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Tracey Crouch (Chatham and Aylesford) (Con): I welcome the Minister's statement on these much-needed reforms. Will he tell the House how the reforms set out today will affect the insurance sector, which shares the same regulatory regime as the banks but clearly operates very differently?
Mr Hoban: My hon. Friend makes a good point about the role of insurance. In this crisis, we must ensure that we distinguish between what has happened to the banking sector and the relative success of the insurance sector in withstanding the storms of this crisis. It is an important sector to the UK economy and a huge wealth generator. We need to ensure that the insurance sector, when it comes within the remit of the PRA, has the right sort of prudential regulation that recognises its strengths and challenges. It will of course be regulated as regards its relationship with consumers by the CPMA.
Nia Griffith (Llanelli) (Lab): The people of this country want to see a bit of humility and payback on the part of the banks. One opportunity to do that would be through the so-called Robin Hood tax on banking transactions, with the money going to alleviate poverty here and to tackle climate change across the globe. Will the Financial Secretary urge his right hon. Friend the Chancellor to introduce such a tax and to influence colleagues worldwide to do likewise?
Mr Hoban: I must say that I think that some humility should be shown by the Opposition Front Benchers for landing this country with a system that led to the longest and deepest recession since the 1930s.
Sajid Javid (Bromsgrove) (Con): I welcome the Minister to his new role. Does he agree that these banking reforms will help to boost confidence in the British economy once they are enacted? That will help to keep interest rates lower for longer, boost investment and create jobs.
Mr Hoban: I am grateful for my hon. Friend's question. It is important to ensure that businesses have confidence that where macro-prudential threats arise in future, action will be taken to resolve them. They did not have that confidence in the previous regime and I hope that they will have that confidence following the reforms that we have put forward today.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC): Economic growth in the past decade was driven largely by consumption. As a consequence, £1.4 trillion-worth of personal debt is circulating in the UK economy, which means that the human cost of the current recession will be particularly severe. Will the new Consumer Protection and Markets Authority make sure that lenders have to undertake affordability audits so that individuals and families incur only debts that they can service?
Mr Hoban: The hon. Gentleman is right to pick up on this issue. One of the big challenges is ensuring that consumers are properly equipped to understand their borrowing and saving needs, and the Consumer Financial Education Body has a key role to play in improving financial capability in order to help people to make the right decisions. Also, there is an obligation on industry to make sure that it provides consumers with the best advice possible to help them to make the right decisions.
Harriett Baldwin (West Worcestershire) (Con): I very much welcome that direction of travel, just as I welcomed the decision of the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), in 1997, to set the Bank of England free to make decisions on interest rates. Will the Minister clarify whether the Financial Policy Committee will publish its minutes openly and on a regular basis, and how it will deal with a situation in which it is concerned about a specific institution?
Mr Hoban: It is important that the Financial Policy Committee is transparent in its dealings. It is a great strength of the Monetary Policy Committee that it is transparent and that it can be held to account by the public for its decisions. We need to ensure that similar arrangements are put in place for the FPC-while respecting, as my hon. Friend has pointed out, the confidentiality of individual firms.
Mr Philip Hollobone (Kettering) (Con): Will one of the new organisations under the Bank of England, the Office for Budget Responsibility or someone else alert the Treasury if the housing market starts to get overheated again?
Mr Hoban: One of the roles of the Financial Policy Committee is to identify threats to financial stability as they emerge. I would expect the FPC, in its work of looking at overall trends in the economy, to identify that sort of risk and to make it known not just to the Treasury, but to the wider public through its regular reports.
Clive Efford (Eltham) (Lab): Will the hon. Gentleman say how many people at the FSA and at the Bank of England currently earn more than the Prime Minister? Does he intend to apply the policy in the coalition document? If he decides to pay above the rate of the Prime Minister's salary, should that element of the pay be performance-related, given the gravity of the decisions that such people will be taking?
Mr Hoban: There is an issue about pay levels, which we will need to look at. I am intrigued by the hon. Gentleman's suggestion that there should be a greater variable element in relation to performance, given that a critique of many is that an excessive bonus culture in the City contributed to the financial crisis.
Bob Blackman (Harrow East) (Con): Will the Minister please explain how today's announcements will end the confusion in the markets and make sure that there is proper focus on regulation to end that confusion?
Mr Hoban: The package that we have set out today, which was greeted with a great deal of support last night when the Chancellor outlined it to the City, ends any uncertainty. The transition process that we have outlined today in relation to legislation, and the team led by Hector Sants, the current chief executive officer of the FSA, will reassure the City about the direction of travel on regulatory reform. The new settlement, which takes into account macro-prudential supervision, micro-prudential supervision and effective consumer supervision, will ensure that we have the right package of regulatory structures in future to safeguard the economy and to give confidence to consumers and others in the markets.
Mr Kevan Jones (North Durham) (Lab): I welcome the Minister to his new position. I know that County Durham will be proud as he is a son of Country Durham. Has he given any advice to the regulator on the position of non-executive directors on banks' boards, particularly regarding their role, remuneration and qualifications? He will know that one problem with Northern Rock was the fact that the non-executive chair's only qualification appears to have been that he was a member of the Ridley family-he inherited it from his father.
Mr Hoban: The hon. Gentleman makes an important point about the qualifications of non-executive directors. That is why the FSA has already instituted a process of interviewing senior members of staff and directors, before their appointment to boards or positions of responsibility, to ensure that the qualifications and experience that they bring to those important roles is checked.
Geraint Davies (Swansea West) (Lab/Co-op): Is the Minister seriously contending that had these arrangements already been in place, the financial crisis would not have occurred? If he is not making that absurd suggestion, will he accept that he cannot promise that such a financial crisis will not occur again with these arrangements in place?
Mr Hoban: It is clear that if the Bank of England had not lost its power to monitor and act upon the level of debt in the economy, it might have been in a position to consider what was happening in the housing market, to consider the role that Northern Rock played in fuelling the asset-price bubble and to take action to cool that down. The only person who tried to rule out boom and bust in the past was the right hon. Member for Kirkcaldy and Cowdenbeath.
Alok Sharma (Reading West) (Con): Does my hon. Friend agree with the Governor of the Bank of England's assessment that there was little real reform of banking regulation under the last Government, and that the Opposition should therefore welcome the measures that we are setting out today?
Mr Hoban: I hope that the Opposition will welcome the measures, but their views were not very clear from what the shadow Treasury spokesman said. In the past three or four years, when we have debated the reform of parts of the banking regulation sector, the problem has been that the then Government were unable to engage in the fundamental debate about whether the architecture was right. They failed to address that question, and that led to a new Government addressing that question and putting things right for the first time.
Steve Rotheram (Liverpool, Walton) (Lab): Will the Minister invite hon. and right hon. Members who are interested in the future of Liverpool football club to a meeting with RBS officials fully to scrutinise the deal that props up its leveraged buy-out by two American business men?
Amber Rudd (Hastings and Rye) (Con): Given the global nature of banking, will the Minister advise us on how regulation will proceed on an international basis, bearing in mind the need to maintain as many jobs as possible in this country?
Mr Hoban: It is important to make sure that debates on regulation are co-ordinated at the global level, and my right hon. Friends the Chancellor of the Exchequer and the Prime Minister take an active role in those debates in the G20. I have recently taken part in ECOFIN's summit, at which we discussed new supervisory arrangements in Europe. I am absolutely certain that we will engage in the debate both in Europe and globally to ensure that the structure of regulation supervision going forward is right to make sure that the system is stable and to ensure that decisions that have a fiscal impact are taken here, by UK regulators, and not in Europe.
Chi Onwurah (Newcastle upon Tyne Central) (Lab): I will accept that the banking reforms will make it more likely that if exactly the same problems happened in exactly the same way in exactly the same countries, we might be able to spot them, if not to do anything about them. Does the Minister accept that by failing to address the institutional failures in the banking system that are outside regulation-such as pay incentives within banking, the role of the rating agencies, the failure of international information flows and the lack of transaction costs in international financial markets-our country is just as vulnerable as ever to banking failures?
Mr Hoban: I do not agree with the hon. Lady. The package of reforms makes a significant improvement to the regulatory architecture in the UK, and there is further work that we can do at the European and the global level to make it more effective. She is right, in part, to say that institutions need to change their behaviour. We need to look at the structure of banking, which is why we will set up the Banking Commission that the Chancellor announced yesterday. Those reforms will help to improve structure, but let us look at what is important. Let us get the architecture right in this country, let us remedy the flawed system that her party's Government introduced in 1997 and let us ensure that the Bank of England has the tools to do the job. That will make a significant contribution to improving financial stability.
Mr Kevan Jones (North Durham) (Lab): On a point of order, Mr Deputy Speaker. In the Financial Secretary's address to the House today, he made the accusation that Labour Ministers, possibly including myself, made spending commitments that were not funded. My hon. Friend the Member for Halton (Derek Twigg) made the point that, if that was the case, I and other Ministers would have had to send a letter to the accounting officer-that is to say, the permanent secretary in the Department. Could you use your offices to request that those letters be produced, to go against the accusation that has been made today?
Mr Deputy Speaker (Mr Lindsay Hoyle): That is not a matter for the Chair, as the hon. Member well knows, but he has certainly got his point on the record and I am sure that everybody has taken on board his comments.
That this House has considered the matter of building a high- skilled economy.
It is a delight, having spent so many years in the shadows, to come into the light and be able to speak in this House as the new Minister. Some hon. Members will have read today in the press of my endorsement for floristry and dance. I am wearing this perfectly coloured co-ordinated buttonhole to illustrate the first, but the House, and you in particular, Mr Deputy Speaker, will be relieved to know that I shall not be illustrating the second, at least not by example.
The performance in office of the shadow Minister, the hon. Member for Cardiff West (Kevin Brennan), once the man who called the tune, was rather more of a conga than a quickstep. You know the conga, I have no doubt, Mr Deputy Speaker. It comprises a group of hapless individuals linked by routine, hopelessly following one another on a journey to nowhere.
Adult learning is a subject that inspires in those hon. Members present-I know this is true of hon. Members across the Chamber-emotional attachment and personal commitment. At the same time, it is not a subject in which anyone or any party can claim a monopoly of wisdom, which is why I am interested to hear views from across the Chamber. However, a new Government offer a new chance of a fresh start, the opportunity to bring change and hope to adult learners. However, not everyone realises that there has been a change. Sitting in my office the other day in my new Department, I was surprised to receive an out-of-the-blue phone call from someone asking for Mandy. I had to break the news to him that Mandy had moved on. To paraphrase Barry Manilow, "Oh Mandy, well you came and you took without giving...but I sent you away."
Lord Mandelson was right in at least one important respect. He made the economic case for skills. The economic case for skills was by far the strongest case made by the previous Government. It is significant, of course-indeed it is vital-but it is not the only case for skills. The economic case, which I shall deal with first, has been thrown into sharp relief by the economic turbulence, by the rising levels of unemployment and falling levels of hope, especially among young people, and by the growing numbers of employers finding it difficult to stay in business. It will continue to occupy a prominent place in public discourse as we move out of recession and towards the renewed growth about which my right hon. Friend the Secretary of State spoke recently at the Cass business school.
Mark Lancaster: I am grateful to my hon. Friend. I should like to invite him to join me in paying tribute to the Open university. The one thing that has not changed in recent times is the contribution that that institution has made to lifelong learning.
Mr Hayes: The fact that I anticipated my hon. Friend's intervention merely gives it more force. He is right to say that the Open university plays a critical role in that regard. I will happily visit that place once again to cement the relationships that I have already formed there.
The economic case for skills will continue to be important because of the link between skills and competitiveness. It is well established, and it was made clear five years ago in the Leitch and Sainsbury reviews. Already their analysis has become orthodox in the debate about skills and the economy. The essence of their case was, and it remains salient, that driven by new technologies, the pace of economic and industrial change is growing, not just here in the west but in Asia and increasingly in Africa and South America. Once, those countries either did not compete in the same markets as this country or could offer only technologically inferior products. That is no longer the case. The unequal competition between high quality and low cost has been replaced by what Lord Sainsbury called a "race to the top".
Steve McCabe (Birmingham, Selly Oak) (Lab): In the context of international competition, how worried is the Minister by the letter in today's The Daily Telegraph from senior executives of leading British companies, who warn against the dangers of cuts to university funding and the risk that we will be left behind in the international competitive league as a result?
Mr Hayes: There is no doubt that the relationship between research and development and the kind of dynamism that I have described is a profound one. I know that my right hon. Friend the Minister for Universities and Science will take that very seriously indeed in the process of framing our policy in respect of higher education.
I know that the hon. Member for Birmingham, Selly Oak (Steve McCabe) is sympathetic to the argument, so I may be pushing at at least a half-open door when I say that further education matters too. Building skills from the bottom up, re-engaging young people who are not in employment, education or training, up a ladder of skills to the levels that he is describing-levels 3, 4 and 5-is critical. The hon. Gentleman will understand why today I want to speak particularly about further education, as that is my responsibility.
We need to provide workers with the skills they want and businesses with the skills they need to compete in this increasingly challenging world. The Leitch analysis pointed towards an intensive effort to raise skills in this country, and indeed the House more than once debated these matters when the Labour party was in government. It is easier perhaps to say on the Opposition Benches, but I will repeat it from the Government Bench, that I do not accuse the hon. Member for Cardiff West of anything worse than a mistake. I do not think that Labour Members are malevolent; I think their intentions are broadly the same as ours. I just think they are misjudged. This is not about malice; it is about error. I know that they will want to acknowledge that when they speak in the debate. They are big men, and I want to give them this chance, because I am a generous Minister, to rush to the Dispatch Box to say that they got it wrong. Wouldn't we welcome that? Wouldn't the whole country welcome it, too?
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