Financial Services (Banking Reform) Bill

Lord Sharkey Excerpts

Wednesday 24th July 2013 Lords Chamber

[Lord Sharkey]

My Lords, there are lots of things about the banking system that need reforming, and I would like to talk about four that do not feature yet, or enough, in this Bill—payday loans, central counter parties, the payments system and the whole area of competition in general.

Let me turn first to payday loans. I think all noble Lords will recognise the justified concerns about payday lending. It is true that the Government are alive to these concerns and that the FCA will take over responsibility for regulating this sector in April next year. But that is eight months away and, in the mean time, the use of payday loans continues to grow alarmingly. In a Written Answer on 1 July, the Government estimated that payday lending had risen from £900 million in 2008-09 to £2.2 billion in 2011-12, with around 8 million new loans. Your Lordships will recall that Wonga recently increased its interest rates from just over 4,000% to just over 5,000%.

This is all pretty depressing, but the real situation may be much worse. The Government have no plans to monitor stock of payday lending until the FCA takes over in April next year, when they will think about it. This seems wrong. I can confirm to the noble Lords, Lord Higgins and Lord Watson of Invergowrie, that the Government have announced today that they have arranged for the banks to publish disaggregated lending figures by postcode quarterly from December this year. Why cannot we do exactly the same for payday lending? We will certainly look to amend the Bill to make this possible.

Perhaps even more worrying than lack of accurate and timely data is the Government’s ambivalence about the whole sector. I understand their concerns about driving borrowers to loan sharks, but the fact is that there is a successful model already well established of imposing strict limitations on payday lenders. In Florida, the state strictly regulates payday loans. There is a maximum borrowing limit of $500 at any one time. You can have only one loan outstanding, and this is tracked and enforced by a state-wide database of all loans taken out. The maximum fee is 10% plus a $5 verification fee, with no rollovers without having paid off the previous loan and a wait of 24 hours before applying for a new one. The software that does all this is available for implementation in the UK right now. I am sure we will want to consider in Committee the merits of having a similar regime in the UK.

The second area of concern is to do with the regulation of central counter parties, the small number of exchanges through which derivatives and derivative-type products must now be traded. Concentration of these trades into a small number of exchanges had the objective of increasing transparency and therefore predictability and therefore stability. It is quite possible that this concentration may have the opposite effect. If our banks are too big to fail, Andy Haldane of the Bank of England has pointed out that CCPs are,

“too big to fail on steroids”.

If the primary purpose of the Bill before us can be seen, as the BBA rather optimistically asserts, as,

“the final step in financial stability orientated measures”,

it is by no means clear how this Bill contributes to the stability or the resolution of CCPs or how it reduces exposure for the taxpayer. Perhaps it was not intended to, but we need to address these issues somewhere.

The third area of concern is the payments system, which essentially means VocaLink. This is the system, owned by the banks, which makes all money and credit transfers happen. It has two products—faster payments and BACS, one very fast, one remarkably slow. There are fundamental problems with this system as it stands. Leaving aside the question of who has the use of your money when it is slow in transit—when it has left your account but has not reached the recipient’s account—there are issues of competition, ownership and innovation here. The large shareholders in VocaLink have typically charged a premium for smaller banks to have access to the system. The Government are doing something about this, but the abuse of power by the large bank shareholders does not stop there.

The big bank owners of VocaLink have no incentive to innovate. Indeed, they have every reason to avoid innovation. VocaLink itself says in its observations on the Bill that,

“there are few incentives (owing to the pricing structures, length of contracts and commercial arrangements in place) for VocaLink, the payment schemes themselves or the end user banks to invest in innovations”.

Here “end user banks” really means big owner banks. You can see why they do not want to innovate. It would probably cost only between £25 million and £50 million to develop new, better, faster, more comprehensive payment systems. But because the banks’ IT systems are essentially clapped out and starved of investment, it would cost each bank hundreds of millions to upgrade its systems to implement new services. Of course, in any really competitive, customer-focused market, at least one bank would do just this, but our big banks are not competitive and certainly not customer- focused and they do not do any of this. They do not even invest in their current IT systems enough to stop them falling over. This is cartel-like behaviour—and I will return to the issue of competition in more detail in a moment. The fact is that the banks should not own or control the payments system, and we need to fix that. I think I heard the Minister say that the Government will bring forward amendments to do just that, which is very welcome. I look forward to discussing those amendments when they appear in Committee.

Before I leave the financial plumbing system, I would like to touch briefly on the issue of account portability. There has been progress on this. The new current account switching service will be available from September and mobile to mobile payments from 2014. This is a good thing as far as it goes. But, again, the fact is that we could do much better without the cartel-like involvement of the big banks. For example, under the proposed account switching arrangements, know your customer checks will still have to be carried out by the new bank, as the noble Lord, Lord Flight, said. This will delay switching for many retail accounts and is virtually certain to delay switching for all SME accounts. It need not be like this. Know your customer checks could be the responsibility of the plumbing system of a newly liberated VocaLink, and so could all the details of direct debits and other payments. How nice it would be if the banks were really forced to compete to service these consumer packages. This is an issue that we will certainly want to return to in Committee.

What many of the previous areas I have mentioned have in common is competition or, rather, the lack of competition. This is the final area that I want to talk about. I strongly agree with what the noble Lord, Lord Eatwell, said on this subject. Our banking system is not even remotely competitive. Four big banks control more than 80% of the market, and it is this problem which is a key driver of many of our other problems with the banks’ behaviour—resistance to change, corruption, criminality and incompetence. It is worth reminding ourselves, very briefly, of the most recent scandals: the collapse of HBOS; the fixing of LIBOR; the involvement of Standard Chartered and HSBC in sanctions-busting and drug money laundering; the failure of the RBS payment systems last summer; and, last week, Barclays being fined half a billion dollars in the United States for allegedly rigging the gas markets. All this is compelling evidence of corruption, criminality and incompetence.

However, these are not the worst things. The very worst scandal, an almost unbelievably bad scandal, is the mis-selling of PPI policies. This scandal was the worst for three reasons. First, it was absolutely huge. The banks are going to have to pay at least £16 billion, and perhaps £30 billion, to settle the claims made against them. Secondly, it was not just one bank; it was lots of banks. But, most of all, it is worst because it was deliberate exploitation of their customers. It is worth quoting what John Lanchester recently said in the LRB about the PPI scandal. He said:

“PPI was about banks breaking trust by exploiting their customers, not accidentally but as a matter of deliberate and sustained policy. They sold policies which they knew did not serve the ends they were supposed to serve and in doing so, treated their customers purely as an extractive source”.

The PPI scandal is the clearest possible indication that the banks do not have their customers’ interests at heart—the opposite seems to be the case. It is precisely the lack of effective competition that has allowed the banks to develop and maintain this corrupt culture.

The Government are alive to all this and so, to an extent, are the banks themselves. The Government would like to see a more diverse and competitive banking landscape and have made important moves to produce this. In particular, it will be easier to set up new banks and this will help. They would like to see the equivalent of the Sparkasse here in the UK. That would help, too. P2P lending may also help, although I should say in passing that I am very alarmed to see Santander muscling in on Funding Circle. It is very hard to see how this would increase diversity in our banking landscape. But all this is very small and very gradual. It would take decades and decades before any of this had any real effect on the big banks’ market share.

The banks themselves offer two sorts of solutions. One is better, more ethical cultures and better, more ethical leadership. However, it is hard to be convinced that this would be sufficient. At the time that HSBC was busting UN sanctions and laundering drug money, it had an Anglican clergyman in charge of it. The other solution is better regulation. The Government agree with this and in this Bill and in the Financial Services Act put enormous faith in the ability of smarter, stricter regulation to help solve the problem. I am convinced that regulation will help a great deal but I am equally convinced that on its own it will not solve the problem. In fact, I do not think the problem with our banks can be solved unless we make them really competitive and really focused on serving their customers. How we might do this, we will want to discuss in detail as the Bill progresses, but we do need to do something radical. At the moment, our banks are too big to fail, too big to jail, too big to trust and too big to manage. We should not believe that they are also too big to break up.

Bank of England: Monetary Policy Committee

Lord Sharkey Excerpts

Tuesday 9th July 2013 Lords Chamber

[Lord Newby]

My Lords, my understanding is that it is for the MPC to decide on the scale of quantitative easing. As my noble friend will know, there is a Treasury representative at all meetings of the MPC. That representative is allowed to speak but does not have a vote.

[Lord Sharkey]

My Lords, last week the New Economics Foundation suggested a new approach to quantitative easing. It suggested channelling investment directly into housing infrastructure and SME lending. Does the Minister agree with that suggestion?

[Lord Newby]

My Lords, the Government are looking at a number of ways of increasing investment in all those areas of infrastructure. We set out in the spending review our plans for doing that in 2015-16 and subsequently. Plans or programmes already in place, such as the finance for lending scheme, are already having a significant impact on new housing construction.

Bank of England: National Debt

Lord Sharkey Excerpts

Monday 24th June 2013 Lords Chamber

[Lord Newby]

My Lords, this measure was taken to deal with the heart attack suffered by the British economy and over a period it will be unwound. This is a matter for the Monetary Policy Committee of the Bank of England to manage. At the point at which it feels it right to start unwinding, no doubt it will explain how it plans to do it.

[Lord Sharkey]

My Lords, the Prudential Regulation Authority has said that the banks must raise an additional £27 billion in capital. Will the Minister tell the House how the Government intend to make sure that this increase in capital requirements will not lead to further reductions in lending to SMEs?

[Lord Newby]

My Lords, the Government are not responsible for the way in which banks may or may not raise capital. We are very keen for the banks to continue to lend money to SMEs and, indeed, to increase the extent to which they do it. One way in which we hope that this will happen is through increased competition in the banking sector. We hope that current trends in some aspects of that, with some of the new smaller banks lending to SMEs, will continue.

Public Service Pensions Bill

Lord Sharkey Excerpts

Tuesday 12th February 2013 Lords Chamber

[Lord Davidson of Glen Clova]

My Lords, we on this side welcome the amendments. The Minister gave a commitment to the House which we are pleased has been honoured. We recognise that significant movement has been made by the Government in relation to governance and pension boards. In particular, we applaud what the Minister said about equal representation on pension boards. To have employees on such pension boards is a very welcome development.

Perhaps it is a small matter, but the Minister referred to the amendment dealing with conflict of interest. It is particularly gratifying to see that a small matter which might have been seen as an obstacle to equal representation on the pension board has been removed by careful drafting.

[Lord Sharkey]

My Lords, I shall speak briefly in support of Amendments 9, 10 and 11. I raised the issue of member representation on pension boards at Second Reading, and in Committee, as the Minister said, I tabled an amendment that would have required one-third of members of pension boards to be members of the underlying scheme. I was grateful then for the support of the noble Baroness, Lady Donaghy, and the noble Lord, Lord Eatwell, for the amendment.

With the amendments now before us, I think that the Government have taken a realistic and fair view of member representation. The equality of employer and employee representatives on pension boards is an entirely satisfactory resolution to the problems that we outlined earlier. In fact, I think that the amendments provide a better solution than those proposed previously here and in the Commons. Equality of representation is very simple and clear and completely unambiguous. I know that my noble friend has been instrumental in securing the amendments, along with my right honourable friend Danny Alexander, and I pay tribute to their efforts and thank the Government for proposing the amendments.

Amendment 9 agreed.

Taxation: Tax Collection

Lord Sharkey Excerpts

Tuesday 5th February 2013 Lords Chamber

[Lord Newby]

My Lords, it is important to recognise that the big cut in staff in HMRC took place before 2010. The number of staff fell by 25,000, and 10,000 staff working in compliance roles—that is, the very staff about whom the noble Lord is concerned—were cut during that period. We have added 2,500 staff in that area since we came in and they are generating a very significant amount of additional funding. On international tax evasion and avoidance work, a whole raft of initiatives is under way. There is a new unit within HMRC and we are working very closely with the OECD. I am sure that a number of further announcements in this area will be made during this calendar year.

[Lord Sharkey]

My Lords, the 2010 comprehensive spending review committed HMRC to improving the customer experience. However, in December last year, the National Audit Office concluded that customers were still not getting a good service. For example, last year 20 million calls went unanswered and there was a cost of £33 million in phone charges to customers kept hanging on. Will the Minister say whether HMRC intends to increase staffing and resources to address this problem?

Public Service Pensions Bill

Lord Sharkey Excerpts

Tuesday 15th January 2013 Lords Chamber

[Baroness Donaghy]

My Lords, I shall speak to Amendment 54. At Second Reading I referred to ambulance service staff. I am hoping for the inclusion of ambulance service staff in the protected uniform services section of the pension regulations. I propose that the Bill should refer to ambulance service staff providing 999 responder services as opposed to referring to particular occupational groups such as paramedics, as there is a large number of non-registered ambulance staff who provide 999 responder services and registered paramedics who fulfil administration and managerial roles.

It is well documented that the main cause of ill-health retirement in the ambulance service is muscular-skeletal injuries and mental and behavioural disorders. These occupational hazards are not limited to staff working in paramedic grades and above but can be experienced by all staff providing 999 responder services. In addition, as a cost-saving measure, many ambulance services have created new support roles for 999 staff. Although the level of clinical intervention is different from that of a registered paramedic, their exposure to hazards and highly distressing circumstances remains the same. You have only to walk through the town centre of practically anywhere in the UK on a Saturday night to know that. They should be exempt from working longer.

The current NHS job evaluation scheme recognises these occupational hazards in job profiling for ambulance service staff. All ambulance grades that provide 999 responder services receive the same job evaluation level on the factors that contribute most to ill-health retirement. For example, an ambulance practitioner at the bottom of the Agenda for Change band 4 and an advanced ambulance practitioner on the top of band 6 score the same job evaluation level on physical effort, emotional effort and working conditions despite there being a difference of 19 pay points between these two jobs. The factors that heighten the risk of ill-health retirement remain the same.

In 2008, NHS Pension Scheme research indicated that the average retirement age in the NHS was 63, while in the ambulance service it is estimated that only one in 100 front-line staff reach normal retirement age. Staff working in the ambulance services are four to six times more likely to retire on the grounds of ill health compared with the rest of the NHS. A UNISON freedom of information request has shown that between 2008 and 2011 the average age of ambulance staff retiring on the grounds of ill health was 52. Muscular-skeletal injuries and mental and behavioural disorders—for example, post-traumatic stress disorder—represent more than 50% of the reasons for ill-health retirement. For that reason I believe that ambulance service staff providing 999 responder services should be included in these regulations.

[Lord Sharkey]

My Lords, I rise to speak in support of Amendment 56. I also have great sympathy for Amendment 54 in the name of the noble Baroness, Lady Donaghy. As the noble Baroness has so eloquently said, the working conditions and physical requirements of ambulance service staff who are 999 responders are very similar to those of the other exempt categories. However, the problem may be that there are quite a few other occupations whose members feel there is an equally strong case for inclusion within the exempt categories. Some of these occupations were discussed when this issue was debated in the Commons. I have heard Northern Ireland prison warders and staff in secure psychiatric institutions mentioned in this context and I know there are other claimants, too.

It is obviously very difficult to make judgments about which groups, if any, should be included alongside the uniform groups recommended by the noble Lord, Lord Hutton. I am not at all certain that it would be appropriate to add one particular category to those groups without considering, in detail, the claims of the other groups. That is not to say that there are no other groups that should be exempted from the standard state retirement age. In fact, I am personally convinced of the case put forward for ambulance service staff who are 999 responders. I think a sensible approach to this is contained in the amendment of the noble Lord, Lord Eatwell, to which he has spoken so forcefully. It is surely sensible to give the Secretary of State the power by order to include other occupations in the exempt groups if he thinks the case has been objectively made and thoroughly examined by a scheme-specific capability review.

A very similar, or perhaps even identical, clause to that of the noble Lord, Lord Eatwell, was put forward by Chris Leslie in the Commons. I have read Hansard carefully and the Government’s response did not seem entirely convincing. I am glad that our different rules of procedure in this House will enable the case for Amendment 56 to be put once more and I am glad that the Minister will have the opportunity to reply in full. I hope that when he does reply he will find himself in sympathy with Amendment 56.

[Baroness Wall of New Barnet]

My Lords, I, too, would like to support in particular Amendment 53 and to some degree Amendment 54, especially with regard to the front-line staff in the ambulance service. I am sure the Minister is aware that in the private sector the task of the job and the onerous nature of that task is always directly related to age regarding how pensions are dealt with. Very often there is mood music around that says the public sector wants to be treated differently from elsewhere. As I know from my work with ICI, there were always certain jobs that were absolutely prescriptive in the task of the job and the risk of the job being associated with the age of individuals. We are really asking for that responsibility to be taken by employers in that context.

Public Service Pensions Bill

Lord Sharkey Excerpts

Wednesday 9th January 2013 Lords Chamber

Moved by

[Lord Sharkey]

34: Clause 5, page 3, line 8, leave out subsection (1) and insert—
“(1) Scheme regulations for a scheme under section 1 must provide for the establishment of a board, at least one third of whose members must be members of the scheme or their representatives, with responsibility for assisting and making recommendations to the scheme manager in relation to the following matters.”

[Lord Sharkey]

My Lords, this amendment has two purposes. The first is to put into the Bill the requirement that pension boards have at least one-third of their members who are members of the underlying scheme. The second is to make certain that these pension boards universally have some influence and are not entirely to be emasculated by the scheme regulators. The drafting of the Bill leaves the exact powers and responsibility of the boards to be defined by the scheme regulators, saying only that the boards are to assist the scheme manager. As I said at Second Reading, the word “assist” is virtually meaningless in this context and that is why this amendment also gives a board the explicit power to make recommendations to the scheme manager.

The question of scheme members being members of their scheme’s pension board should not be controversial; as the noble Lord, Lord Eatwell, mentioned a moment ago, recommendation 17 of the report of the noble Lord, Lord Hutton, says explicitly that every public service pension scheme and individual LGPS fund should have a properly constituted, trained and competent pension board with member nominees. The Government agree with this principle. In Committee in the Commons, the Minister said that Lord Hutton recommended that each pension scheme local board should have a pension board and the board should include member representatives. We agree.

Lord Hutton, on pages 125 and 126 of his report, explains what factors led to this recommendation. He notes that there are currently boards where members are sometimes not formally represented. He notes with approval that the majority of local authorities have some form of member representation in their governance arrangements. However, he also noted that it seemed that only a very small minority of member representatives had full voting rights. He quotes evidence given to his commission by UNISON that,

“by 2009 only seven of the 89 England and Wales Fund authorities had allowed voting by scheme members of pension committees”.

That is not representation, that is tokenism. It is still tokenism even after Government Amendment 40 in this group. All this amendment does is to require that members of a scheme must be represented on the scheme’s pension board. It is entirely silent about the size of this representation.

This whole issue of size of member representation on pension boards was discussed in some detail at Committee stage in the Commons. There, Chris Leslie proposed an amendment that would have resulted in one-third of pension board members being scheme members. The Government declined to agree. The Minister said:

“There is no objection in principle to having scheme-member-nominated representation on pension boards. That is our policy. Our objection is to applying a private sector standard to the public sector schemes without considering whether that is appropriate given the different structures and contexts of public schemes. Unlike the private sector, the public schemes span large work forces and multiple employers”.—[Official Report, Commons, Public Service Pensions Bill Committee, 8/11/12; cols 267-68.]

This refers to a provision in the Pensions Act 2004; Section 241 of this Act requires pension boards in the private sector to have at least one-third of their members to be members of the underlying scheme. The Minister’s arguments, that what the private sector is forced to do by statute is not appropriate as a statutory provision for the public sector, seems to me to be on very weak ground. I would specifically ask the Minister to explain in detail why we can happily have a one-third rule in statute for private pension schemes but not for public pension schemes.

In the Commons, in Committee, the Government attempted to resolve the argument over the size of member representation in part by saying:

“I can tell the hon. Gentleman that for various schemes, there is already extensive work going on draft schemes and draft policies … Once he sees that, he will see that a lot of the concerns that he understandably has about representation will be addressed”.—[Official Report, Commons, Public Service Pensions Bill Committee, 8/11/12; col. 269.]

The Minister said he was happy to release some of those drafts. Could I ask the noble Lord the Minister to make those drafts also available to this House to help us in our deliberations? It may be that, as Sajid Javid said, these drafts will in fact help. But until we can see and discuss them, I think that the Minister must explain from first principles why it is wrong to guarantee significant member representation on pension boards by writing this requirement on to the face of the Bill. I beg to move.

[The Deputy Chairman of Committees (Lord Colwyn)]

My Lords, if this amendment were to be agreed I could not call Amendment 35 due to pre-emption.

--- Later in debate ---

Amendment 38 would also give a pension board in an unfunded, pay-as-you-go public service pension scheme a role in the scheme’s financial management. Schedule 4 already extends legislation to require appropriate internal controls on the financial management of scheme assets and payments to the public service schemes. These matters are already within the scope of pension boards by virtue of Clause 5(2). These responsibilities represent an appropriate role in the financial management of the schemes. In our view, it would not be appropriate for a pension board to have a wider role in the finances of public service schemes. For these reasons, we feel strongly that this amendment is inappropriate. I hope that the noble Lord will be content, therefore, to withdraw it.

[Lord Sharkey]

I thank the Minister for the promise to give us sight of the draft scheme regulations; that might be very helpful. I continue to believe that it is a mistake to leave the number of member representatives to the scheme regulations. Who protects the interests of the scheme members as the regulations draw up the plan for these boards? Consultation does not do that. Consultation is very well and fine and should take place, but it does not necessarily protect the interests of the scheme members.

I also wonder what mechanisms will prevent or cure the non-voting tokenism identified in evidence by the noble Lord, Lord Hutton. I find that I am unconvinced, on the whole, by the Government’s responses on this issue. It is clear, however, that there is substantial concern in the Committee about this whole area and I expect that we shall return to the question on Report. In the mean time I beg leave to withdraw the amendment.

Amendment 34 withdrawn.

Public Service Pensions Bill

Lord Sharkey Excerpts

Wednesday 19th December 2012 Lords Chamber

[Lord Sharkey]

My Lords, this is a necessary Bill which addresses fundamental problems left largely unaddressed by successive Governments. Unlike my noble friend Lady Noakes, I believe that it is broadly successful in achieving a practical balance between the interests of the taxpayer and of those in the public service.

In many ways, the Government had no choice but to act. The cost to the taxpayer of public service pensions has been increasing at a truly alarming rate. The taxpayer cost of public service pensions has increased by a third over the past 10 years and now stands at around £32 billion annually. Without reform, this amount would rise by a further £7 billion by 2016-17 to a total of £39 billion. That is a 22% increase. The current scheme has failed to respond to the rising life expectancy of the population. As the noble Lord, Lord Newby, said, as things now stand, highly paid workers get more for their contributions than those on much lower, steadier incomes. That is because final salary pension schemes benefit high fliers and those with big salary increases awarded near retirement. That is obviously unfair.

Overall, taxpayers have seen their contributions to public service pensions rise very significantly. For example, when the teachers’ pension scheme began, employees contributed 5% and so did the taxpayer. The figures now stand at around 6% and 14%. Although previous Governments have in fact made some attempt to sort out the situation, the fundamental problems still remain and these and the growing gap between private and public pension provision clearly make the current position unsustainable. Indeed, the noble Lord, Lord Hutton, said in his interim report of October 2010:

“It is my clear view that the figures in this report make it plain that the status quo is not tenable”.

I think the Government were right to take corrective action and have done very sensible things. It was eminently sensible to ask the noble Lord, Lord Hutton, to review and report on the situation and to make clear remedial recommendations. It was eminently sensible to agree to implement those recommendations and to set out to negotiate with the trade unions in an inclusive, detailed and non-adversarial way. My right honourable friend Danny Alexander and Mr Brendan Barber deserve a lot of credit for this even if they probably will not get much at all.

There are lots of good things in this Bill. The lowest paid public sector workers are protected. There will be no increase in contributions for those earning less than £15,000 and no more than 1.5 percentage points for those earning between £15,000 and £21,000. All pension rights already accrued will be protected and there will be transitional arrangements for those who are within 10 years of their normal pension age on 1 April 2012. The taxpayer is protected from unforeseen changes in scheme costs by the employer cost cap. Linking the normal pension age to the state pension age, with some exceptions to which I will return later, is also a vital change.

But having said all that, some aspects of the Bill may be a cause for concern and certainly call for detailed discussions in Committee. I have five areas in mind. The first is the retrospective power in Clause 3 that has been mentioned by other noble Lords. Clause 3(3)(c) states that scheme regulations may “make retrospective provision”. This clause generated much discussion as the Bill made its way through the Commons, with some claiming that the Bill allows for the reduction of accrued pension benefits. The Government have said that this will not be the case. The Chief Secretary to the Treasury said in a speech to the IPPR in June 2011:

“We will honour, in full, the benefits earned through years of service. No ifs, no buts”.

Despite this, the issue was still controversial at Report stage in the Commons. There the Minister, Sajid Javid, said on 4 December in response to these concerns:

“I can tell the House that the Government do not have a closed mind on this serious issue … I can only reiterate that we are listening and do not have a closed mind. I am sure that the issue will be discussed in the other place, and we shall listen carefully then as well”.—[Official Report, Commons, 4/12/12; col. 786.]

I think that this is the right approach and acknowledges that the issue is serious, that it is a cause of real and justified uneasiness and that it is unresolved.

The second area relates to the powers of the national boards, currently defined in Clause 5(1) as “assisting the scheme manager”. I know that many have argued that unless these boards have the power to recommend or even to direct, they have little real discernible purpose. I look forward to hearing the Government’s views on this in the debate at Committee stage.

Thirdly, there is the question of member representation on scheme boards. I think there is a strong case for having on the face of the Bill a requirement to have one or more member representatives. I was very glad to hear that the Government are reflecting seriously on this. Fourthly, there is the rather vexed question of whether the Bill is entirely in compliance with EU pensions regulations. I look forward to the debate, as I am sure does the Minister, on whether the LGPS is or is not in compliance with Articles 8 and 18 of the well known institutions for occupational retirement provision directive.

Fifthly, and finally, I have heard a very strong and compelling case for the inclusion of ambulance staff who are 999 responders, with firefighters, the police and the Armed Forces, among those who may retire at 60. I look forward to discussing that further in Committee.

I hope that the Minister will take these comments on board and reflect on them before Committee stage. If he does, I believe that it will help to make a good Bill even better.

Banking: Regulation

Lord Sharkey Excerpts

Monday 10th December 2012 Lords Chamber

[Lord Sharkey]

My Lords, regulation will surely provide for penalties for those who break the rules. However, when it comes to the massive mis-selling of pensions, endowments or PPI policies, the FSA has confirmed that in the past five years not one single bank employee has had disciplinary action taken against them. Does the Minister believe that that is right, and can he reopen the issue with the FSA?

[Lord Newby]

My Lords, one of the general problems that we are grappling with is that bankers seem to think that they live in a different world to the rest of us and that they should be able to avoid not just censure but charges if they have done something that is criminally wrong. That is why in the recent Financial Services Bill we introduced new provisions to deal with people who have manipulated the LIBOR rates so that, when the whole episode is fully looked into, if criminal action is necessary, it will for the first time be able to be taken against people who have cheated the system.

Financial Services Bill

Lord Sharkey Excerpts

Wednesday 5th December 2012 Lords Chamber

[Lord Sharkey]

My Lords, I support some of the sentiments, but not the amendment, of the noble Lords, Lord Barnett and Lord Peston. Like them, I believe it would be a good thing if Mr Carney were to appear before the Lords Economic Affairs Committee as well as the Commons Treasury Committee. Mr Carney is entirely used to dealing with bicameral legislatures with separate committees. On 30 October this year, he appeared before the Canadian House of Commons Standing Committee on Finance to discuss the October monetary policy report. The following day, he appeared before the Canadian Senate Standing Committee on Banking, Trade, and Commerce to discuss the same report.

However, since this is a suggestion from the noble Lords, Lord Barnett and Lord Peston, I know they would prefer me to use the word “must” rather than “may”, but it may be better to suggest to the Minister not that Mr Carney must appear before our Economic Affairs Committee but that he may want to appear. The Minister may want to suggest this to him.

[Lord Sassoon]

My Lords, I will make sure that the suggestion to Mr Carney is passed on, but of course it is breaking radical new ground that a prospective governor should appear before the Treasury Select Committee, and I do not know whether we want to be too radical at this juncture, but the point is taken.

Turning to the matter in hand, first, I have to admire the persistence, consistency and eternal optimism of the noble Lords, Lord Barnett and Lord Peston, on this matter. I am sorry to disappoint the noble Lord, Lord Peston, but on this occasion the Treasury’s word processor did not slip a few words. There is a very important issue here, which is why the two noble Lords raise this matter on a regular basis. We debated very similar amendments to this one in Committee and on Report, although I recall that on Report the amendment was moved by the noble Lord, Lord Eatwell, on behalf of the noble Lords, with, let us say, a degree of enthusiasm.

The House will be unsurprised to learn that my position on this point is unchanged on the back of what I have heard this afternoon. The FPC’s primary objective must be financial stability. Financial stability is the FPC’s reason for being, its primary purpose. The aim of the committee will be to secure a safe and stable financial system, which will help create the conditions necessary for stable and sustainable economic growth. I should not rise to every bit of bait but I have to say that my right honourable friend the Chancellor of the Exchequer has done an outstanding job in extremely difficult economic circumstances, as we will discuss later this afternoon. While he is always grateful for any additional advice, we should have the FPC stick to its main task as its primary objective.

The legislation makes clear that, subject to achieving its primary objective for financial stability, the FPC should act to support the Government’s economic objectives. This structure strikes the right balance, by giving the FPC a clear and positive mandate to support economic growth, but without prejudicing its primary responsibility to protect and enhance financial stability. It is clear already, from the way that the shadow FPC is operating, that it has this mandate well on board.

The primary flaw with the structure proposed in Amendment 10—namely, to give the FPC dual, equally weighted objectives—is that this would allow the FPC to take action that would damage financial stability with the aim of encouraging growth. This would take the FPC outside its remit and expertise, and directly frustrate its primary purpose, which is financial stability. I simply do not believe that the model proposed by the noble Lords is appropriate or workable and I ask the noble Lord to withdraw his amendment.