place, raised one last year, if not the year before, relating to one son in Singapore and another in the USA. This is not a matter that we can just put into the long grass. I know that my noble friend is not doing that, but it is getting very near the outfield. I suggest that he should come back to the House and tell us exactly when the consultation will start and when we will get some substantive recommendations out of it.

[Lord Ashton of Hyde]

I can reassure my noble friend, because the date that the regulations have to be brought in is June 2017, so the consultation will take place in the second half of this year. It will be implemented before June 2017. I think that that is pretty clear and there is no question of it being put into the long grass. I have subsequently learned that the consultation will be 12 weeks and it will be after July—so I hope that my noble friend will be reassured by that.

My noble friend Lord Flight basically implied that any enhanced due diligence for all Peers, MPs and MEPs would be ridiculous. The directive and the Financial Action Task Force do not agree. They think that anyone who is an MP should have some form of enhanced due diligence. Of course, there is a huge range that can take place within enhanced due diligence. The point of the amendment and the regulations will be to make sure that there is a true difference. A Back-Bench Peer who may not have the position to influence corrupt acts—although every Peer and MP has access to people, so they are not exactly like every citizen—will have some form of enhanced due diligence, but it should be proportionate. The way that this will be done will ensure that.

The banks are in absolutely no doubt about the Government’s view on this. The Chancellor has personally written to the heads of the large banks, and the Economic Secretary to the Treasury has written to colleagues. Every bank now has a contact person with whom Peers, MPs and MEPs can get in touch if they feel that the enhanced due diligence is too great.

Lobbying: Government Grant Agreements

Lord Naseby Excerpts

Tuesday 19th April 2016 Lords Chamber

[Lord Bridges of Headley]

My Lords, I understand what the noble Baroness is saying. Her concerns have been heeded in the sense that the consultation on the implementation of this clause began the minute that the clause was announced in February. As regards curbing freedom of speech by charities, that is not the case. Let me remind your Lordships that charities make up only 7% of grant spend. Charities can continue to use any other funds to lobby government. Indeed, in the DCLG, where this clause has been in place for the past 18 months, Shelter, which has been receiving a grant from the DCLG, has continued to lobby this House and the other place on the contents of the housing Bill, for example.

[Lord Naseby (Con)]

My Lords, could we remind the House that this public money has come from taxation of well-off people, poor people and other people throughout the kingdom? The money is there to be granted for useful purposes; it is not there to pay for campaigning and lobbying. It is public money. If people want to campaign or lobby—I have lobbied and given money for lobbying—it should not be done with public money.

[Lord Bridges of Headley]

It will not surprise your Lordships that I agree with my noble friend. As I said, £130 billion is paid out in grants, and it is absolutely concomitant on any Government to ensure that that money goes to where it is meant to go.

Bank of England and Financial Services Bill [HL]

Lord Naseby Excerpts

Tuesday 15th December 2015 Lords Chamber

[Lord Davies of Oldham]

My Lords, the amendment tabled by the noble Lord, Lord Naseby, which the Government support, is an important step. We welcome the move by the Government to commit to a more diverse financial sector, in which the mutuals are clearly key. However, it is not enough merely to put this into legislation—action is required. What are the Government doing to ensure that this is more than just a gesture? Presumably, the FCA’s remit letter will have to be changed to reflect this new principle. Will the Government therefore commit themselves to introducing an amendment at Third Reading to reflect this obvious fact?

[Lord Naseby (Con)]

My Lords, I shall speak to the new clause which stands in my name as Amendment 15. In doing so, I reflect the privilege of working with the mutual movement for 30 years. In creating this amendment, it was very clear that the Bill as it stood left some gaps of the one-size-fits-all kind. I gave some examples on Second Reading and further examples in Committee. Indeed, I can record this evening in your Lordships’ House that there is one new mutual insurer now trading, for the first time in 20 years. It is a new military mutual, serving our Armed Forces. I cannot think of a better new mutual to stand on the market than one which serves our Armed Forces.

I pay tribute to the Front Bench and in particular to the Minister. I understood that the examples I gave of misunderstandings, or of being left out or not fully understood, have been looked at by Her Majesty’s Treasury. I think that they were found to be quite genuine cases. I recognise that Her Majesty’s Government reserved the right, from the start, to look at the wording of the original new clause that I had tabled. I always had an open mind that those words might have to be amended, if necessary. They have been and are now before us.

There is still a problem in the world outside in understanding this. Half the population is being served by mutuals, yet very few people in authority really understand the driving force behind the mutual movement and why it is growing today. There is a need for all of us in society, particularly the regulators, to have a better understanding. I question whether the new regulator has anybody senior who has ever worked in a mutual. If not, then I hope there will be some appointments made hurriedly.

As far as the mutual movement is concerned—the building societies, the mutual insurers, the friendly societies and credit unions, and of course the Co-Op—tonight will be a special night if this new clause is accepted. It will recognise that their future needs will have to be considered and be better understood, so I say a huge thank you on their behalf to your Lordships’ House if this new clause is accepted.

[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.

--- Later in debate ---

[Lord Naseby]

My Lords, I record my enormous thanks to Her Majesty’s Government, colleagues from across the House and, in particular, the spokesmen from the Liberal Democrats and the Opposition for their help in the early stages of drafting the amendment.

Amendment 14 withdrawn.

Moved by

[Lord Naseby]

15: Before Clause 18, insert the following new Clause—
“Diversity
(1) Section 3B of the Financial Services and Markets Act 2000 (regulatory principles to be applied by both regulators) is amended as follows.
(2) In subsection (1)(f) after “persons” insert “(including different kinds of person such as mutual societies and other kinds of business organisation)”.
(3) After subsection (3) insert—
“(3A) “Mutual society” has the same meaning as in section 138K.””

Bank of England and Financial Services Bill [HL]

Lord Naseby Excerpts

Wednesday 11th November 2015 Lords Chamber

Moved by

[Lord Naseby]

31: After Clause 25, insert the following new Clause—
“Duty on Financial Conduct Authority and Prudential Regulation Authority to consider ownership models and size of firms
(1) After section 1E(2)(e) of the Financial Services and Markets Act 2000, insert—
“(f) the importance to consumers of a diverse financial services sector that includes both firms of different ownership models (including mutual societies) and firms of different sizes.”(2) After section 2H(2) of the Financial Services and Markets Act 2000, insert—
“(3) In discharging its general functions, the PRA must also have regard to the importance to consumers of a diverse financial services sector that includes both firms of different ownership models (including mutual societies) and firms of different sizes.””

[Lord Naseby (Con)]

My Lords, I thank my noble friend for taking seriously the issue of diversity as it affects the mutual movement. I also thank him for the good working session that we had last week when I was able to highlight in a little more depth the problems that have arisen for the mutual movement and how, I hope, the proposed new clause seeks to provide the answers. I shall not repeat what I said on Second Reading but merely highlight the depth of the problem. I remind your Lordships that we are talking about the mutual movement—in other words, building societies, mutual insurers, friendly societies and credit unions.

I acknowledge that the present Government have made a welcome and broad commitment to diversity, which is greatly welcomed across the nation. This is not a party-political issue. That is self-evident from the fact that the Official Opposition have generously attached their name to my amendment, as have the Liberal Democrats. Both parties have a rich history in mutuality.

The issue, basically, is whether it is sufficient for the Prudential Regulation Authority to make a commitment in its annual remit letter. I do not deny that that is clearly helpful but enshrining it in legislation makes it totally emphatic to the Bank of England, including the PRA and the FCA, to consider diversity of provider. As well as helping competition, if executed, that would deliver a lasting commitment to the benefit of both the consumer and the wider economy.

I suspect the question that my noble friend is wrestling with is: is it really necessary? I would say yes because life is full of good intentions. However, in my 40-plus years as a representative of the people—25 years in your Lordships’ House—I like to see something in the Bill and not be dependent on good intentions. The reality is that the mutual financial institutions keep being forgotten about and left out. Frankly, that would not happen in Canada, Holland and certain other European countries where the mutual movement is that much stronger.

I gave two examples on Second Reading which helped to highlight the issue. I have now got three different examples. They are all short but at least they will re-emphasise the extent of the problem. Overall, there is still a problem in the mutual movement. The Building Societies Association commissioned a report on whether or not the movement was growing. Sectors of it are growing but other sectors are not. The report noted that one of the contributory factors for the areas that are not growing is the tendency for regulation to push for what I call uniformity and called at the time for a statutory corrective.

Both regulators can point out—I readily acknowledge this—that they have on occasions been proportionate and differentiated approaches in terms of need. However, there are also instances, which I will highlight in a minute, where this is not the case. It is important for regulators to get things right first time every time to support diversity.

In the past, a one-size-fits-all approach to regulation, often designed for large companies with a plc ownership model, has given rise to problems for both smaller and customer-owned financial institutions. The impact can be magnified for organisations which belong to both categories, and that is not an issue we have discussed before. These issues do not occur just in the UK; they arise when one is dealing with the EU. I submit that adopting this proposed new clause, requiring the PRA and FCA to consider the size and ownership model during policy formulation, would be a first step towards stopping the channelling towards uniformity and would help to prevent some of the problems encountered by financial mutuals in recent years.

I shall give three short examples. First, in 2015 during the summer that has just gone, the PRA implemented the bank recovery and resolution directive, as it was charged to do. In the directive it is permitted to reduce the reporting requirements and frequency for smaller institutions. In practice, this would have allowed smaller institutions not to submit annual updates, but instead to do so every other year, saving significant resources. But the PRA decided not to allow this, in spite of the fact that it was spelled out in plain words in the directive. I do not think that that was a sensible decision on its part or a sensible analysis of that sector of the mutual movement.

Secondly, let us look at the credit unions. Again, in June this year the PRA proposed to reform the prudential regime for credit unions, and once more it is absolutely right that it should do that. The PRA proposed a substantial increase, however, in the capital requirements for large credit unions, taking them to a leverage ratio of 10%. By contrast, the leverage ratios expected to be applicable to banks range from 3% to 5%, depending on their systemic impact. Frankly, I find it difficult to see the justification for a large, established credit union to hold more than twice as much capital in relation to its assets as a bank. I hope that this issue will be amended so that the big credit unions can be brought in line with the banks. But had the PRA paid attention to the size diversity across the board from the start, I do not think that we would be in this situation today.

Lastly, I turn to mortgages, which are an absolutely key dimension of our society at the moment and something on which the whole of Parliament is regularly focused. In 2014, there was speculation about interest rate rises, as a result sparking a significant increase in consumers’ interest in taking out fixed-rate mortgages, which is sensible. Following the mortgage market review regulatory changes overseen by the FCA, the authority required lenders to provide full mortgage advice and test against affordability criteria. This involves stress testing against rising interest rates, with many consumers choosing a fixed-rate mortgage product.

The building societies themselves have a specialist sourcebook, issued by the PRA, which places restrictions on the proportion of fixed-rate mortgage lending that a number of societies can carry out. Some societies were close to reaching the limit of their permitted fixed-rate lending, meaning that they were likely to withdraw fixed-rate products from their portfolios. This combination of regulation by both the FCA and the PRA could still have a detrimental effect on the amount of lending that societies can advance. Building societies may need to advise customers to go elsewhere rather than expand their businesses, thereby concentrating consumer choice on fewer organisations, which will in fact reduce competition in the market. This is quite important when we think about who is providing mortgages today because, between 2012 and June this year, the building society movement provided £52 billion- worth of net new mortgage lending while the rest of the mortgage market produced a rather miserly £7 billion. Therefore, it can be seen how important it is that the building society movement is treated properly and with understanding.

To conclude, we are asking for an environment where all types of firms are able to operate on a fair basis, with regulations that are appropriate and proportionate to them, rather than one size fitting all. Enshrining this commitment in legislation will require regulators to give the diversity of financial provider due consideration, looking at the different business models and the sizes of the providers side by side. We believe that this will lead to a more appropriate and proportionate regulatory regime, which in turn will lead to a more competitive financial environment in the future. I beg to move.

--- Later in debate ---

My noble friend’s amendment raises some interesting and useful points and, given this, we will actively consider how these proposals might clarify the existing competition objectives. We look forward to discussing this subject with my noble friend again before Report. I will of course take note as well of the suggestion of the noble Baroness, Lady Kramer, on consultation. In the light of that commitment, I would be grateful if my noble friend would withdraw his amendment this afternoon.

[Lord Naseby]

My Lords, I first give my sincere thanks, in particular to the noble Baroness for putting further emphasis on the European situation, about which she is much more knowledgeable than I am, and for the one or two other points that she made. I also thank the Official Opposition, where it is a great pleasure to see my noble friend opposite—I can say that, as he is quite good as my golf partner.

Leaving that aside, I am deeply appreciative of the way in which the whole ministerial team has listened carefully. As I understand it, the team in the department will now look in considerable detail at how the points I have raised, which my colleagues have agreed with, can be addressed. I hope very much that, when we come back on Report, we will have found a solution that will meet the requirements of this very important sector of the United Kingdom—certainly I am available at any hour to discuss this further. With that, I seek leave to withdraw the amendment.

Amendment 31 withdrawn.