Health and Social Care
Lord Tunnicliffe Excerpts(7 years, 4 months ago)
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Lord Tunnicliffe (Lab)
My Lords, I, too, would like to be associated with the condolences from all parts of the House to the noble Lord, Lord Prior of Brampton, and his family. Nevertheless, I have utter faith that the noble Baroness, Lady Chisholm, will answer all our questions in her normal, thorough fashion.
I, too, congratulate my noble friend Lord Harris on securing this important debate. He has a long and distinguished record of championing involvement of the public, patients and staff in key decisions about the future of health and social care. He speaks with great authority. It is a timely debate, five years on from the introduction of the Health and Social Care Act 2012. This was a huge Bill, as your Lordships will recall, providing an unnecessary, disruptive and costly reorganisation of the NHS that David Cameron had said his party had no intention of doing. Noble Lords will also recall the Government’s unprecedented “pause” in the face of widespread opposition to the Bill while a full-scale consultation exercise was undertaken through the NHS Future Forum.
It is worth reminding ourselves of the Future Forum’s ambition, which led many to hope that it could mark the start of the sea-change in consultation and involvement, independent scrutiny and shared decision-making that was needed. To quote the forum’s report:
“Involvement must extend beyond the decisions about an individual’s care, and apply to decisions that affect the design and provision of care for communities: as part of designing services for a particular group or condition; in strategic decisions about commissioning of services at the local level; and at a national level, in decisions about commissioning and the operation of the health and wellbeing system … commissioners cannot expect to design integrated, efficient pathways to deliver high quality care if they do not involve the people who will be using the services in their design, as well as patient representatives and patient organisations”.
As we know, the Health and Social Care Act created duties to involve patients and the public at all levels of the health and well-being system. Most importantly, this year’s guidance to CCGs states that they must:
“Involve people early on, not as an afterthought”.
Unfortunately, too few CCGs have put this into practice. As we have heard on sustainability and transformation plans, the “afterthought” approach has sadly dominated in many of the 44 footprints.
I have a number of questions for the Minister. On reporting back to NHS England on their participation approach, can the Minister provide any analysis of the information provided by CCGs? Can she confirm whether there is a breakdown of the best and worst- performing CCGs or areas in this respect? What action is being taken by NHS England to address poor performance and to seek improvements in involving and consulting local patients and communities, including local Healthwatch groups? During the passage of the HSC Act, the noble Earl, Lord Howe, spoke at length about how the legislation would lead to,
“a fundamental shift in the balance of power away from politicians and on to patients themselves”.—[Official Report, 9/11/11; col. 269.]
If this was the case, why has NHS England removed patient groups from membership of the patient and public voice assurance group, leaving only individual members of the public to hold NHS England to account?
The noble Earl said that Healthwatch groups will act as the independent eyes, ears and voice of patients and service users in a local area. The Future Forum was ambitious in the key leadership role it wanted national and local Healthwatch organisations to play. As we have been reminded, there was concern across the House about the authority and independence of Healthwatch England in the light of the Government’s insistence on its relationship to the Care Quality Commission. The Labour Benches strongly supported full independence. The Future Forum clearly saw Healthwatch England, with sufficient funding, as,
“one of the key national players in the new system”.
The extent to which it has been able to fulfil this role so far has to be questioned, given the scale of budget cuts to Healthwatch organisations, the overall funding crisis in the NHS and social care, and the fragmented NHS structures which have made integrated working even more difficult to achieve.
The Healthwatch network received 5.9% less funding this year than last year, and 31.3% less than was given to councils for local Healthwatch groups ahead of their first year in operation. The recent Autumn Statement could have addressed this, or addressed some of the wider funding issues in the health service. Sadly, the Chancellor chose not to act. For the record, under its first chair, Anna Bradley, we felt that a good start was made in establishing and developing Healthwatch England. The Government’s failure to reappoint her when her term of office ended is a mystery. She was an excellent ambassador for the organisation, interacting with the health and social care community to explain the watchdog’s work, meeting local Healthwatch groups and listening to the voices of local people. Some excellent work was undertaken.
The Healthwatch report on hospital discharge, Safely Home, with its particular focus on the elderly, people with mental health conditions and the homeless, was just one example of the strategic overview and scrutiny function that Healthwatch must play if it is to be an effective watchdog of care and performance. However, the Government must give Healthwatch England and the local groups additional support if they are to truly fulfil their role. The King’s Fund has identified local groups’ lack of capability and their need for additional advice and resources as they seek to gain legitimacy and credibility in their communities. How do the Government propose to address the patchy and fragmented local system that has emerged thus far?
Finally, I turn to sustainability and transformation plans. Specifically, I record my concern about the huge inconsistency in the roles and treatment of local Healthwatch groups as these “footprints” are created by health and care organisations across the country. Despite the Government’s commitment that STPs would provide a means for communities to shape their local health and care provision, a number of local Healthwatch groups have reported being frozen out of the decision-making process or involved at only a superficial level at the very latest stages. In light of these concerns, and wider concerns that STPs are merely vehicles for cuts to local services, can the Minister confirm what steps the Government are taking to ensure all local Healthwatch groups are properly consulted on the contents of the STP in their area?
The Labour Party took important steps to promote user participation in local health and social care provision. This Government’s stated intentions on user representation are honourable but, as we have heard in this debate, there is a growing body of evidence that patients’ voices are not being heard and, in some cases, not even being sought. Healthwatch England and local Healthwatch groups have the potential to play a significant role in ensuring that health and social care provision reflects the needs of local communities, but they must step up to the mark and speak out forcefully when needed. Almost five years after the passage of the Health and Social Care Act, the Government must act to deliver on the promises they made to patients. It is incumbent on the Government to provide proper resourcing to Healthwatch and to include other specialist user groups in discussions where they have relevant expertise. Only by properly listening to the views of patients can we have a health and social care service that responds to their needs.
Bank of England and Financial Services Bill [HL]
Lord Tunnicliffe Excerpts(8 years ago)
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Baroness Kramer
My Lords, the kind of language the Government may use in dealing with this in legislation may be limited, but I am very glad that they are taking action. Will they take on board, when talking with allies in other countries, the importance of how the concept of the PEP is handled? I am in the appalling situation of finding that my husband’s relatives in the United States have been challenged on opening accounts because they are related to me. How that relationship was disclosed, I find extraordinary. There must have been an awful lot of trawling through genealogical tables, or else someone is reading my emails. There is a serious issue about how this spreads to the families of Members of this House, of Members of the other place and of others who may rightly be regarded as politically exposed. Their relatives at many distances removed surely cannot be caught in that trap.
Lord Tunnicliffe (Lab)
My Lords, I, too, have some sympathy with the concern about PEPs. My bank managed to be very surprised that my son had repaid a debt. There is no question that banks have overreacted in this area. In general, banks seem to overreact to regulation. They do not seem properly to understand proportionality at individual level. It reminds one that one does not have a right to a bank account, and suddenly one realises that one would be a non-person without one. So it is right that we look for some protection for politically exposed persons—who could be in a very widespread group.
However, one must not lose sight of the fact that the Panama papers revealed just how widespread money laundering is and how much of it happens among politically exposed persons. As far as I know, no politically exposed person has been revealed in the UK, but in the wider world money laundering is a fact and it feeds terrorism and corruption.
We welcome this amendment as an effort to produce proper proportionality on this subject, but the balance must be maintained—and, just as we must be concerned about PEPs, we must be concerned about potential crime and the maintenance of public confidence in officials.
Lord Ashton of Hyde
My Lords, I am grateful to noble Lords who have replied. There seems to be unanimity that this is a serious issue that needs addressing and at least a partial acknowledgement that this is a start. We have accepted this amendment because we acknowledge that there needs to be a sensible approach to this problem.
The noble Lord, Lord Sharkey, mentioned that guidance exists already. In many of my replies to noble Lords, I am going to fall back on the fact that, having begun the process with this amendment, a lot will depend on the consultation about the regulations that we will bring in before 2017. I urge noble Lords to take part in that consultation so that all the points that have been made today and the concerns that people have heard about can be brought into that consultation so that we can get a sensible set of regulations, which this House will be able to look at, in place before 2017.
The noble Lord, Lord Sharkey, mentioned penalties. Again, the degree of penalties will obviously be part of the consultation and will be included in the regulations when they come in due course.
Housing and Planning Bill
Lord Tunnicliffe Excerpts(8 years, 1 month ago)
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Lord Tunnicliffe (Lab)
My Lords, for the convenience of the House I shall now seek, representing the opposition Chief Whip, discussions with the government Chief Whip and the noble Lord, Lord Newby, as soon as I have left the Chamber. I hope that my noble friends will allow us to continue business until that is concluded.
Lord Harris of Haringey
My Lords, if it helps the House, given the assurance from my noble friend that these discussions will take place and that we will get a report, I beg leave to withdraw my Motion that the House will be now resumed—but I may come back to it if there is no sign of progress.
Bank of England and Financial Services Bill [HL]
Lord Tunnicliffe Excerpts(8 years, 4 months ago)
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Lord Tunnicliffe
Lord Tunnicliffe (Lab)
My Lords, I rise with some trepidation to bring this period of peace to a close. I, too, have been involved in this Bill from the beginning and have worked with my noble friend Lord Davies and the Minister, and I, too, thank him for the enormous amount of time and effort he has put into trying to achieve a consensus on so much of the Bill. The amendments we have already agreed tonight are the product of that work. I also commend the Minister, his team and the members of the Bank, the PRA and so on who put so much effort into trying to persuade us not to move this amendment. It is somewhat sad that they failed, and therefore I rise now to speak to Amendment 20, which is tabled in my name and that of my noble friends Lord Davies and Lord McFall and the noble Baroness, Lady Kramer.
The effect of the amendment is simple. It would ensure that the so-called reverse burden of proof on senior managers comes into force as planned from March 2016. The Government have argued that the Financial Services (Banking Reform) Act 2013 and the senior managers and certification regime—the SMCR—represent a significant improvement to the regulatory system and the regulatory standards that existed before the financial crash. On this, we are in full agreement. Along with the structural reforms that have already been set in motion by the Financial Services Act 2012, the 2013 regulation also had a very important message for senior managers in the financial service sector. From March 2016, the burden of responsibility for failure to prevent regulatory breaches would live solely with them, and whether they were aware of failings or not would be irrelevant. They would have to show that they had taken all reasonable steps necessary to prevent a breach taking place. Quite simply, the buck would stop with them.
Two years on, before the regime has even come into effect, the Government want to back-track on the promises they made to the British public and replace the reverse burden of proof with a duty of responsibility. That means that the burden will be on the regulators, rather than the bankers themselves. According to the Government, the introduction of the duty of responsibility in place of the presumption makes little difference to the substance of the new regime. They even suggest that the change is one of process, not substance. We disagree.
We believe that the retention of the reverse burden of proof is crucial. So too does the Parliamentary Committee on Banking Standards and, following intense debate in your Lordships’ House and the other place, so did both Houses of the previous Parliament. Despite a lack of any case history to back up their claims or any examples to draw on, the Government have suggested that the original proposals will create a checklist and tick-box mentality that ultimately will be unhelpful, and that merely presenting evidence that this template had been followed would enable senior managers to meet the burden of proof for defence but leave the regulator to prove that the steps taken were not reasonable.
As I stand here, Major Tim Peake, the first British man in space—whether he is the first British person is somewhat debatable—is safely up there, speeding over us at 175,000 miles an hour. Actually I do not really know where he is; he could be thousands of miles away, but the fact is that he is safely in space. How did he get there? Did a bunch of people wake up this morning in Russia, join together and, to somewhat paraphrase the Minister’s letter, form a responsible management team taking considered and reasoned decisions? No, they did not; they woke up this morning with checklists that they went through and ticked off, and, because those checklists contained hours of thought and lots of experience all moulded together into a process, the take-off was successful and he is safely in space.
In deriding the value of checklists, the Government could not have picked a less appropriate person than myself. I have lived with checklists for over 50 years. Ever since the man said, “If you don’t learn the checks, lad, you can’t fly the aeroplane”, I have been involved in checklists. I was involved with checklists in aviation and in the railway industry, of which I ran a small but important part and we ran a whole series of operations using checklists. We did not call them checklists; we called them manuals and procedures. We would spend millions of pounds on a whole variety of projects because at board level we considered what rules to make, and at executive level we said, “Meet these rules if you want your projects to run”, and that worked well. Then I moved into the nuclear industry, where if you wish to run a nuclear site you will approach a checklist of 36 chapters that forces you to set out how it will be run and be safe and viable. For a period I was chairman of the Rail Safety and Standards Board, which did nothing but create rules that people had to obey to make things safe.
So I am afraid that I believe in checklists. If the present legislation means that banks are spending their time carefully setting out what procedures should be followed in order for them to operate safely and legally, then that is a good thing. Good checklists, good tick-box procedures and good checks on those procedures are a good thing. Bad checklists are a bad thing, bad law is bad, bad procedures are bad and bad regulation is bad, but we are not talking about them; we are talking about banks using their resources to ensure that they obey the rules of the future.
I turn to what I believe is the heart of the issue, something that the Government have dismissed over and again: the question of culture—more specifically, what will bring about the much-needed cultural change in the banking sector. There was a time when banks were trusted and respected, part of the local community. The noble Baroness, Lady Kramer, referred to Captain Mainwaring. He was a cartoon figure, but that was how my generation looked at banks. We expected banks to give a service for our interests; we had the sense that we could trust them and did not have to question them. We were probably naïve and maybe we were being ripped off rotten, I do not know, but we trusted them. We are not there any longer. Ask the British public today what they think of banks, and bankers in particular, and they will use words like “greed” and “exploitation”. You certainly cannot blame them for thinking that way; events like the PIP scandal, rate swaps or HBOS give people the impression that these are not the exception but the norm. A change of culture is desperately needed if banks are to regain their reputation as public service institutions. I am certainly not saying that this will be an easy or quick task. It will require sustained effort from all involved, but in the view of the Opposition there is no better starting point for this repair than the implementation of the reverse proof of burden.
Noble Lords
Lord Tunnicliffe
Thank you very much—the implementation of the reverse burden of proof. If I go back to my script, I will get it right.
It is important not to underestimate, as the Government seem to be doing, just how significant a departure this would be from the previous regime, not only symbolically but practically too. There could be no denying the intent and commitment to bring about the most rigorous and thorough regulatory regime if the reverse burden of proof were introduced. We believe that knowing that there is nowhere to hide from failure, and that the burden is on you as a senior manager to prove that you took all reasonable and necessary steps, is a more powerful tool to bring about such change. That is why Labour has tabled this amendment to ensure that it comes into force next March, along with the rest of the SMCR.
We have been prepared to listen to the Government’s defence, and accept that they have put forward a very convincing point about why the reverse burden of proof might not be wholly acceptable in its current form. I speak specifically on the issue of proportionality. Given that the Bank of England and Financial Services Bill extends the scope of the SMCR to the entire financial services sector, we fully acknowledge that exemptions from the burden of proof for those not covered by the original proposals would be entirely sensible and necessary, but we do not regard a differentiation in regime as an insurmountable hurdle to overcome.
Therefore, by way of consensus, if the Government would be willing to indicate their intention to bring forward amendments at Third Reading preserving the reverse burden of proof but making exceptions for smaller firms, we would be open to further discussions. However, if the Government fail to do that, it is our responsibility to stand up for the change that people desperately want to see in the banking sector. It is the difference between reform and the status quo—the difference between the path back to public trust and continued disbelief. It is the difference that we need and deserve.
Baroness Kramer
My Lords, I am going to speak only briefly on this issue. My noble friend Lord Sharkey, who is sitting beside me, is perhaps the greater master, with particular expertise of the detail, and I do not think that the House needs to hear the same speech twice. Still, I want to make a few remarks because this is such a crucial issue.
To pick up the point made by the noble Lord, Lord Tunnicliffe, I say that the importance of the reversal of the burden of proof is, above all, its cultural impact—the impact that it has on every chief executive and every head of department to understand that if things go wrong, if there is misconduct and bad conduct within their own department, they are essentially on the line. Historically they have not been, and they know that. This reversal of the burden of proof changes that impact. We can tell that from the many conversations that I keep hearing from the Government that, if there is a reversal of the burden of proof, it might be harder to recruit new people to these posts because of the burden that now sits there.
In a world where we are sure that regulation alone cannot ensure that the banking industry behaves properly, and where enforcement is exceedingly difficult, it is very hard to follow a paper trail when lawyers have been very careful to ensure that one does not exist. There might be no electronic trail either; in fact we have just seen an example of such behaviour by Barclays, which explicitly set up a scheme, for which it has since apologised, which was designed to have no electronic trail whatever. Where the trail is so extremely difficult to follow, what matters is that chief executives and heads of department and other key players lead that cultural change; that they appoint people who will challenge them; that they put people in positions where they will blow the whistle when things go wrong; and that they drive through their whole organisation an understanding of the importance of ethical behaviour and proper conduct. That is the best defence that we can have.
Frankly, government arguments for cancelling the reversal of the burden of proof—the sort of argument for a key reason—have constantly shifted over the past few weeks when we have been discussing this issue. To gather from the last set of conversations around this issue, the argument is now primarily that the senior managers regime, which identifies who is responsible for different activities and different tasks, is both much tougher than the existing regime and much tougher without the reverse burden of proof rather than with it.
Lord Bridges of Headley
My Lords, this amendment has led to a very interesting debate. I would like to pick up on what the noble Lord, Lord McFall, said, and remind the House of the context. As he so well knows, and everyone here will remember, seven years ago, the world was engulfed by a financial crisis, triggering a deep recession. It was a crisis caused, in part, by the reckless actions of some bankers and it was a crisis which our regulatory system failed to prevent. Today, we are all still paying the price for it and we are still hearing cases of crimes and misdemeanours in our financial services, as my noble friend Lord Lawson mentioned.
Although a number of banks have paid eye-watering fines for their misdemeanours, it is wholly unacceptable that so few bankers have themselves been held to account for their wrongdoings. The current regime, the approved persons regime,
“has created a largely illusory impression of regulatory control over individuals, while meaningful responsibilities were not in practice attributed to anyone. As a result, there was little realistic prospect of effective enforcement action, even in … the most flagrant cases of failure”.
These are not my words but those of the Parliamentary Commission on Banking Standards. The Government are absolutely clear that this has to change.
Our regulatory system needs to be able to hold individuals—I repeat, individuals—and not just banks to account for misconduct or recklessness, a point that the noble Lord, Lord McFall, rightly made in Committee and my noble friend Lord Lawson echoed. More than that, regulation needs to deter misconduct and recklessness in the first place. Good regulation is a spur for good behaviour and, as such, is crucial to driving the cultural change in the industry which we all want.
What are the characteristics of such a regulatory regime? It is one in which individuals’ responsibilities are crystal clear. It is one where individuals cannot shirk responsibility for their actions or those of their employees. Tasks may be delegated, but never accountability. A good regime is a regime where ignorance is no excuse. It is a regime where there are strong, simple principles that guide people’s conduct. Above all, it is a regime in which all senior managers understand that if something goes wrong in their team—be it a team of 20 or 20,000 —or on their watch, they will be held individually accountable. That is a good regulatory regime. Are these the features of the current approved persons regime? They are not but they are the hallmarks of the new senior managers regime that we will implement. As the noble Lord, Lord Grabiner, eloquently argued, the new regime will be tough and it will help to change the culture across the financial services industry for the better, which is what the noble Lord, Lord Tunnicliffe, desperately wants.
I am aware that there are concerns that the replacement of the reverse burden of proof with a statutory duty of responsibility will leave us in the same position as under the approved persons regime, where it can be very difficult, as I have said, for the regulators to hold senior management to account. I can reassure your Lordships that this is simply not the case. Let me set out exactly how the new regime will deliver a step change in senior manager accountability. First, the clarity of responsibility which has been so desperately lacking under the approved persons regime will be embedded in the system. This will be achieved in a number of ways.
An application by the firm for approval of a senior manager must be accompanied by a statement of responsibilities setting out what the senior manager will be responsible for managing in the firm. This must be updated if the responsibilities of a senior manager change. That ensures that both regulators and the firm will have the necessary clarity about who is responsible for what, and senior managers will take full ownership of their respective areas of responsibility.
This requirement is bolstered by the regulators’ rules, which require each firm to have, and to submit to the regulators, a “responsibilities map” setting out how responsibility for the business of the firm as a whole is allocated amongst its senior managers. This minimises the risk of any responsibilities falling through the cracks between different senior managers. On top of that, under rules of conduct made by the regulators, it is made clear that a senior manager must take all reasonable steps to ensure that any delegation of their responsibility is to an appropriate person, and they must oversee the discharge of any delegated responsibilities effectively.
Secondly, tough rules will apply to the senior managers. A senior manager can now be found guilty of misconduct if a breach of regulations occurs in the area of the firm’s business for which they are responsible and if they did not take such steps as a person in their position could reasonably be expected to take to prevent it. Crucially, it does not matter whether or not the senior manager is aware of the regulatory breach. Ignorance is no defence. What matters is whether they have taken reasonable steps to prevent the breach. If they have not, they are guilty of misconduct. They will not be able to avoid liability simply because the email trail has gone cold. The regulator will not—I repeat, not—be completely stymied if all conversations and exchanges take place in an environment where there are no minutes, no emails, no memos and no existing trail.
Indeed, as the noble Lord, Lord Pannick, said, the very fact that there is an absence of such an email trail, and that a senior manager is totally unaware of what is going on in an area of the firm for which they are responsible, may very well suggest that they have been guilty of failing to take reasonable steps to prevent a breach of regulations. This is the new system we are introducing and the Bill before Parliament does not change any of what I have just said. The measures in this Bill do not take us back to the days before the financial crisis.
Noble Lords need not take my word for it. According to Andrew Bailey, deputy governor for Prudential Regulation and chief executive officer of the Prudential Regulation Authority, the introduction of the statutory duty of responsibility, instead of the reverse burden of proof,
“makes little difference to the substance of the new regime. Once introduced, it will be for the regulators (rather than the senior manager) to prove that reasonable steps to prevent regulatory breaches were not taken. This change is one of process, not substance”.
Furthermore, the removal of the reverse burden of proof does not change the penalties which can be applied. If found guilty of misconduct under the statutory duty of responsibility, a senior manager could face an unlimited fine and/or prohibition from working in the industry. All this means that situations where things go wrong because of irresponsible, reckless or negligent management by a senior manager will be less likely to occur in future, because of the strong deterrent effect of the statutory duty of responsibility. If they do occur, the regulators will be much better equipped to take action against senior managers who have mismanaged the firm.
To those who would still like to keep the reverse burden of proof, I would say this. First, Andrew Bailey has highlighted to the Treasury Select Committee in the other place that the way banks are starting to prepare for the introduction of the reverse burden of proof next March is unhelpful. We understand that some of their legal advisers are being asked to prepare checklists, as the noble Lord, Lord Tunnicliffe, said, of “reasonable steps” which their senior managers should follow. I would say to the noble Lord that the point about checklists is this: presenting evidence that a template or checklist had been followed could enable the senior manager to meet the burden of proof for the defence, but would leave the regulator to prove that the steps taken were not reasonable.
In practice, the reverse burden of proof would not give the regulator a significant advantage but could sow the seeds of a new tick-box culture. The reverse burden of proof will add no significant weight to the regulators’ powers of enforcement, but instead risks creating a great deal of lucrative work for City lawyers. Secondly, the Government are expanding, as has been said, the senior managers and certification regime so it covers all authorised financial services firms, the majority of which are small. The tick-box culture I have described risks leading to the perverse outcome whereby senior managers in the largest firms are less exposed to legal risk under the reverse burden of proof, thanks to being able to employ the best lawyers and compliance officers.
I have been pressed on why the Government cannot introduce a two-tier system, with the reverse burden of proof applying to deposit takers but not to other firms. First, I have described the potential for detrimental effects on small firms. These issues are also relevant for small deposit-takers—for example, small building societies and credit unions, the latter often relying on volunteers for their staff. This approach would also raise serious issues of cross-sectoral competition. Noble Lords on all sides want a vibrant, innovative financial services industry that offers high-quality, good-value products to consumers. To achieve that, the regulatory system must, as far as possible, deliver a level playing field to support competition.
A reverse burden of proof that applied only to the banking sector would undermine this. For example, both deposit-takers and non-deposit-takers can engage in mortgage advice. A small building society or bank, for which the reverse burden of proof would apply, engaged in direct competition with firms, for which it would not apply, could find it more difficult to attract key members of staff. There could be a particular issue for challenger banks, especially those seeking authorisation for the first time.
Legitimate questions of fairness would also be asked about why senior managers in deposit-takers, particularly small ones, should be subject to the reverse burden of proof while those in firms such as large insurers or investment firms, which may pose greater risks to positive consumer outcomes and market integrity, are not. This approach would also create a great deal of complexity in large groups that contain firms which have deposit-taking permissions and firms that do not.
So, introducing a two-tier regime would introduce unnecessary complexity, when we have a tough, fair and practical alternative—the statutory duty of responsibility —that can be applied consistently to all firms. This is why the Government do not believe it appropriate to retain the reverse burden of proof. Is it needed to prove a senior manager culpable for a misdemeanour? No. Is it needed to clarify responsibilities of individuals in firms? No. Is it needed for the regulator to prosecute a senior manager if the email trail goes cold? No. Is it the silver bullet that will make the individuals who manage our banks responsible for their actions? No.
Instead, as I have explained, the new regime, with its statutory duty of responsibility, is a formidable tool for holding senior managers to account and for changing behaviour and culture in banks and across the entire financial services industry—a change we and the British public so very much want. I therefore ask the noble Lord to withdraw his amendment.
Lord Tunnicliffe
My Lords, I am conscious that there are two possible tests for deciding when to bring a debate to a conclusion. One is when all arguments have been exhausted, the other when there are no minds left to change. I suspect that the second test is the more acute one, therefore I will be brief.
Many noble Lords have taken part in the debate. In many ways I do not need to answer the points, in that it has been a balanced debate and points have been contested across the House. I am particularly grateful to those noble Lords who agreed with me; I am less enthusiastic about those who disagreed with me. A particular point raised was the matter of human rights. I counter that with the point that the noble Lord, Lord Deighton, affirmed that this part of the Bill is compatible with the regime.
I thank the noble Lord, Lord Sharkey, for speaking in support of my position and, in particular, for bringing out in how many areas the reverse burden of proof is in our law. It is not common, but it is there in particular cases.
I note the point made by the noble Lord, Lord Hunt, on credit unions. In my speech I made the point that we were willing to enter conversations with the Government so that they could come forward at Third Reading with a sensible carve-out from the overall effect. I plead with the noble Lord—he may remember way back when he was in opposition—that we have modest resources. Putting together a series of sensible additions to do the carve-out would not be sensible. We are very happy to agree carve-outs with the Government.
I thank my noble friend Lord Brennan for once again reminding us of the Health and Safety at Work etc. Act 1974. That is one of the most outstanding pieces of legislation in the British system. Its impact on safety in this country has been phenomenal. I and many managers in this country have laboured under the reverse burden of proof that that Act brings. The reverse burden of proof can be the right thing to do and has proved so in safety. We believe that it would prove so here.
The noble Lord, Lord Pannick, said that we have not brought out sufficient justification. He says that it is difficult to prove. No: it has so far proved impossible. I thank my noble friend Lord McFall for reminding him, us and fellow commissioners of how forcefully they supported the reverse burden of proof in their report—I have pulled out extracts but I will not take up the time of the House and read them.
Banking: Financial Crime
Lord Tunnicliffe Excerpts(8 years, 5 months ago)
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Lord Bridges of Headley
My Lords, I am sorry but I cannot go into greater detail on that point. However, I draw the noble Baroness’s attention to the fact that, under the FCA’s rules, money laundering reporting officers will have to be senior managers. The FCA will also require firms to allocate overall responsibility for the firm’s policies and procedures for countering the risk that the firm might be used to further financial crime to an approved senior manager, who could be the MLRO but does not have to be. This will ensure that there is accountability for financial crime matters at the top executive level.
Lord Tunnicliffe (Lab)
My Lords, the problem with the regime so far is that there have not been successful prosecutions. Perhaps I may pick up on the point that my noble friend Lord Davies has been pressing in Committee on the Bank of England Bill. The Government have yet to provide a rationale for their change of heart on the code for senior managers, having moved from the reverse burden of proof to a duty of responsibility. The senior managers and certification regime is not due to come into force until next year so something must have changed their mind. We on this side of the House would like to know what that was. Will the Minister give an assurance that, before Report, noble Lords will be given access to the minutes of the meetings that the Government have had with banks, their lawyers and whoever else they met when coming to this conclusion?
Lord Bridges of Headley
My Lords, it is no secret that a number of banks did not believe that the reverse burden of proof was a good idea. This is public knowledge. Why are we making this change? Because we are rolling out the more rigorous SMCR regime across all authorised financial services firms. We want to do so in a way that is proportionate but robust and which delivers a level playing field for competition across the industry. The new approach does just that.
Bank of England and Financial Services Bill [HL]
Lord Tunnicliffe Excerpts(8 years, 6 months ago)
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Lord Tunnicliffe (Lab)
My Lords, I thank the noble Lord, Lord Sharkey, for filling my morning, because it took me a little time to work out what this amendment meant. It brought home once again the value of professionals in producing the consolidated version of the various Acts. Unfortunately, they did not produce a consolidated version of FSMA 2000, as amended, and it took me some time to find it on the website. It is worth doing because although this Bill intends to delete the appropriate provisions in favour of the Prudential Regulation Committee, what it does is bring out the essence of the point being made by the noble Lord, Lord Sharkey. Reference is made to paragraph 9(b), but first you have to read paragraph 8 of Schedule 1ZB, which states:
“The Bank must secure that a majority of the members of the governing body of the PRA are non-executive members”.
I stress that, because when one turns to the proposed replacement for this schedule to FSMA 2000, which is now Part 3A of what will be the Act as amended by this Bill, no equivalent reference is made to paragraph 8 about there being a majority of non-executive members. As the noble Lord, Lord Sharkey, alluded, it goes on to state:
“For the purposes of paragraph 8 and for the purposes of”,
the principles to which Section 3C requires the PRA to have, none of the following can be non-executive members:
“(a) the members referred to in paragraph 3(a), (b) and c), and
(b) a member who is an employee of the PRA or of the Bank”,
to which the noble Lord proposes to add proposed new sub-paragraph (c),
“the chief executive of the FCA”.
I want to bring out two points. First, I agree entirely that in no way can the chief executive of the FCA be seen as a fully independent non-executive. The Minister was at a very fine point the other day when he said that Martin Wheatley was not sacked. My understanding is that his term was to run until March 2016 but I believe that he departed in September, presumably on gardening leave. He did not exactly leave quietly. When addressing a meeting at the Queen Elizabeth II conference centre in London, he said:
“I am disappointed to be moving on”,
and that he was doing so,
“with a sense of unfinished business”.
He later listed the ongoing work as being to clean up markets through the Fair and Effective Markets review and the implementation of the Senior Managers Regime, which is intended to hold top bosses to account when things go wrong. The article reporting his speech added that the clean-up was prompted by the LIBOR rigging scandal.
Martin Wheatley had many critics and I am sure that he is not a card-carrying member of the Labour Party; I doubt whether he has ever voted Labour, but he was to many citizens who took an interest a man of the people. He took the banks on in a pretty robust way, and I think that an awful lot of people in society felt that the banks needed to be taken on in a robust way. I am sure that he was first leaned on and then eventually fired. It is interesting to note that if you look up the CV of his successor, she is listed as only an “acting” chief executive. In no way can this person be considered to be independent. I assume that when the noble Lord accepts the amendment, he will tidy it up and make a reference to the Prudential Regulation Committee which is to take over the responsibilities presently listed in FSMA 2000. That would introduce a new subsection to what is presently Section 30A of FSMA, which requires there to be a sufficient number of non-executives to outnumber the executives of the Bank plus the chief executive of the Financial Conduct Authority. I think that that is the intent of the amendment even if it is not what it actually says, and I support that.
The whole of the debate on this Bill has been about influence and independence. We will be moving on to the Prudential Regulation Authority or the Prudential Regulation Committee in the clause stand part debate, but I think that not making it clear that there should be a majority of NEDs on the committee is a retrograde step. It almost implies, through the wording of this subsection, that the chief executive of the Financial Conduct Authority is independent.
I have had the privilege of working for Her Majesty’s Government, not as a civil servant but in the public sector. I know about being leaned on and I have to recognise that it is very effective. The one thing you cannot say at the end of the exercise is that you are independent.
The Parliamentary Secretary, Cabinet Office (Lord Bridges of Headley) (Con)
My Lords, I thank the noble Lord, Lord Sharkey, for provoking this debate. Unlike the noble Lord, Lord Tunnicliffe, I have not had the enjoyment of spending my morning looking at FSMA consolidated Acts, but I have been looking into this matter. I do not want to go on at length and repeat ad nauseam what I was saying on Monday. As the noble Lord, Lord Tunnicliffe, said, this comes down to a matter of independence. He is absolutely right to pinpoint that. Despite hearing the cases that he and the noble Lord, Lord Sharkey, mentioned, I remain in no doubt that the FCA CEO should be counted as an external member. She is not an executive of the Bank and the FCA is an independent body entirely separate from the Bank.
Noble Lords should also be aware that the legislation further reinforces external representation on the new Prudential Regulation Committee, as compared with the PRA. The majority of external members, as has been said, is increased compared with the PRA board with at least seven external members, at least six appointed by the Chancellor in addition to the FCA CEO, compared with only five internal members: four officers of the Bank and one appointed by the governor. So, for the PRC, external members will be in the majority by at least two. This compares with a requirement for a majority of one on the PRA board.
It could be argued that if you use the power to add an extra deputy governor to the PRC, that majority of externals is lost. I would argue that the power to add an extra deputy governor to court and to the committee requires secondary legislation, so Parliament will have its say. Furthermore, Clause 1 provides that if secondary legislation is used to add a deputy governor to the PRC, it may also provide for an equal increase in the minimum number of members appointed by the Chancellor of the Exchequer to ensure a continued balance of internal and external members.
I shall leave it at that. I hope that the explanation I have provided satisfies the noble Lord and that he will withdraw his amendment.
Baroness Kramer
My Lords, I find it extraordinary that there is an argument that the Bank of England knew what was going wrong but sullenly kept its mouth shut because the constraints gave the key responsibilities to the FSA. We have to break away from that sort of cultural notion that one observes only the very narrowest interpretation of responsibility when we are talking about an organisation such as the Bank of England. I agree that that culture tends to continue. That is one of the frustrations and concerns that we have, particularly with the removal of the oversight committee, which is the one challenge to that ongoing attitude. Let us set that aside for the moment, although I find it a constant frustration not to recognise that the Bank of England did not act when it certainly had an opportunity to lay on the table the many problems it now says it saw with such clarity.
I go back to the underlying issue, which is that the PRA has been a success. The PRA has been absolutely key in establishing the kinds of regulations that have made the Bank safer for the future, setting standards for regulatory capital being an important part of that. In addition, in the period before we had the PRA, it was virtually impossible to get a new bank licensed in this country. We have had Metro Bank but essentially no new bank for 150 years. People had to find an existing banking licence, buy it and go for some sort of change of purpose. The PRA was a leader in changing that whole culture and recognising the importance of bringing in challengers and new players. Had it stayed tightly within the existing Bank family, which had resisted that approach over and over again, I very much doubt that we would have seen that kind of change. So the experience we have had since setting up a PRA which has some distance from the Bank—a small distance, I fully acknowledge, but separate responsibilities governed under company law—has been that it has brought forward change in a way that is not part of the history of the Bank. I am very concerned at the potential for losing that.
The noble Lord, Lord Carrington, also suggested that if we changed the existing structure it would not allow a proper flow of information from the Bank of England to the PRA. But look at the membership of the PRA: we have crossovers in deputy governors, and I believe that the Governor of the Bank of England is the formal chair of the PRA. If these individuals are unable to remember the meetings that they were exposed to and the memos that they read when they wore one hat, and bring that information into the meetings they have when they play their role within the PRA, I frankly find that extraordinary. As far as I understand it, there is no problem of information flow—and if there is, we would very much like to hear from the Minister what the instances are, where there has been that kind of breakdown, and why an individual involved in discussions in one particular part of his or her job has been unable to remember those discussions when participating in another part of it. Those are quite serious allegations. I would like to hear from the Minister where this communication has so badly broken down when it is quite frequently the same individuals who are involved.
Lord Tunnicliffe
My Lords, again, I support the noble Lord, Lord Sharkey, on his general thrust in this debate. I come at it from a slightly different direction, although I think that the fundamental proposition is, “If it’s not broken, why are we trying to fix it?”. In fact, the supporting paperwork says that it is working well. We need to go behind that—back to the 2012 Act, the FiSMA 2000, as amended, and all that sort of stuff—to look at how the Bank is now going to work.
I think the Bank will move its emphasis from the Monetary Policy Committee towards the FPC. Regarding the control of interest rates and the Government’s injections of cash, depending on which textbook you read, it was the actions of banks in creating credit that formed the bubbles that caused the crisis of 2008-09. I believe that is the technical reason and that we are seeing many bubbles emerging again. As to the process of the FPC, by reading through the consolidated Act we see that its many powers—to make recommendations about new tools, for example—and all the things it is able to do to control the creation of credit, among other things, are absolutely fundamental to how efficiently the money system supports the economy, and hence are fundamental to the economy.
Now, what is the thing that keeps this clean? The thing that keeps it clean is the fact that the PRA is a subsidiary—an independent company, as mentioned, governed by company law—and, therefore, there has to be an arm’s-length relationship between it and the FPC. Under the various terms of the Act, the FPC can create various macroeconomic tools, which it then hands down to the PRA. It hands those down not through some side-channels or influence but, because of that independent legal status, in a very formal way to its subsidiary, and I think that is healthy. I do not believe that in effect moving the PRA closer to the Bank—and, by definition, closer to the FPC—is a good thing. The present separation is working, and I think we should continue it.
The reform included in the Bill ends this subsidiary status. The PRA board will be replaced by the Prudential Regulation Committee and, as I said, that must have the right balance. The Government so far, frankly, have not come up with a good reason for this change. The noble Baroness, Lady Kramer, made the point that mechanisms for information transfer are there, and therefore that is not at risk. The whole purpose of being in a subsidiary company—I headed a subsidiary company of a large organisation—is to get focus on its business, so that there are very clear responsibilities. I think that the move in the Bill away from its being a subsidiary is a bad thing, and I hope that the Government will reconsider the inclusion of this clause.
Lord Bridges of Headley
My Lords, once again I thank the noble Lord, Lord Sharkey, for provoking a very interesting debate and for the thoughtful contributions that he, the noble Baroness, Lady Kramer, the noble Lord, Lord Tunnicliffe, and my noble friend Lord Carrington of Fulham have made.
The noble Lords, Lord Tunnicliffe and Lord Sharkey, absolutely got to the nub of the matter here. We are seeking a PRA that is effective and independent, and getting the balance right between those two aims, and making sure that we achieve both, is absolutely crucial. I would argue that the proposed changes will increase the PRA’s effectiveness—making it better still, to address the point made by the noble Lord, Lord Tunnicliffe—but do not undermine its independence.
Let me first address the issue of increasing effectiveness, and I will try here to steer clear of management-speak. The governor has explained the links—I have crossed out the word “interdependencies” that was in my brief—between monetary and financial stability and why, therefore, it is right that both these macroeconomic policy responsibilities should rest with the central bank. The Bank is also committed to implement a set of changes to its internal organisation, aiming to ensure that different parts of the Bank work even better in pursuit of its twin aims of monetary and financial stability. The Bill builds on and reinforces these organisational reforms.
Ending the subsidiary status of the PRA will reinforce the Bank’s efforts to strengthen its capacity to work effectively across its responsibilities. At Second Reading, it was suggested that ending the PRA’s subsidiary status and creating the Prudential Regulation Committee might represent a downgrade of the prudential regulation function—a point that has been alluded to. I entirely disagree with that. I would argue that this change will have the precise opposite effect. Placing the Prudential Regulation Committee on the same footing as the MPC—and, with our changes, the FPC—means elevating the microprudential role to the same level as monetary policy and macroprudential policy.
This is, I would argue, an upgrade that reinforces not just to the Bank staff but to the wider public, to whom the Bank must be transparent and accountable, that the Bank is not simply an organisation dedicated to setting interest rates but one with equally important macro and microprudential responsibilities.
The Bank has told us that closer integration has increased the feeling among PRA staff that they are an integral part of the Bank’s mission and have broader opportunities for progression across the whole Bank. This can only assist recruitment of the best people to the supervisor, which I am sure is something that all your Lordships will support.
Bank of England and Financial Services Bill [HL]
Lord Tunnicliffe Excerpts(8 years, 6 months ago)
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Lord Tunnicliffe (Lab)
My Lords, I support the amendment from the noble Lord, Lord Sharkey. One of the main concerns of the Financial Services Consumer Panel has been the uneven playing field between paid-for and not-for-profit debt management services. People are being exposed to poor debt advice, as the noble Lord said, and this needs to be addressed both directly and in the round.
The central concern is this curse of our modern time: cold calling. Something could be done quickly. A Labour amendment was voted through in this House during the passage of the Consumer Rights Act on caller identification, but it has not yet been commenced. In response to my noble friend Lady Hayter, the noble Baroness, Lady Neville-Rolfe, stated that the Government were about to begin a consultation on caller ID. Can the Minister say now, or in writing at a later date, what the timetable is for this consultation? When can we expect to see some action on this issue?
Are the Government considering any other measures that could help tackle unsolicited market practices? They include the automated reporting of nuisance calls; the collation of nuisance calls—for example, more than 100 complaints and the calling number’s owner could be automatically referred to Ofcom, the Information Commissioner’s Office and perhaps the police; and appropriate victim redress for persistent cold calls from the same organisation.
The concern highlighted by the noble Lord, Lord Sharkey, is important in its own right, and so is the whole issue of cold calling. The two come together in this amendment, which we support.
Lord Ashton of Hyde
My Lords, the Government share the concern of the noble Lord, Lord Sharkey, about long-standing problems in the debt management market. Indeed, I have had the pleasure of answering questions from the noble Lord on this subject, and had a subsequent meeting with him and officials from the Treasury. We agree that it is imperative that vulnerable consumers in this market are treated fairly by firms and provided with the services that meet their needs.
As the Committee will be aware, responsibility for consumer credit regulation, including debt management firms, transferred from the Office of Fair Trading to the Financial Conduct Authority on 1 April 2014. The ensuing, more robust regime is dramatically improving consumer protections. The Government have ensured that the FCA has wide enforcement powers to take action where its rules are breached. There is no limit to the fines that it can levy and, crucially, it can force firms to provide redress to consumers.
Debt management firms are in the first group of firms to require full authorisation, with the FCA thoroughly scrutinising firms’ business models and practices. Every debt management firm will have to demonstrate compliance with the FCA’s rules and principles, including the requirement to treat customers fairly. Firms which do not meet the FCA’s threshold conditions will not be able to continue in the market. Decisions on those authorisations are due to take place—the first ones by the end of this year.
The FCA has also introduced tough new rules to protect consumers in the debt management sector, and the FCA actively monitors that market. It has flexible rule-making powers and, if it finds further problems, it will not hesitate to take action. The FCA requires that all advertisements and other promotions must be clear, fair and not misleading, and it is able to impose tough sanctions where wrongdoing is found.
Regarding the noble Lord’s specific points about unsolicited marketing, the financial promotions regime applies to those providing debt management services. The FCA requires that unsolicited marketing by phone, text or email makes clear both the identity of the firm and the purpose of the communication so that the consumer can decide whether to proceed. This was highlighted by the noble Lord, Lord Sharkey.
The FCA also requires regulated debt management firms that accept leads from lead generators to satisfy themselves that business has been procured fairly and in accordance with data protection and privacy in electronic communications law. More broadly, in 2014 the Department for Culture, Media and Sport published its Nuisance Calls Action Plan. This set out the actions being taken by government, regulators, consumer groups and industry to tackle nuisance calls.
Importantly, the FCA has already committed to undertake a review of unsolicited marketing calls, emails and text messages from consumer credit firms, which will begin early next year. The Government believe that requiring the FCA to take a particular course of action before this review has taken place would limit the FCA’s ability to exercise its powers independently and would not necessarily achieve the desired result.
In answer to the question, “Why not act now?”, asked by the noble Lord, Lord Tunnicliffe—and I think that the noble Lord, Lord Sharkey, implied that even if he did not say it directly—it is worth noting that, if additional requirements for debt management firms were introduced at present, those firms would be required to alter their internal processes. That would cause disruption to the FCA’s ongoing authorisation process, which is due to begin producing results within the next couple of months.
I shall take advantage of the offer from the noble Lord, Lord Tunnicliffe, to write to him on the caller ID review timetable, because I do not have that to hand.
In summary, the authorisation process is well under way and will not take a year, and the FCA review of unsolicited marketing calls will begin early next year, so I submit that the noble Lord’s amendment is not appropriate at this time. I therefore ask him to withdraw it, confident in the knowledge that he will continue to hold the Government to account on this subject.
Baroness Kramer
My Lords, I do not think that I can improve on anything that has been said by the noble Baroness, Lady Drake, because she understands these issues with such clarity and works so extensively in this field. In a strange way, the noble Lord, Lord Hunt, made the argument for how a duty of care should be at the heart of everything that banking institutions and financial institutions do. I hope very much that the Government will take on board the importance of embedding these kinds of responsibilities deeply within the requirements for the financial services industry.
Lord Tunnicliffe
My Lords, what became evident both during and after the crash was that financial providers had failed to exercise any duty of care towards consumers across the sector that the industry is supposed to serve. The amendment before us was previously moved by my noble friend Lady Hayter, and I draw largely on her experiences as a member of the Financial Services Consumer Panel. The cases she worked on during her time at the FSCP were, among others, high loan-to-value mortgages and high loan-to-income mortgages. This was plainly about selling products to people who could not afford them with no consideration of their interests. This was done in spite of the fact that should circumstances change, those people would have no way of repaying their loans. As time went on and the number of loans increased, each one as reckless as the last, no account was taken of the hurt to individual borrowers or of the far wider group of consumers whose house prices fell in the subsequent crash, while future loans dried up and repayment terms became unsustainable.
The amendment would ensure that financial services had a duty of care to their consumers collectively as well as on a one-to-one basis with their clients. Case law provides for a duty of care across the financial services sector, but it is clear that that is not enough. Despite this, the Government have continued to resist writing it into legislation and have relied only on case law. The first part of the amendment would establish a fiduciary duty that would demand a higher standard of care for direct consumers, and the second part would extend that general duty to all consumers across the sector. This would fill a gap which currently exists in the financial services sector. If it were to be introduced alongside the new extended senior managers and certification regime, it could bring about a cultural change in the financial services sector that the Government, the Treasury Select Committee and the Bank of England have all said is necessary.
The experience of many of us of the financial sector has moved from a position where as a generality we expected that we could trust the industry with our money and for appropriate advice. The crash has completely destroyed that trust, so an amendment like this, if accepted, could help to bring it back. Confidence in the sector remains dangerously low and something has to be done to restore it. Perhaps this duty of care would provide a route back to public trust.
Bank of England and Financial Services Bill [HL]
Lord Tunnicliffe Excerpts(8 years, 6 months ago)
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Lord Tunnicliffe
Lord Tunnicliffe (Lab)
My Lords, in moving Amendment 5 I will speak also to Amendment 6. Amendment 5 would omit the subsection that transfers the power for the creation of the financial stability strategy from the court to the Bank. Amendment 6 would specify in the Bank of England Act 1998 that the Chancellor of the Exchequer should be consulted in relation to the development and production of the financial stability strategy.
The maintenance of financial stability is arguably the overwhelming role of the Bank of England and its committees. If you look at what has gone wrong in the recent past, it has overwhelmingly been issues of financial stability that have impacted on the financial system and, much more importantly, on society as a whole, both in our country and across the world.
It is interesting to look at what is supposed to happen now. The appropriate part of the Act, which I can read from the consolidated document that the Treasury was kind enough to provide us with, is Section 9A—“Financial stability strategy”—which says:
“The court of directors must … determine the Bank’s strategy in relation to the Financial Stability Objective (its ‘financial stability strategy’), and … from time to time review, and if necessary revise, the strategy … Before determining or revising the Bank’s financial stability strategy, the court of directors must consult about a draft of the strategy or of the revisions … the Financial Policy Committee, and … the Treasury”.
That seems quite straightforward. It seems to put the court at the centre of the creation of the stability strategy, and to invite the right other parties to be involved.
Indeed, the importance of that process is demonstrated by the fact that it gains a place on my favourite piece of paper, which is a print-out of a splendid one-page summary on the Bank’s website, called “How we are governed”. It says:
“The FPC is a sub-committee of Court and its objectives are set by reference to the Bank’s Financial Stability Objective. The Bank’s Court is required by statute to prepare and publish a Financial Stability Strategy, in consultation with the FPC and HM Treasury”.
That is all very straightforward. Sadly, it has not been a great event so far. A strategy document was produced in 2013, called The Strategy for the Bank’s Financial Stability Mission 2013/14. It was five pages long and it was approved by the court on 25 September 2013. The strategy was revised and published in the 2014-15 report, which was signed by the chairman on 4 June 2014. If I read that document correctly, the strategy was reduced to one column and, while asserting a negative is always rather difficult, in the Bank’s 2015-16 report I could find no mention of a financial stability strategy in the ownership of the court.
It looks as though the Executive have to some extent pre-empted this part of the Bill by letting the responsibility of the court wither on the vine. My amendments are really simple and probing. What has happened to the financial stability strategy and what will happen under the new arrangements? Who will produce the financial stability strategy or have the Government effectively decided that the role of producing it should be subsumed into the FPC and, if it is being subsumed, where in the Bill or in the subsequent amended Act is that enabled?
My other area of concern about the situation is that, reading through the document, we find increasing references to HM Treasury’s input to the strategy. So on the one hand, you have responsibility for the strategy clearly drifting away from the court. As far as I can see, the Bill intends to take it away totally from the court and I would value confirmation of whether that is true. On the other hand, one seems to be having increasing input from Her Majesty’s Treasury. I do not wish to comment particularly strongly on whether that is a good or bad thing but I would certainly value the Minister confirming whether the Government intend to take this role away from the court and increase the role of HM Treasury in this important area. I beg to move.
The Parliamentary Secretary, Cabinet Office (Lord Bridges of Headley) (Con)
My Lords, I thank the noble Lord, Lord Tunnicliffe, for his introduction to his amendments. We discussed the Bill’s changes to the arrangements for the financial stability strategy at Second Reading. I hope to address the issues raised during that debate and some of the points that the noble Lord has just raised again. As I said earlier, legislation generally confers powers and duties on the Bank of England in two ways: either directly on the Bank or on a statutory committee of the Bank, such as the Financial Policy Committee. Consistent with this approach, Clause 5 moves responsibility for determining and revising the Bank’s financial stability from the court to the Bank. I reassure the noble Lord and the Committee that the court, as the body responsible for managing the Bank’s affairs, will retain ultimate responsibility for determining the financial strategy. But by naming the Bank instead of the court, we would grant the court the ability to delegate production of the financial stability strategy to those best placed within the Bank.
I argue that this flexibility is important given the broad range of policy that the financial stability strategy covers, which obviously extends beyond the responsibilities of the Financial Policy Committee. For example, responsibility for resolution policy, regulation of financial market infrastructure, note issuance and macroprudential policy are held within separate parts of the Bank, but the financial stability strategy will need to cover all these areas and others to be truly comprehensive. The clause as drafted does not affect the court’s ultimate responsibility for determining the Bank’s strategy, while granting the court additional flexibility as to who within the Bank undertakes the work to pull together the actual document. As I have said, the court will be able to delegate production of the strategy within the Bank but, as the noble Lord, Lord Tunnicliffe, asks, who will be left holding the pen? It is for the court to determine who is best placed to produce the strategy, and this may shift over time as the Bank decides to prioritise particular elements of its responsibilities. However, it is clear that a document of this importance will require significant engagement by the Bank’s senior management. I expect that the Bank’s governors will all be heavily involved when the strategy is determined or revised. I should add that there is no intention to increase the role of the Treasury in the Bank’s financial stability strategy. As I have just said, the court will be responsible for the strategy, although it will be required to consult Her Majesty’s Treasury, as now.
Lord Tunnicliffe
I thank the Minister for that response. He says that the court has delegated this to the Bank. The minutes of the court are now published, but when your total staff resource is half of one person, actually finding the information is quite difficult. I am not criticising the Bank, because I am all in favour of producing lots of information, and it is very open and all that sort of thing. However, the Minister has the machinery, while I do not, and I wonder whether he could dig out for me the appropriate minute which shows that transfer of responsibility and whether he can provide evidence that the court is responsible. The wording of the Act, as it stands before amendment, seems to suggest that this is an active responsibility, but I do not get a sense of that active responsibility. I am sure that could be evidenced with the publication of the minutes. I would be grateful for that.
I am sure the Minister is right to say that the 2013-14 statement is the current strategy, but there is a column in the 2014-15 account labelled, I think, “Strategy”. It would be good if he could look at these points and produce a letter which, like his first letter, references back into the parent documents to convince me about what he is saying and whether, although I am sure it is accurate, it is actively accurate in the way it involves the court. With those few comments, I beg leave to withdraw the amendment.
Lord Sharkey (LD)
My Lords, I will be very brief. This amendment would increase the number of non-executive directors of the FPC from the five proposed in the Bill to six. Exactly as with our proposal to preserve the NED balance on the court and our proposal to reject the abolition of the oversight committee, this amendment aims to preserve or strengthen the influence of the non-executive directors.
The Treasury has supplied a very helpful chart showing the current composition of the Bank’s governance structures. As things stand, the FPC consists of the governor, three deputy governors, the CEO of the FCA, one governor appointment—the executive director for financial stability—and four appointments by the Chancellor. These four people are the external members, the equivalent of non-executive directors. This means the FPC consists of five Bank officials, the CEO of the FCA and four non-executive directors.
The Bill before us changes this. It adds a deputy governor and one external member. In the words of the Treasury briefing note, it adds the latter to,
“maintain the existing balance between existing executive and non-executive members”.
Under the new arrangements, the composition of the FPC will be: six Bank officials, the CEO of the FCA and five NEDs. As the Treasury note says, this preserves the preceding balance, but it also highlights the position of the CEO of the FCA. We do not argue that she should not be a member of the FPC—on the contrary—but we are not convinced that she could be described as an external member, with the same independence of thought and action as the other truly external FPC members. Indeed, the Treasury note does not describe her as an external member. It simply lists her as “the CEO of the FCA”.
In many respects, the CEO is more like a Bank official than an external member. She depends for her job on the confidence of the governor and the Chancellor. What her organisation can or cannot do is in many respects controlled, or can be controlled or constrained, by the Bank or one of its organs. We saw what happened to the current FCA CEO’s predecessor: Martin Wheatley was summarily sacked by the Chancellor. I assume the governor, at the very least, did not oppose this. On balance, it would be entirely reasonable to conclude that the CEO of the FCA is not as independent of Bank influence as the truly external members of the FPC. In practice, that means that in the current and proposed FPC compositions, there will be a majority of Bank officials and Bank-dependent officials, and a minority of external members. We believe that that is unhealthy. We believe that accountability and scrutiny will be improved by having a more truly independent member on the FPC. It should also be true for the PRA, incidentally, and I will argue that case in Amendment 19. This amendment would raise the number of independent members of the FPC from the five proposed in the Bill to six. It does that to ensure a sufficiency of truly and unquestionably independent members on the FPC. I beg to move.
Lord Tunnicliffe
My Lords, I will try not to make this a habit, but I find the case persuasive.
Lord Ashton of Hyde (Con)
My Lords, this has been a brief debate. I am sorry that it falls to me yet again to argue numbers with the noble Lord, Lord Sharkey, and I am afraid to disagree with his argument.
This is a superficially simple amendment which seeks to change the balance of the membership of the Financial Policy Committee by increasing the number of external members from five to six. The noble Lord, Lord Sharkey, was again correct in outlining the numbers on the FPC as they stand today: namely, the governor, the three deputy governors and the executive director for financial stability strategy and risk, who are the internal members; and the five other members, who I would describe as external, who are the chief executive of the FCA and the four members appointed by the Chancellor. There is also a non-voting member from the Treasury. This gives an equal balance of voting membership between the Bank executives and those from outside the Bank. The Bill adds two new members to the committee—the deputy governor for markets and banking and an additional external member—which preserves the existing balance between the executive and non-executive members of the committee.
We think that that is appropriate: it strikes the right balance between ensuring sufficient input from the Bank of England’s executive and internal expertise and supporting the external, non-executive members’ role of providing a challenge to members’ thinking. Crucially, the committee can draw on the expertise and resources of the Bank, while the non-executive members provide a strong challenge function by bringing outside perspectives and expertise to the committee’s discussions and preventing groupthink.
Bank of England and Financial Services Bill [HL]
Lord Tunnicliffe Excerpts(8 years, 6 months ago)
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Lord Tunnicliffe (Lab)
My Lords, I thank my noble friend Lord Eatwell for this amendment, which takes us to the central problem with the Bill. His words are powerful: he calls the Bill opaque and obscure, and he says that it leaves unclear who makes policy. I thank him for his review of the previous legislation and his assurance that, broadly speaking, it works. I thank him for the concept of an “active entity”, which I shall adopt. However, he comes back to the point: who is doing what?
Perhaps before I go on, I should explain where the Opposition stand on the Bill. We feel that the role of the Bank of England is quite central to the economy and that it needs to be reviewed and probably reformed. We believe that, to do that, we have to have a period of reflection and study. My noble friend the Shadow Chancellor in another place has announced those reviews. Nevertheless, in respect of this Bill, we have a role to review the Bill, ensure that it makes sense and do all that we can to help the Government bring it back to a more sensible position.
Like my noble friend, having read the Bill, I ended up feeling that I understood less about how the Bank works than I did when we were in the very painful position in 2012—I say painful because it took so long to get there—when we created the legislation that created the present situation. Largely speaking, there is a question around why we are changing it from something that is clear to something that is significantly less clear. I thank the Minister for all his help in trying to help me understand the Bill—I wish that he had had more success. I am very grateful for the consolidated document that his staff have produced, and that has made studying the Bill and the Acts that it affects so much more straightforward. I also thank the Minister for the meetings he arranged, with himself and with the chairman of the court.
Those two meetings had an interesting effect: they produced two letters. One was dated 4 November and the other was dated November; noble Lords will have to take my word for it that it came after 4 November. I will quote selectively from the letters and am very happy to circulate them to anybody who is interested. Under a large paragraph labelled “Court of Directors and Financial Stability Strategy”, the Minister says:
“The Court, as the governing body of the Bank, is responsible for managing the Bank’s affairs except for the formulation of monetary policy. The Court is also responsible for determining the Bank’s objectives and strategy, and, in line with the Court’s role overseeing the Bank, the Bill makes the Court responsible for the oversight functions. The Court is therefore ultimately responsible for deciding how power given to ‘the Bank’ should be exercised, and how duties given to ‘the Bank’ should be fulfilled. This includes the Bank’s recovery and resolution powers”.
When I read that, I thought that it was pretty straightforward and sounded like any other company: power rests with the board—we happen to call it “the court”—except for where it is either taken out by statute, which it clearly is in the formation of monetary policy, or where the court has decided to delegate that power.
Unfortunately, after I met the chairman of the court, I got another, shorter letter. Under a paragraph labelled “Powers and duties conferred on the Bank”, it said:
“As the governing body of the Bank, the court is responsible for deciding how powers given to the Bank should be exercised and ensuring that the Bank fulfils its duties”.
That sounds okay. It then goes on to say that:
“These include powers and duties in relation to note issuance, resolution, and supervision of financial market infrastructures”.
It does not quite say that it shall have no other duties, but I put it to noble Lords that they are a pretty thin number of duties, given the tremendous responsibility that the Bank has in our monetary affairs. In the next paragraph, under the heading, “Powers and duties conferred on statutory committees”, the letter states:
“Powers and duties conferred on a statutory committee are for that committee to exercise, according to the terms of their legislation. The Court cannot exercise the powers conferred on a statutory committee”.
Because there was no legislation passed between 4 November and the something of November, I assume that the two letters say the same thing; I just have a lot of trouble seeing how. If the first letter is right, as I read it, then I am relatively comfortable. Unlike the Bill—and we can clear that up with some amendments—it restates my understanding that the court is in charge, except where responsibility is taken out by legislation. The second letter rather implies that there are four entities in the Bank: the Financial Policy Committee, the Monetary Policy Committee and the Prudential Regulation Committee—I think I have got them roughly right—which have clear powers and lots of authority and are all, incidentally, chaired by the governor; and then there is something called “the Bank”, which is left with note issuance, resolution and supervising infrastructure. We all know that no committee is going to have much to do in a resolution situation, since it will happen over a weekend in 48 hours We have moved from a position where the court is central to the Bank to one where it seems almost irrelevant.
There are two points here. First, is that move the Government’s intention and, secondly, is it clear? We are going to worry elsewhere about the standards for senior management in banks. If a bank came along with its roles and responsibilities as obscurely set out as we now have in the proposed legislation, it would be denied a licence to operate. What are we asking from these organisations? It is absolute clarity of who does what, with what authority. This does not meet those standards and it would not get a licence. I hope the Minister will ponder on what my noble friend, Lord Eatwell, and I have said. If he agrees that the Bill produces more obscurity than light, I hope he will pause and bring forward some amendments on Report, first to make absolutely clear what the Bill does.
Lord Flight (Con)
My Lords, when the Bill was published, I wrote to the Economic Secretary to the Treasury on this territory, because I could not really understand how the reorganisation of the Bank was intended to operate, or what it intended to achieve. Part of the reply I got was:
“The Governor has said that: ‘Our strategy will be to conduct supervision as an integrated part of the central bank and not as a standalone supervisory agency that happens to be attached to a central bank’. De-subsidiarisation, together with the organisational changes being put in place by the Bank as part of its ‘One Bank’ strategy, is an important element of this, and will help to break down any remaining barriers that could stand in the way of a unified culture and impede flexible and coordinated working across the Bank”.
I thought about this and looked at the structure. In answer to the points raised by the noble Lord, Lord Eatwell, what struck me was that “the Bank” actually means “the Governor”.
Lord Sharkey
My Lords, I do not believe that Clause 3 should be part of the Bill. Clause 3 abolishes the oversight committee and transfers its functions and responsibilities to the court itself. This is a significant weakening of the oversight of the Bank. The oversight committee consists only of the non-executive directors of the Bank; there are quite deliberately no bank officials on the committee. Parliament arranged this in order to be certain that oversight was truly independent and to avoid the possibility of undue bank influence in assessing the performance of the Bank itself in its various roles.
There is an irony in the proposal to abolish the committee. As the noble Lord, Lord Eatwell, pointed out at Second Reading, the Court of the Bank was opposed to the original proposal to create a supervisory board. It was the Bank itself that proposed an oversight committee composed exclusively of non-executive directors.
The reasons given by the Government for the abolition of the oversight committee are extraordinarily weak. The Minister’s letter to me, received last Thursday, says about the oversight committee:
“The new oversight functions and transparency measures have been successful, but the extra layer of governance imposed by the oversight committee has proved unnecessary”.
It goes on to say:
“There is effectively an oversight committee overseeing the work of an oversight board”.
That is emphatically not the case. It was precisely because Parliament found oversight by the board to be unsatisfactory and defective that it introduced the non-executive director-only oversight committee.
In exercising oversight of the Bank there is a completely obvious difference between having that oversight carried out by the Bank itself sitting as five officials and seven NEDs, and having it carried out by an oversight committee composed only of non-executive directors. Anyone with experience of corporate governance in the commercial world would immediately recognise the difference and the danger to independent scrutiny in the current proposal.
The Minister also says:
“The non-executive chairman of the Court has found the division of responsibilities between the Court and the Oversight Committee difficult to operate and unnecessarily complex since, to ensure that the meetings are effective, the Oversight Committee has often required the presence and engagement of the executive members of the Court”.
As a reason for abolishing the oversight committee, this is very feeble. Does the chair of the court imagine that the oversight committee could function without calling on the executive directors? How could any oversight committee function without evidence from the executives it is charged with overseeing? Does the chairman not understand the obvious and critical difference between court executives being called to give account to a committee of nine non-executive directors, and these same court executives giving an account of their actions and decisions to a full court meeting of five bank executives and seven non-executives? When you come right down to it, the main reason advanced by the Government for abolishing the oversight committee seems to be that the chair has diary and scheduling issues.
Perhaps I should remind the Committee—although seeing those present in the Chamber this afternoon, I probably do not need to—that Parliament considered the oversight committee a vital part of the reform of the Bank’s structure of governance. It was intended to prevent a recurrence of groupthink and as a check on the tendency to arrogance. It was intended as a means of ensuring a cool, independent view of the Bank’s operation, as a means of ensuring proper scrutiny and transparency and, as the Minister says, it has been successful in doing exactly this.
The Government have made no meaningful case for abolition. Abolition would reduce oversight and transparency and reinstate the Bank’s influence over oversight itself. It would ignore all the reasons Parliament advanced for the establishment of the oversight committee in the first place and, in common with other measures in the Bill, it would increase the influence of the governor and the Bank in areas where Parliament has taken deliberate steps to decrease it. Abolition is a retrograde and dangerous measure. The Government have given no compelling reasons—in fact, hardly any reason at all—for abolishing the oversight committee. This clause should not stand part of the Bill.
Lord Tunnicliffe
My Lords, I support the noble Lord, Lord Sharkey, in his contention that the clause should not stand part of the Bill. This whole issue is about holding the executive to account. In these situations it is very difficult to make a speech which does not sound as though you are criticising the current executive and governor. Oversight mechanisms are in place for when things go wrong. They are largely irrelevant when things are going right but they are there in case they go wrong. I contend that the Government’s proposals significantly reduce the power of the non-executives to hold the executives to account.
Those of us who sat through those long days of Committee on the Financial Services Act 2012 will remember that the Government stated that they,
“fully recognise the importance of strong lines of accountability for the Bank, given its expanded responsibility and powers”.—[Official Report, 26/6/12; col. 184.]
I am not sure whether the Government took that view immediately in the debate, but it was the consensus in the Chamber at the time, after an enormous amount of discussion.
Anybody doing what you have to do in the modern world to see how the Bank functions and looking it up on the Bank’s website will find a very good page—except that we are about to change it all—labelled “How we are governed”, which says:
“The Oversight Committee of Court, consisting solely of non-executive directors and supported by an Independent Evaluation Office, reviews and reports on all aspects of the Bank’s performance”.
That is very convincing for anybody with a proper interest in the banking structure and all the various banking responsibilities. There is a process whereby people who know what is happening can call the executive to account.
Lord Tunnicliffe
Surely there is a world of difference between the phenomena of groupthink in either one of the policy committees or on the court than the phenomena of the seven NEDs meeting alone. If they do produce a piece of groupthink, the most harm they will do is require a part of the activities of the Bank to be examined. It is very unlikely that they would do that, but it would do no great evil and cause little inconvenience. We are talking about a radical difference in balance when it comes to the powers of the NEDs to question the executives of the Bank.
Lord Bridges of Headley
My Lords, it is clear that I still have some persuading to do. I would argue that those powers have not changed in the sense that they have been transferred from the committee to the court.
Deregulation Bill
Lord Tunnicliffe Excerpts(9 years, 2 months ago)
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Lord Tunnicliffe
“( ) Section 88 shall only apply to a person exercising a regulatory function in so far as it is consistent with the proper exercise of their existing regulatory functions.”
Lord Tunnicliffe (Lab)
My Lords, the Labour Party, despite rumours put about by the Benches opposite, is pro business. We see business as central to our society: it is essential, and thriving industry is good for us. We are also pro growth. We might have slightly different views about its distribution: we think that growth should go to the many as well as to the few. That would have been a point of difference until the recent conversion of David Cameron to a belief that firms should be paying their staff more. This we applaud, and therefore we so far have consensus. Because we are pro business and pro growth, we support the generality of Clauses 88 and 89, but with reservations. I was almost talked out of supporting the two clauses by the Minister, who pointed out that the 2006 Act apparently does what these two clauses do anyway. Life might have been easier if the Government had not brought forward these clauses at all.
However, just as we are pro business and pro growth, we are pro good regulation. Once again, I am absolutely delighted that we are not alone in this. Oliver Letwin, the Minister of State for Policy, indicated at the beginning of this Bill in the other place that he, too, was in favour of good regulation. Good regulation protects the citizen from the overly powerful, be it overly powerful commercial interests, the state or other large bodies. It protects consumers, workers, patients, the old and those with disabilities, while other regulatory bodies protect the environment, the built environment and many other areas of our lives. The challenge is to create a balance between legislation that is pro growth on the one hand and protects the citizen on the other. We think that Clauses 88 and 89—and I think Clause 90 as well—go too far, and that is why we are moving Amendment 44A.
Just stand back for a second and see how these clauses are going to promote growth, and look at the guidance material that we have already received—and discussed at some length in Committee. They divide into two areas. A great deal was said about the bureaucracy of regulation, the same form coming twice and different inspectors coming on different days. The essence of much of the illustration of the value of these two clauses was about regulators being much more efficient at bureaucracy, more sensitive to the needs of business and much more business-friendly. We could not agree more. It is absolutely sound that that should be true.
The other potential for the two clauses is to have an impact on protection itself and actually diminish it. We are very concerned about that. We discussed this at some length in Committee, and the Minister very kindly arranged a number of meetings. We thank him for doing that. Those meetings were very much the same. They were very much the curate’s egg—good in parts. They almost always started with the Minister present stating fairly flatly that these clauses were not meant to diminish protection. The Minister would say that they did not have an impact on safety. Then, towards the end of the meeting, the Minister would float back into perhaps that being the area where they could impact.
At the end of this, we had two letters, including a very useful letter from the HSE. I shall not quote it at any length, but the HSE is a much derided body. It is an excellent organisation that has matured greatly under the chairmanship of Judith Hackitt. In many ways, its maturity is reflected in the letter. Essentially, the HSE does not say that it does not need the provision, but it is sort of saying that in practical terms it will not make a difference to protection because the essence of the 1974 Act—one of the best pieces of legislation around, which has survived to this day largely unamended—is that it had a sense of proportionality about it. It said,
“so far as reasonably practicable”.
We were very satisfied with that letter.
Then—not exactly sequentially—the Minister wrote to us to assure us. His letter had more of the history of British Raj about it, almost: “On one hand”, and then “On the other”. Early in the letter, he says:
“I can assure you that the duty will complement existing duties and will not override or reduce the protection of the public”.
I had a little trouble with “complement”. If you look it up, it seems to mean “add to” or even perhaps “enhance”, but where in the Bill is it clear that the duty will not override or reduce the protection of the public? It is clear in his assurance in this letter, but it is not clear in the Bill. This is where in the meetings we had the same sense of floating away. The letter states that: “This duty sits alongside”—so one is now having words of equal weight—
“any other factors that a regulator must consider … As experts in their relevant areas, it is the regulators themselves who are best placed to decide how much weight it is appropriate to afford to the desirability of economic growth in the relevant circumstances; in order that economic growth is considered whilst public protections are maintained. Indeed, it would not be appropriate for Government to dictate how growth should rank in relation to other factors which regulators also need to consider”.
We do not agree. It is appropriate for government and this House to give clear guidance in the Bill about how the growth duty ranks with the other duties of the regulators involved.
Once again in this balanced approach we get to where he says:
“I might also add that if a regulator has had regard to, and considered growth, and can justify its decision, then a business cannot expect to successfully challenge that decision, nor can it use the duty to escape legitimate compliance costs”.
One of the ways to understand a sentence like that is to reverse it. It would then read: “I might also add that if the regulator has not had regard to and not considered growth and cannot justify its decision, a business could expect to successfully challenge that decision and could use the duty to escape legitimate costs”. In other words, each of the three conditions—“have regard to”, “consider growth” and “justify”—have to be met for the challenge not to be made. Clearly, the person who drafted this letter envisaged that challenges could be made, and those were the three conditions that had to be met.
Why am I so concerned with what might seem like a nuance? The whole problem with regulation is that, frequently, balance is achieved very much in the matter of the nuance. I come from a very regulated back- ground—originally aviation, then railways, then nuclear, and so on. In a high-hazard background you sit down and consider killing people and how much you are going to spend to avoid that, to mitigate that risk. Those are very difficult decisions, but they are taken. When you edge or nuance protection, ultimately you are talking about harm and about people getting killed. I worked in an industry where, sadly, we killed people every year. You cannot carry 800,000 passengers a year without killing some of them. We abandoned the whole idea that it was just an accident; we took the view that every death was our responsibility. That meant that every death was analysed so we could establish how much we could have spent or sensibly should have spent to mitigate that death.
Those are the sorts of decisions small and big companies take. We know that they take those decisions, perhaps most famously from the BP Texas City explosion in 2005. The examination of that event uncovered that BP head office had demanded cuts in costs. There was no mitigation on safety and no qualification; cuts in cost had to be made. Sadly, 15 people died in that event. We know that BP did not learn its lesson, because the Gulf of Mexico spillage happened five years later, in 2010.
What, then, is our remedy to avoid this now? It is the amendment to which I speak:
“Section 88 shall only apply to a person exercising a regulatory function”—
that is the growth duty—
“in so far as it is consistent with the proper exercise of their existing regulatory functions”.
That makes it clear that the protection—the balance—in the present regulatory structure should be unaltered. It makes it clear that in the nine areas which we have talked about, particularly the bureaucratic areas, let us get rid of the bureaucracy—yes, great—and if you look at the impact assessment, you will see that that is where virtually all the money is. However, it protects us from any erosion of the protection of the current regulatory regime.
My nuance may be unfounded—it may be that all firms take their safety and other protection responsibilities seriously. However, sadly, I have seen too much evidence of the opposite. I have been in rooms where people have said, “Compliance with this regulation is too expensive. How can we avoid it or reduce it?”. We have to maintain the present regulatory balance while introducing the growth concept. We want noble Lords to support this amendment to protect citizens from the bad guys, which of course will leave a level playing field for the good guys.
Lord Tunnicliffe
My Lords, I thank noble Lords who have taken part in this debate. I thank the noble Baroness, Lady Andrews, for explaining how the point we are making has a wider application, particularly as regards a chilling effect. Some of these regulators are quite small, some have very tight budgets and some may face very large organisations, particularly in the planning world. The chilling effect on behaviour takes place over time.
I respect the experience of the noble Earl, Lord Lindsay, in this field—it is interesting that we have ended up with two regulators and a regulatee in this debate—but I am afraid that I do not share his view. The duty we are discussing may not cut across others but certainly has the potential to be considered on an equal footing. He quoted the draft guidance, which is now over a year old. The Government have not thought fit to revise it; I wish that they had. I do not find the draft guidance clear. Indeed, it is a wonderful topic to debate as, rather like the works of Karl Marx, you can find anything to justify anything. It contains as many words of assurance—which the noble Earl found—as of discomfort, which I found. The noble Earl mentioned a figure of £2 billion, which I believe the department subsequently withdrew. I believe that the £2 billion represents the gross sum of the regulatory bodies but does not cover just their regulatory work. I believe that a figure emerged that was half that sum.
The comments of the noble Lord, Lord Wallace, in many ways reflected what was said in various meetings. I am not accusing the Government of a conspiracy here. I do not think that the Government want to roar through the countryside, throwing out regulation all over the place by means of this clause and I am very persuaded by the bureaucracy point, which was well made in the regulations and the supporting documentation. However, the issue of protection worries me. If noble Lords do not agree with my amendment, they are implying that the exercise of the function we are discussing could be inconsistent with the proper exercise of the existing regulatory functions. For that reason, I wish to test the opinion of the House.
Lord Greenway (CB)
My Lords, I declined to follow the noble Lord, Lord Prescott, down this route at Second Reading because I wanted to talk about other things and, unfortunately, when it was his turn to speak on this clause in Committee, I was chairing the All-Party Parliamentary Maritime and Ports Group upstairs. This is the first time that I have had a chance to speak on this subject and it looks as though I am third time unlucky, because I have been beaten by the clock as well, so I will be very brief.
The noble Lord, Lord Prescott, who did great things for British shipping in bringing in the tonnage tax when he was Secretary of State, speaks with enormous passion on this subject as a former seafarer. I, like him, share this passion for the sea and ships, which I have had all my life. However, in this instance my passion has been tempered by rational thought. We are looking here at something comparatively simple. This duty that is to be removed is the duty to reopen a maritime inquiry where new and important evidence has been discovered. In the case of the “Derbyshire”, which the noble Lord mentioned, there is no question at all that a Secretary of State would reopen an inquiry. However, there are occasions where it may not be such a good idea. After all, let us not forget that such inquiries cost £6 million to £8 million. They tie up busy people such as lawyers and maritime experts for quite a considerable time. In the fiscal circumstances in which the country still finds itself, if we can save any money then we should look at that quite seriously.
I will not go into the safety aspect because safety is in some ways an entirely different matter. Thankfully, the need to reopen these inquiries has happened on only three or four occasions. The need has got less since the Marine Accident Investigation Branch was set up in 1989. It has reduced the need for these inquiries. The whole system of looking into maritime affairs has been changing quite rapidly over the last 20 or 30 years. We have a different system in place and, in my opinion, I feel very happy that Clause 41 should remain part of the Bill.
Lord Tunnicliffe
My Lords, it is my responsibility to respond for the Opposition Front Bench on this issue. In order to save time, I carefully studied the debate in Committee. Having listened to my noble friend Lord Prescott, we continue to support his position.
Baroness Williams of Trafford
I start by thanking the noble Lord, Lord Prescott, for his enormous patience here this evening. He had to listen to several debates on parking before we came to his issue. I think that the Minister who should have responded to him might have been a woman—