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28 Nov 2006 : Column 1047

That view is far too pessimistic. The City of London’s reputation has been built not over two decades but over 300 years. The tradition and integrity of our markets, and of our accountancy and legal professions, underpin the City of London. We have established a reputation for talent and expertise as well as a depth to our markets that is respected all around the world—again, a reputation that has been built over decades. The reforms of the big bang, which led to the explosion of foreign firms and new talent coming to London, were introduced well before any changes in the US corporate governance regime. In my judgment, we should be confident about London’s success—our skills, the cluster of London markets, our integrity and our reputation. We should see reform in Europe as an opportunity for us to expand into new markets in France, Germany and other European countries. Similarly, if the United States does decide to reform the Sarbanes-Oxley regime—in terms of its implementation or more generally—we should see that as an opportunity. As we know, a number of United Kingdom firms and auditors are currently burdened by the regime to some extent, and it would be in the interests of not just the United States but the global economy for some of the reforms to be enacted.

We should welcome the speeches being made by Hank Paulson and by Securities and Exchange Commission chairman Christopher Cox. We should be confident that a successful global New York market and a successful global London market can succeed and prosper in the future, side by side. The rise of new financial centres in Shanghai, Hong Kong and Dubai, and also in the rest of Europe, gives London an opportunity to build new partnerships and win new business.

I am not pessimistic about the City of London. I think it is right for us to act to protect our regulatory regime, but we must do so with the right kind of risk-based, proportionate regulation and a continued focus on investing in skills. We must bring the best talent from around the world to London and to our other financial services in the United Kingdom, and encourage others in Europe and the world to move in our direction—the direction of a more risk-based, proportionate approach to regulation.

I do not believe that London will be set back; I believe that it will continue to prosper. We can win more jobs and more investment, and make London the global financial centre of a globally integrating world. It is with that intention and that commitment that I hope the House will support the Bill tonight.

8.21 pm

Mr. Hoban: I echo the thanks expressed by the Economic Secretary in his opening remarks.

The Bill is important to the future of the City. As the Economic Secretary pointed out, it is not about tackling foreign ownership. Since the big bang the City has thrived as a result of openness and our ability to allow what were venerable British names to be bought by overseas companies. That has enriched and strengthened the City. I am sure that when the Economic Secretary meets those in City institutions he recognises, as I do, the international diversity of both ownership and personnel. That is one of the great assets of the financial services sector, and it is what I think has made the sector so successful in a global economy. It has also led to opportunities for the City in that global economy:
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existing relationships with countries overseas can be exploited and developed still further.

There is, however, a legitimate reason for the Bill. There has been widespread concern about the impact of United States regulation if a United States exchange acquired the London stock exchange, and in recent months there has been considerable debate on the subject in the City. That concern is not based on prejudice or on some narrow interest; it reflects the experience of people who work in the City every day, and who have a creeping sense of extra-territoriality entering the regulatory regime. It is a genuine concern that should be addressed.

When people first began to ask how we could protect the regulatory environment from which the United Kingdom financial services sector benefits, a host of mechanisms were proposed to ring-fence the regime, including adjustments to the ownership structure post-acquisition in the stock exchange. However, it was clear to most participants in the market that none of those mechanisms would be particularly effective in recognising and retaining the strength of the regulatory regime that we have today. It was, I think, a recognition of the failings of those alternative mechanisms that led to the Bill, which provides a vital opportunity to safeguard the regime. It sends the clear message that we are keen on foreign ownership of UK-based businesses, but also keen to maintain the strength of the regulatory sector.

The hon. Member for Wolverhampton, South-West (Rob Marris) asked whether we were talking about low regulation. I do not think that we are, on either side of the House. We are talking about the right level of regulation—proportionate regulation that responds to the level of risk and is based on principles, not on detailed rules. That type of regulatory regime has stood the UK in good stead in recent years, benefiting both consumers and those who supply financial services products.

I agreed with the Economic Secretary’s closing remarks. We should be optimistic about the future of the financial services sector. I am always impressed by the people whom I meet in that sector, who are full of ideas about how to exploit markets, come up with new products and take advantage of the changing world in which we live. However, in recognising their skills, talents and innovations, we cannot afford—and the Economic Secretary cannot afford—to neglect the sector. We cannot say “The job is done tonight”, because the job has not been done tonight. More work must be done to maintain the competitiveness of the UK financial services sector.

We must think about skills, tax, infrastructure and regulation. We cannot assume that one summit every 10 years is enough to tackle those issues. We must continue to safeguard the future competitiveness of the sector, and think hard about what it needs and how Government and politicians can strengthen it. We must not neglect it, because unless we look after it and are concerned about how it develops, it will not continue to thrive on the basis of its talents alone. We must make a collective effort to safeguard its future.

I believe that the Bill will play an important role in safeguarding the sector’s future, and in taking the regulation of exchanges into a new dimension in a new way. I hope that, as a result, more businesses will continue to come to London to raise capital and use our capital markets here in the United Kingdom.

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8.26 pm

Dr. Cable: I welcome the positive conclusion that we have reached. In my contributions, I had initially intended—as the Financial Secretary rather kindly put it—to add a bit of grit to the debate while also educating myself in some of the issues, but what others have said has taught me things about matters that were not entirely clear to me at first. For example, the hon. Member for South-West Hertfordshire (Mr. Gauke) explained how the Sarbanes-Oxley legislation might be inadvertently introduced into United Kingdom rules as a result of private litigation, and that helped me to understand the process.

I think that one useful contribution I made was to prompt, or provoke, the Economic Secretary into a helpful intervention that cast new light on the whole subject. Press comment on takeovers has been very controversial and the language has often been protectionist, but the Economic Secretary told us on the basis of his own conversations that the American exchanges were relaxed about—indeed, supportive of—the Bill, which would not inhibit a takeover bid from them on normal commercial principles. That was a considerable clarification.

The Economic Secretary could, however, increase my satisfaction quotient from 95 to 100 by dealing with one of my questions which has not yet been answered. Although we debated at length the possibility that American legislation would have a detrimental effect, intentionally or otherwise, and how the Bill might deal with it, there remains the problem of what might happen if a European, perhaps a German, exchange acquired a British exchange and took action in relation to, for instance, the LIFFE or the alternative investment market that proved detrimental. Might not the companies involved argue that they were protected by single-market legislation, and might the Bill therefore not be effective in that context?

The hon. Member for Fareham (Mr. Hoban) made a helpful point. The Bill deals with one aspect of the much bigger issue of extra-territoriality; we dealt with the human dimension involving the NatWest Three. We were not given a great deal of help on that from the Government, but it remains a live issue, and some of the legislative aspects have yet to be addressed. Having heard the debate and received reassurances, however, I welcome this step forward.

Question put and agreed to.

Bill accordingly read the Third time, and passed.

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Cycle Helmets

8.29 pm

Mr. Peter Bone (Wellingborough) (Con): I wish to present to the House of Commons a public petition from the people of Wellingborough and surrounding areas. The Wellingborough and Rushden Herald and Post, the excellent weekly newspaper for Wellingborough and Rushden, always stands up for the local community and campaigns on important issues. It has recently been highlighting the number of children injured while riding their bikes. The petition has developed out of that outstanding campaign.

The petition declares:

To lie upon the Table.

Public Toilets (Thundersley)

8.31 pm

Bob Spink (Castle Point) (Con): I rise to present a petition on public toilets, which are most important, particularly to people with medical issues, those with young families and the elderly. I have campaigned long and hard for decent provision of public toilets from the local council across all of Castle Point. That provision is a mark of the level of public service provided by the council for the people, and the people deserve a decent public service.

The petition states:

To lie upon the Table.

28 Nov 2006 : Column 1051

Local Government Reorganisation (Somerset)

Motion made, and Question proposed, That this House do now adjourn.— [Kevin Brennan.]

8.33 pm

Mr. David Heathcoat-Amory (Wells) (Con): Somerset is again a target for local government reorganisation. The Liberal Democrat-controlled Somerset county council voted to apply for unitary status. That means that it wishes to abolish the five existing district councils and consolidate all power, finance and services at county hall in Taunton. That would create the biggest unitary authority in the country, with a population of more than 500,000 people. I and my hon. Friend the Member for Bridgwater (Mr. Liddell-Grainger)—who I am happy is present—believe that that would create a remote, unwieldy and undemocratic structure. Furthermore, the costs of reorganisation would create another burden for the long-suffering council tax payers of Somerset.

Unfortunately, it seems that the Government have been beckoning Somerset down that path. Discussions at official level have been taking place for many months between the relevant Department and officers of the county council to prepare the way for that bid. Most elected councillors have been excluded from those discussions. That is the opposite of open government, and it is frequently a way that bad decisions or ideas take root.

The trigger for the bid was the publication in October of the Government White Paper on the future of local government. It was rather a disappointing document in many respects, but its aim was simplification. In the foreword to the White Paper, the Prime Minister said that it

but the White Paper’s proposals seem to me to be far from simple. There is endless talk of community and partnership and so forth, as though the simple repetition of those words somehow gives them meaning. There is also a bewildering array of initiatives. Each area of the country is to be encouraged to have a local strategic partnership—an LSP—a local area agreement, a sustainable community strategy, a local development framework and probably a multi-area agreement as well, and on top of that a range of regional strategies. That is not simplification; it is completely baffling to the public and shows what happens when the official mind collides with the need for local democracy.

From that fog of strategies, partnerships and acronyms emerges a pattern of what the Government are pursuing for local government. They are going for big unitary authorities wherever possible, with huge regional authorities above them. They are joined in support for that plan by the Liberal Democrats, who of course like unitary authorities. That is why Somerset Liberal Democrats have applied for it, and it has long been Liberal Democrat policy to go for regional government. A rather unhealthy Lib Dem-Labour coalition is developing to carve up the local government map of England to suit such a structure. When the Minister replies to the debate, I would like her to confirm that that is indeed the strategic aim that is buried in the White Paper. That would be a disaster for
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Somerset, and the regional structure that we have—that we have to live with—is already highly damaging.

The south-west region is a completely artificial entity stretching for hundreds of miles from the tip of Cornwall. The South West regional assembly is a self-important talking shop that absorbs a great deal of time and effort but achieves very little. The South West of England Development Agency has shown complete insensitivity to the needs of local businesses in my constituency. The Government should remember what happened to their plan for an elected regional assembly for the north-east, which was crushingly defeated by 78 per cent. in a referendum a few years ago. These big units might look fine from Whitehall, but the public do not like them. Whitehall loves these units because there are fewer people to talk to, it can control them more easily and they look good on a small map of England, but they are the death of local democracy.

If we want to promote the vitality of local government and to strengthen local democracy, we should be doing the opposite—devolving power to smaller units. Very occasionally in the White Paper, the Government seem to be saying the same thing. With their usual jargon, they talk about “empowering local communities”. How can they empower local communities when they are removing the tier of local government—district councils—that is closest to those local communities wanting to be empowered? It is understandable that the Liberal Democrats want to destroy the district councils, because they usually do not control them. In Somerset, they have only one of the five councils. They do temporarily control Somerset county council, which is why they want to concentrate power at county level, but the county council has not earned the right to monopolise local government in Somerset. In my area, I find that Mendip and Sedgemoor district councils are more responsive to my constituency cases.

Until quite recently, the county council did not even know how many people it employed. It took many years work by the opposition Conservative group to find out how many people were on the payroll. The number has been going up pretty steeply every year, which is another problem, but the fact that the county council did not know how many people it actually employed shows a degree of ineptitude.

There have also been a number of fiascos, which we have lived with over the years. We remember the fiasco whereby more than £2 million of ratepayers’ money was spent putting up a lot of unnecessary and ugly road signs, which did very little for road safety and had to be taken down again at vast cost. I could go on—there have been many other problems over the years. I am quite tolerant of local government making mistakes, but the county council seems to be very slow in correcting them. Meanwhile, the council tax has gone up every year way above the rate of inflation, and the debt with it. There is a problem for the Government; if the unitary bid succeeds, the county council will be exporting this financial structure of high taxes and high debt to the rest of the county, replacing many of the more prudent district councils.

Who is going to pay for this reorganisation? The up-front costs are always huge. Staff have to be paid off or relocated, buildings have to be bought and sold, and building leases have to be terminated. There will be
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bigger salaries and more people employed at the centre. Then there is the cost of preparing the bid itself, which is already diverting officers’ and councillors’ time away from doing what they are elected and paid to do—to deliver good services to voters. Instead, they are engaged in an expensive and time-consuming bid for unitary status. I should be grateful if the Minister addressed the question of what is going to happen when the costs escalate and the council tax goes up even more, or other services get hit. Is that in line with the ambitions of the White Paper? If not, the Government should stop the bid dead in its tracks.

Of course, we have been here before. Those of us with long memories remember the Banham commission of the 1990s, which correctly recommended the abolition of Avon, but when it moved on to the part of Somerset that I have been talking about, it got into a most frightful muddle. It first recommended a unitary county structure exactly the same as the one being bid for now. On closer inspection, that was shown to be a mistake, so it changed its mind and recommended a unitary structure based on three smaller units. On yet closer inspection, that proved to be unworkable, as well, and the whole thing was abandoned.

More recently—the Government, should have fresh memories of this—tried a merger of the police forces in the south-west, which again proved unworkable in practice. That, too, has been abandoned. A great many politicians and officials have worked very hard to try to reorganise the south-west, and Somerset in particular, as regards government and the delivery of services, but it just does not work. So I say to the Government: stop this bid now. It is unwelcome, unnecessary and undemocratic. The districts—certainly the ones under Conservative control—are willing to work more closely with each other and the county council to improve services. There is nothing static about local government and it can always be improved, but the solution is not complete revolution in the familiar structure that is recognised and appreciated by most local people.

I would be very grateful if the Minister answered my final question: who will decide the bid? The invitation to bid document rather coyly says, using the usual jargon, that if it is to succeed, it must be

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