“if we are to restore investor faith in banking sector balance sheets, nothing less than a radical rethink may be required.”

He was referring, entirely, to accounting standards. I therefore refer the Government to my private Member’s Bill introduced on 13 May 2011, which seeks to introduce parallel prudent accounting for banks. It is a couple of pages long and I hope that it can be added to this Bill.

I also refer the Government to “The Law of Opposites”, a paper produced by the Adam Smith Institute and written by my colleague Gordon Kerr, who has spent 25 years “gaming accounting rules”, as he would perhaps say, in order to make a profit. The banking system is in a far worse state than is generally believed. I do not see how either the Financial Policy Committee or the Prudential Regulation Authority can operate without a true and fair view of the state of financial institutions, and I do not believe for a moment that the international financial reporting standards give that to us.

On the conduct of individuals, we fail too often to think about the pattern of regulation in which we have engaged. It seems that the first thing that legislation does is damage the incentives and disciplines of the market. Having thereby created moral hazard, regulators come along to try to mitigate the consequences of that moral hazard. A banking licence today is a licence to lend money into existence, at interest, with the risk socialised. When we look at central banking, deposit insurance and limited liability, we find that moral hazard is absolutely rife in the banking industry, even before we consider investment banking. I suggest to the Government that it is time to increase the liability of banks’ directors. There should be strict liability for them, and bonuses should be held in a pool and treated as capital for at least five years. I will introduce a private Member’s Bill to that effect on 29 February.

We have talked about financial stability and the difficulty of defining it. There has been a sense that there is some kind of equilibrium economy—an evenly rotating one—in

6 Feb 2012 : Column 124

which there could be a sustainable and stable quantity of credit. Indeed, on pages 14 to 16 of the Joint Committee’s report there is an interesting discussion about the need to regulate credit.

To leave time for my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg), I will just say that if we were talking about any other commodity and were discussing adding to a failed regime of price control a regime of quantity control, we would certainly reject the idea out of hand. In Lord George’s testimony to the Treasury Committee before the crisis, he made it absolutely clear that the Bank of England had created a credit bubble to avoid falling into recession, yet we are going to give the Bank even more powers, more tools, more risk of ruin and more big-player effects and distortions of economic expectations.

I congratulate the Government on introducing the Bill, and I sincerely hope that it represents the absolute zenith of contemporary thinking on interventionist bank reform.

9.35 pm

Jacob Rees-Mogg (North East Somerset) (Con): I thank my hon. Friend the Member for Wycombe (Steve Baker) for being so brief. I refer Members to my entry in the Register of Members’ Financial Interests.

We should welcome the great reform that is restoring the Governor of the Bank of England’s eyebrow to its rightful place in bank regulation. It is, quite seriously, an important thing to be doing, as banks will see by the supercilious movements of Sir Mervyn King’s brows when they are doing things wrong. That has been a useful test in the past. More important is the FPC, which will have a very wide-ranging role in ensuring stability, and I wonder to what extent the Government have considered how that role will interact with that of the Monetary Policy Committee. One of the risks through the early years of this century was interest rates remaining very low because of an apparently low inflation background, and that was probably a mistake because of the growth in China and its import effects, with very high domestic and asset price inflation. Could the FPC have overruled the MPC on interest rates if it had viewed that as a serious risk? I wonder whether Her Majesty’s Government might consider giving a broader set of instructions to the MPC to allow it to co-operate with the FPC’s wider role.

The other important aspect of the FPC’s role will be its working with international regulators and having proper flexibility, particularly with bank capitalisation rates. Europe is going for very high rates as the economy is turning down and that is quite wrong. We probably need low bank capitalisation rates now and high ones in a boom. It is important that the FPC should have that flexibility to adjust bank capitalisation rates for this economy. Just as we set our own monetary policy because we have our own currency, so we should set our own regulatory framework, suited both to our monetary policy and to the risks we are taking, and what is happening in Europe might cause problems for the FPC in dealing with that.

Overall, the FPC of course has an impossible task, because the credit cycle will wax and wane over the next century, whatever we set up. We can go back to the tulip mania and the South Sea bubble and so on; these things

6 Feb 2012 : Column 125

always happen and people always warn of them. Dr Peter Warburton warned in 1999 of the coming credit crisis, saying that central banks of the world had

“inadvertently created the potential for widespread debt defaults and economic disintegration on an epic scale.”

Economists were warning of the crisis, but people did not take any notice. The FPC will have to be very robust and Cassandra-like to be able to say, “There is a bubble; we must prick it.” When the FPC is set up, one of the first bubbles it might have to deal with will be in the gilt market, because a 2% gilt yield, without a gold standard, is an historic low for yield since the 1890s and is something that many would consider a bubble. We must bear in mind that indexed gilt links were producing a negative return about a fortnight ago. Will the FPC have the courage to say to the Government, “We think your own Government stock is in a bubble”?

I want to speak briefly about the Financial Services Authority, which regulates me, and to say a very little about it, which is that it is very expensive. I encourage the Treasury to take its fees into the Treasury and fund the new body from the Treasury. The FSA is asking for a 15% increase in its budget this year in order, among other things, to increase pay by 3.5%. No other arm of government is doing that and it is why hypothecated taxation and fees are fundamentally bad. It would be better to go through the Treasury. I also happen to think that the FSA is rather arbitrary in its rules—but you have been kind in calling me, Mr Speaker, and I know that we must have the wind-ups.

9.40 pm

Chris Leslie (Nottingham East) (Lab/Co-op): First, I congratulate hon. Members who have taken part in the debate this evening, particularly those who served so diligently on the pre-legislative scrutiny Committee and on the Treasury Select Committee, many of whom are in warmer foreign climes at present. I thank in particular the right hon. Member for Hitchin and Harpenden (Mr Lilley) for chairing the pre-legislative scrutiny Committee and my right hon. Friend the Member for Newcastle upon Tyne East (Mr Brown) and my hon. Friend the Member for Leeds East (Mr Mudie), who contributed to the debates, for their work.

My hon. Friends have spoken on a number of topics this evening, but it would be invidious in the short time left for Front Benchers—only 10 minutes each—to try to discuss them in more detail. But do not worry Mr Speaker, because we will have about 10 hours in every one of the four weeks when we consider this Bill in Committee, so we can elaborate on each other’s comments then. Let me just note that my hon. Friend the Member for Walthamstow (Stella Creasy) rightly spoke about the need for reforms to high-cost credit and that my hon. Friend the Member for Rutherglen and Hamilton West (Tom Greatrex) spoke about the collapse of Arch Cru and the need for lessons to be learned, and made a reasonable call for a Treasury inquiry into those matters. My hon. Friend the Member for Islwyn (Chris Evans) emphasised the need for more action on financial education and my hon. Friends the Members for Glasgow North East (Mr Bain) and for Foyle (Mark Durkan) talked about the current difficulties in the banking sector, particularly with high executive pay. Also, my hon. Friend the Member for Edinburgh East (Sheila Gilmore) spoke about the importance of addressing financial exclusion and access to basic bank account services.

6 Feb 2012 : Column 126

The Bill is a significant piece of legislation and we support the moves to a prudential regulatory approach with improved systemic oversight, but there are serious misgivings about the proliferation of agencies and the confused responsibilities in the Bill, which are far from ideal. As we have heard, we are moving from a tripartite system to a quartet system, and the acronyms abound. That might work, but we need clear lines of accountability. That was the point that my right hon. Friend the shadow Chancellor was making. There are issues with complexity, and risks associated with putting all our hopes on placing regulation in the hands of the Bank of England. The formation of the Financial Policy Committee is sensible, but we need to ensure that it has the right composition, with fewer Bank of England officials in its membership, and that appointments reflect the balance across the economy.

We have touched on a number of issues relating to the economy, such as responsibility and long-termism, and we have heard about consumers of financial services, many of whom are, after all, constituents of ours, for whom we have an obligation to speak. There will undoubtedly be a debate about the objectives of the Financial Conduct Authority and whether they are sufficiently focused on the fairness, transparency and efficiency we need in the system. There is some confusion in the Bill regarding the FCA’s powers when it issues a warning notice, and the extent to which such notices will be published. Will it be known to consumers or will there be a nod and a wink, with notices going privately to the companies concerned? Is that the right balance? I am not entirely sure that that works.

We have to do a lot more to emphasise other consumer protection matters. We must surely grasp the nettle and take this opportunity to do what we can to improve financial education in all our schools up and down the country. We must also make sure that the information available to customers more generally is accessible, intelligible, clear and understandable so that we can try to do something about the asymmetry of information that hon. Members have discussed.

My hon. Friends the Members for Islwyn and for Foyle suggested that a fiduciary duty of care should be placed on providers of financial services, and we think that there are compelling arguments in favour of such a change, particularly as some important points about pensions and charges need to be brought out in the debate, as the hon. Member for Warrington South (David Mowat) mentioned.

My hon. Friend the Member for Walthamstow continued her campaign to introduce a time limit and a limit on high charges for credit, particularly for the vulnerable in our constituencies. I agree that it is time to ensure that the FCA has powers to take action in that regard and on fee charging, debt management plans and further safeguards for depositors.

When it comes to responsibility and the long-term changes that are needed to ensure that financial services address the real economy as well as the needs of consumers and constituents, it is important that we learn the lessons of the past. Therefore, we must look at the FSA’s report on RBS and take action in the Bill to end the bias in advisory fee structures in takeovers. We must take the opportunity to reform acquisition and merger rules, as the FSA has recommended. To what extent can we use the opportunity presented by the Bill to enhance the

6 Feb 2012 : Column 127

role of the Financial Reporting Council, and possibly the FCA, to support sound stewardship and shareholder accountability and to improve the corporate governance that many hon. Members have talked about, never mind the reforms that are so overdue to executive pay, the bonus culture and the remuneration committees that have been so much in the news in recent days? It is also important to take the opportunity to do more to support a diverse financial services sector, supporting mutuals and building societies, many of which do not fit into the neat capital requirements and plc structures imposed on them by current regulatory arrangements. Those are some of the changes that we will want to introduce in Committee.

It would be wrong not to take this opportunity to talk about one of the fundamental vacuums in the Bill: the insufficient attention to jobs, growth and finding ways to support our economy. The action taken by the Financial Policy Committee and the Bank of England will undoubtedly have a big impact on the availability of credit, not least because the Government have signally failed to do anything to encourage bank lending: Project Merlin has already fallen by the wayside and credit easing has still not commenced. The FPC has the objective of protecting and enhancing stability, but we believe that it should also be guided by the objective of promoting employment and the long-term growth prospects of the economy. That is something that the CBI has argued for, and it happens in similar situations elsewhere around the world.

Perhaps the Government’s difficulties stem from their partisan design of these structures when the Chancellor was in opposition. As we heard in his speech, the Government have tried to tell a domestic political narrative that pins the failures of the credit crunch solely on the previous Administration, and suggest that it is something that happened only in this country. In his revisionist attempt to re-write history, not even once did he mention the problems in other countries, or the fact that there was a global financial crisis. He suggested that what happened, happened only here in Britain—as if the then Prime Minister got on a plane and caused all the problems in America, Spain, Germany and elsewhere, as well as in the UK. The Chancellor’s analysis of the history of the credit crunch is lacking, to say the least. It would have been better if he had redesigned regulation in a way that recognised the casino culture of the global banking sector at the time of the financial crisis.

We are faced with a Bill that contains a number of problems, but ones that we hope can be amended and improved. The regulatory structure fails to sit adequately with the international and European regulatory environments. The EU’s supervisory bodies are split thematically to deal with banking, pensions and insurance, rather than mirroring the conduct and prudential arrangements set out in the Bill. Given that the EU drives the vast bulk of the regulatory agenda that will be able to overrule the domestic regulators that we are debating, it is important that the Government state clearly how they will ensure that our voice is not marginalised in those regulatory environments—if, indeed, it is possible to be even more out in the cold than the Chancellor is at present.

Mark Field: Will the hon. Gentleman give way?

6 Feb 2012 : Column 128

Chris Leslie: I am afraid that I have only one minute before the Minister has to speak, in which time I shall also emphasise the points that my right hon. Friend made about the lack of Bank of England accountability in the proposals before us.

The hon. Member for Bury St Edmunds (Mr Ruffley) correctly pointed out the problems of a lack of a proper supervisory function in the court of the Bank of England, and they absolutely have to be addressed. There are problems also with the regulatory structure, which on the one hand describes itself as twin peaks, but looks as though it has at least four elements to it—the quartet model, which we have heard about today. Will we hear the voices of those four institutions in their own right, or will they be subjugated to the voice of the Governor of the Bank of England?

One of the most important issues for us in the House of Commons is accountability to Parliament. We are investing an enormous amount in the Bank of England, with quasi-legislative powers being placed in its hands, and my hon. Friend the Member for Leeds East was absolutely right about the need for us tread carefully in relation to those accountability questions.

We will not object to the Bill this evening, and we hope that it gets a Second Reading, but it is right that we shall spend time debating its contents in detail. Some serious amendments are needed, and we want stronger regulation that is fit for purpose, has sufficient checks and balances, delivers financial stability, promotes employment and growth, protects consumers and safeguards the interest of the taxpayer. The whole country wants to see banks that serve the best interests of the wider economy and society, and we hope that Ministers will listen and amend their Bill accordingly.

9.51 pm

The Financial Secretary to the Treasury (Mr Mark Hoban): This has been a thoughtful debate. We have had 21 speeches, led by the Chairman of the Joint Committee, my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley), who was supported by his colleagues on the Committee, including my hon. Friends the Members for Bury St Edmunds (Mr Ruffley) and for Warrington South (David Mowat), the right hon. Member for Newcastle upon Tyne East (Mr Brown) and the hon. Member for Leeds East (Mr Mudie).

We have also heard from my hon. Friends the Members for St Austell and Newquay (Stephen Gilbert), for West Suffolk (Matthew Hancock), for Wyre Forest (Mark Garnier), for Cities of London and Westminster (Mark Field), for North East Cambridgeshire (Stephen Barclay), for Vale of Glamorgan (Alun Cairns), for Macclesfield (David Rutley), for Thurrock (Jackie Doyle-Price), for Wycombe (Steve Baker) and for North East Somerset (Jacob Rees-Mogg). There were some thoughtful speeches from Opposition Members, too, of which I would highlight those made by the hon. Members for Islwyn (Chris Evans) and for Foyle (Mark Durkan).

I shall deal with some of the issues that have been raised in the debate, and first with Europe, which hon. Members on both sides raised several times. It is absolutely right to ensure that, at a time when Europe is becoming increasingly important in determining the regulatory framework, we engage in the debate about Europe. We took on board the Joint Committee’s comments, and it is fair to say that the regulators and the Treasury

6 Feb 2012 : Column 129

already co-operate effectively on influencing the shape of European regulation, but it is also important that we get the regulation right to enable the FSA’s successor bodies to supervise firms based in the UK.

That is why, in the debate about capital requirements directive 4, for example, we seek to achieve a single rule book through high common minimum standards of capital, and to give the supervisors in the UK the flexibility to go further in imposing high levels of capital if they think it appropriate, given the structure and nature of banking in the UK. That will also enable them to introduce the reforms proposed by Sir John Vickers and his commission.

Several hon. Members raised the issue of the Financial Policy Committee, so let me explain why we have set it up. It is a fundamental part of the architecture, it ensures that there is a body tasked with identifying risk to financial stability and, crucially, it remedies a flaw in the architecture that the previous Government set up, giving it the power to tackle those risks.

Those powers are important. We talked about the macro-prudential tools that the FPC will have, but it will also be able to give advice on where the regulatory perimeter should be in order to tackle issues such as shadow banking. It is also worth pointing out, in response to a comment made two or three times this evening, that its objective is symmetrical: it is about financial stability and considering the impact of its decisions on the prospects for growth in the economy. That symmetry is absolutely important, and we have gone a long way to address the concerns that have been raised today.

As well as the FPC, we will also see a move to unite key parts of micro and macro-prudential supervision in the Bank of England, joining it to the Bank’s existing responsibilities for stability and monetary policy and removing a structural flaw that helped such disastrously unsustainable levels of risk to build up in the run-up to the financial crisis.

The reforms answer the question posed during that crisis: “Who is in charge?” There is currently confusion over who is in charge in a financial crisis, and that cannot continue. The Treasury Committee, the Joint Committee, the Governor and the previous Chancellor of the Exchequer all recognise that. The Government will end that confusion. The Bill makes it clear that as soon as there is a material risk to taxpayers’ money, the Chancellor will have targeted power to direct the Bank to take action. The responsibility for each part of that action is clear, whether it is with the PRA in triggering the use of the special resolution regime or with the Bank in the day-to-day responsibility for crisis management. As soon as there is a threat to public money, the Bank must notify the Chancellor of the Exchequer. That happens when there might be a risk. It does not prejudge what the decision should be. I think that that deals with the point that the shadow Chancellor raised early in his speech.

On consumer protection, the old regulatory structure not only failed to maintain financial stability, but let down consumers. As the FSA’s report into RBS made clear, the remit given to the FSA by the previous Government was too broad, covering both prudential and conduct-of-business regulations. Those require different cultures, experience and expertise. That is shown most acutely by the FSA’s failure to prevent the payment protection insurance mis-selling scandal. With prudential

6 Feb 2012 : Column 130

supervision at the Bank of England, we will have a regulator that is focused on conduct issues and driven by consumer protection, market integrity and promoting effective competition.

The FCA will be more proactive, transparent and accountable. It will have new powers to deliver better consumer outcomes, including the power to ban toxic products. It will promote effective competition so that consumers get a better deal. My hon. Friend the Member for North East Cambridgeshire talked about the risk appetite of the FCA. Let me make it clear that it will be much more likely to intervene to tackle consumer detriment than it has been in the past. That is an important advance that will protect consumers.

Across the House, there has been widespread concern about consumer credit. That matter has been debated this evening. The hon. Member for Walthamstow (Stella Creasy) took a narrow view about what one can do to protect consumers and focused on the total cost cap. Like my hon. Friends the Members for St Austell and Newquay and for Thurrock, I think that we need a broader range of powers to ensure that there is proper consumer protection for those who take out loans. There should be the same level of protection that people take for granted when they buy an insurance policy or take out a mortgage. The Bill gives us the power to transfer the regulation of consumer credit from the Office of Fair Trading to the FCA, giving a better deal for borrowers.

As my right hon. Friend the Member for Hitchin and Harpenden and others have said, our reforms are as much about the style of regulation as about the structure. They are about culture, focus and philosophy. A key failure of Labour’s regulatory system was its focus on tick-box regulation. The financial crisis demonstrated the inadequacies of that approach to bank regulation. That approach also helps to explain failures of conduct regulation, such as with PPI. Judgment and discretion will be at the heart of prudential and conduct supervision. We expect the PRA and FCA to be pro-active, to challenge and to intervene.

I believe that we will see a significant change in conduct regulation and prudential regulation, moving away from the detailed prescriptive rules of the past to giving the regulators the power and authority to intervene, exercise their judgment and spot problems as they emerge, rather than waiting to resolve them once the crisis has broken. That will tackle the broken system that we inherited. That style and structure of regulation let down consumers who were sold toxic products, taxpayers who paid the bill for the banking crisis, and those who relied on banks to finance their business or to enable them to buy a home. Our reforms will change the structure and style of regulation.

The Bank of England and the PRA will have clear responsibility for the stability of banks, insurers and the financial sector. The FCA will have the power to ban the sale of toxic products and to name and shame those who have let consumers down. The FPC, the PRA and the FCA will exercise the judgment and discretion that are needed to supervise financial services better across the UK. The Bill will help mend our financial system to benefit families, businesses and the taxpayer. I commend it to the House.

Question put and agreed to.

Bill accordingly read a Second time.

6 Feb 2012 : Column 131

Financial Services Bill (Programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Financial Services Bill:


1. The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

2. Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Tuesday 20 March 2012.

3. The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

Consideration and Third Reading

4. Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which those proceedings are commenced.

5. Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.

6. Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and Third Reading.

Other proceedings

7. Any other proceedings on the Bill (including any proceedings on consideration of Lords Amendments or on any further messages from the Lords) may be programmed.—(Bill Wiggin.)

Question agreed to.

Business of the House

Motion made, and Question put forthwith (Standing Order No. 15),

That, at this day’s sitting, the Second Reading of the Consumer Insurance (Disclosure and Representations) Bill [Lords] may be proceeded with, though opposed, until any hour and Standing Order No. 41A (Deferred divisions) shall not apply.—(Bill Wiggin.)

Question agreed to.

Financial Services Bill (Money)

Queen’s Recommendation signified.

Motion made, and Question put forthwith (Standing Order No. 52 ( 1 ) (a) ),

That, for the purposes of any Act resulting from the Financial Services Bill, it is expedient to authorise—

(1) the payment out of money provided by Parliament of—

(a) any expenditure incurred under or by virtue of the Act by a Minister of the Crown or government department (apart from any expenditure to be met from the National Loans Fund), and

(b) any increase attributable to the Act in the sums payable under any other Act out of money so provided, and

(2) the payment out of the National Loans Fund of any increase attributable to the Act in the sums so payable under any other Act. —(Bill Wiggin.)

Question agreed to.

Financial Services Bill (Carry-over)

Motion made, and Question put forthwith (Standing Order No. 80A(1 ) (a) ),

That if, at the conclusion of this Session of Parliament, proceedings on the Financial Services Bill have not been completed, they shall be resumed in the next Session. —(Bill Wiggin.)

Question agreed to.

6 Feb 2012 : Column 132

Business without Debate

Consumer Insurance (Disclosure and Representations) Bill [Lords]

Motion made, and Question put forthwith (Standing Orders Nos. 59(3) and 90(5)), That the Bill be now read the Second time. —(Mr Hoban.)

Question agreed to .

Bill accordingly read a Second time; to stand committed to a Public Bill Committee (Standing Order No. 63).

Delegated Legislation

Motion made, and Question put forthwith (Standing Order No. 118(6)),

Senior Courts of England and Wales

That the Civil Procedure (Amendment No. 3) Rules 2011 (S.I., 2011, No. 2970), dated 14 December 2011, a copy of which was laid before this House on 14 December, be approved.—(Bill Wiggin.)

Question agreed to.

Motion made, and Question put forthwith (Standing Order No. 118(6)),

Court of Judicature, Northern Ireland

That the Rules of the Court of Judicature (Northern Ireland) (Amendment No. 4) 2011 (S.R. (N.I.), 2011, No. 422), dated 14 December 2011, a copy of which was laid before this House on 15 December, be approved.—(Bill Wiggin.)

Question agreed to.

Motion made, and Question put forthwith (Standing Order No. 118(6)),

Council Tax

That the draft Local Authorities (Conduct of Referendums) (Council Tax Increases) (England) Regulations 2012, which were laid before this House on 11 January, be approved.—(Bill Wiggin.)

Question agreed to.

Delegated Legislation (Committees)

Ordered ,

That the School Admissions (Admission Arrangements and Co-ordination of Admission Arrangements) (England) Regulations 2012 (S.I., 2012, No. 8), be referred to a Delegated Legislation Committee.—(Bill Wiggin.)

Business of the House (7 February)

Ordered ,

That, at the sitting on Tuesday 7 February paragraph (2) of Standing Order No. 31 (Questions on amendments) shall apply to the Motion in the name of Mr Edward Miliband as if the day were an Opposition Day; proceedings on the Motion may continue, though opposed, for three hours and shall then lapse if not previously disposed of; and Standing Order No. 41A (Deferred divisions) shall not apply.—(Bill Wiggin.)

Business of the House (8 February)

Ordered ,

That, at the sitting on Wednesday 8 February, notwithstanding the provisions of Standing Order No. 16 (Proceedings under an Act or on European Union documents), the Speaker shall put the Questions necessary to dispose of proceedings on the Motion in

6 Feb 2012 : Column 133

the name of Secretary Theresa May relating to Police Grant Report not later than three hours after the commencement of proceedings on the Motion, and shall put the Questions necessary to dispose of proceedings on the Motions in the name of Secretary Eric Pickles relating to Local Government Finance and Council Tax not later than six hours after the commencement of proceedings relating to Police Grant Report; proceedings may continue after the moment of interruption; and Standing Order No. 41A (Deferred divisions) shall not apply.

—(Bill Wiggin.)


Ordered ,

That Mrs Linda Riordan be discharged from the Justice Committee and Seema Malhotra be added.—(Geoffrey Cl ifton-Brown, on behalf of the Committee of Selection.)


Police Cuts (Humberside)

10.2 pm

Nic Dakin (Scunthorpe) (Lab): In just a few hours on a Friday lunchtime, the petitioners collected more than 300 signatures in Scunthorpe town centre opposing police cuts in the area.

The petition states:

The Petition of residents of Scunthorpe,

Declares that the petitioners are opposed to plans to cut £30 million from Humberside Police’s budget over the next four years; declares that the Petitioners reject the Government’s claim that these budget cuts will not have an effect on the quality of policing provided; and further declares that the Petitioners believe these cuts will mean the loss of 331 jobs, on top of the 780 staff who were already offered voluntary redundancy last year.

The Petitioners therefore request that the House of Commons urges the Government to reverse its decision to cut £30 million from the Humberside Police budget and reconsider the proposed funding allowance for Humberside Police.

And the Petitioners remain, etc.


6 Feb 2012 : Column 134

Early-day Motions

Motion made, and Question proposed, That this House do now adjourn.—(Mr Newmark .)

10.3 pm

Graham Evans (Weaver Vale) (Con): I am delighted to have secured this Adjournment debate. Indeed, Adjournment debates are a useful opportunity for us Back Benchers to raise issues that might otherwise not be discussed. The quality of speeches and debates that we have heard on a wide range of fascinating topics in all the many Adjournment debates since the election has really showed that this is an excellent tradition that should be maintained. However, this evening I am here to talk about another parliamentary tradition that is of considerably less worth—early-day motions.

Nearly 3,000 early-day motions have so far been tabled in this Parliament. It is estimated that they cost the taxpayer around £1 million every year. Given that the spending review has looked carefully at every aspect of our public expenditure, it is only right that we take time to reflect on the cost-effectiveness and value of early-day motions. We should ask ourselves whether it is value for money to spend so much taxpayers’ money on a mechanism that has no legislative effect and rarely has any influence whatever. We should consider whether a mechanism that does not ensure a parliamentary debate on a subject, no matter how many Members sign a motion, is an effective mechanism for Back Benchers to raise important issues.

Robert Halfon (Harlow) (Con): An answer to my hon. Friend’s suggestion might be for all early-day motions to be published only on the internet, rather than on the Order Paper, which would save a fortune. Would it not be better to call early-day motions “The Book of MP Petitions”, because that is what they are in essence? That does not negate the fact that they are useful instruments for campaigning.

Graham Evans: I shall mention saving costs on printing by publishing online later in my speech, but my hon. Friend makes a good suggestion on how we should reform early-day motions and what we should call them, which should be considered along with other things.

We should think about the future role of such a mechanism now that the Backbench Business Committee has been successfully established. The truth is that early-day motions have been devalued by the sheer volume that have been tabled—nearly 3,000 were tabled during the last year. Early-day motions have been devalued by the utter ridiculousness of many of them. There are motions congratulating football teams on promotion; motions congratulating two celebrities on their engagement; motions arguing about the origins of Robin Hood; motions suggesting a common hash tag to be used by MPs on Twitter; motions praising Ann Widdecombe’s dancing ability; and even a motion expressing support for an asteroid wiping out the entire human race.

James Wharton (Stockton South) (Con): As my hon. Friend is eloquently setting out, does not the sheer quantity of early-day motions on such a range of topics, which are often rather inconsequential, undermine the function that they were designed to serve?

6 Feb 2012 : Column 135

Graham Evans: I wholeheartedly agree with my hon. Friend. The cost to the House, including in time, means that it is time to consider reform.

Simon Hart (Carmarthen West and South Pembrokeshire) (Con): Does my hon. Friend also agree that pressure groups and individuals believe that early-day motions have value, and are therefore disappointed when they discover, despite their best efforts, that they come to nothing?

Graham Evans: I absolutely agree with my hon. Friend. Many organisations such as charities employ lobbyists, and early-day motions are often used to justify their existence. I shall come to that shortly.

Paul Flynn (Newport West) (Lab): Will the hon. Gentleman give way?

Graham Evans: I will give way to my hon. Friend.

Paul Flynn: I am grateful, and I welcome our new friendship.

Is the hon. Gentleman aware that it is now forbidden in the House to read out the names of the fallen in Iraq or Afghanistan? The only way that the House can confront the results of its own decisions—by reading those names—is through early-day motions. He might have seen 24 early-day motions that record the names of those who have fallen in Afghanistan. What would he do to change the system so that he does not block the only way in which the House can record its respect and gratitude to those who have fallen in battle?

Graham Evans: Other mechanisms can be used to pay respects in the House. For example, the Prime Minister and the Leader of the Opposition pay their respects at the beginning of every Prime Minister’s questions.

The reputation of the House is damaged even further by the mountains of early-day motions that are drafted by lobby firms who use them as little more than a tool to justify their services to naive clients. Plenty of willing Members are more than happy to oblige and table such motions on behalf of lobbyists. All hon. Members know that to be true, because we get bombarded by the same pro forma requests from lobbyists to table this or that early-day motion.

Andrew Bingham (High Peak) (Con): We are besieged by e-mails from our constituents asking us to sign early-day motions that we know are of little consequence because of the volume of them. We have to send a letter disappointing our constituents because they are led to believe that early-day motions will change the world, whereas we know that they will not.

Graham Evans: My hon. Friend raises another good point: the sheer volume of early-day motions means that many constituents do not get the outcomes they seek.

We need to be totally frank about this. We have lobbyists trying to convince their clients that they are being very influential and making progress on their issue by getting an early-day motion tabled with lots of signatures. We have Members who want to convince constituents that they really care about a particular

6 Feb 2012 : Column 136

issue and have even taken the important-sounding step of tabling or signing an early-day motion. And we have local journalists who, desperate for copy, use the press release from the Member bragging about how they are backing an early-day motion. The cycle repeats, but nothing actually gets achieved.

Jason McCartney (Colne Valley) (Con): Like my hon. Friend I was inspired to give up signing early-day motions in August 2010 and the world has not stopped turning. He proposes some good ideas to take matters forward. For example, my hon. Friend the Member for Wycombe (Steve Baker) and I went to the Backbench Business Committee and got a debate on Kashmir, which was a much better way to raise that issue than just tabling an early-day motion. I like the way in which my hon. Friend the Member for Weaver Vale (Graham Evans) is coming forward with alternative ideas.

Graham Evans: My hon. Friend raises the point that there are now other mechanisms. The Backbench Business Committee is one and Westminster Hall debates, in which Ministers are held to account and have to give answers, are another. There are new avenues for Back Benchers now.

It is this frustration that led me to table my own, admittedly tongue-in-cheek, early-day motion 432, calling for early-day motions to be reformed or abolished. I believe that the other 44 Members who have kindly signed my early-day motion share my frustration—

Steve Baker (Wycombe) (Con): If I signed early-day motions, I would have signed my hon. Friend’s early-day motion.

Graham Evans: I am grateful to my hon. Friend.

As I was saying, the signatories include Members from both sides of the House, with several senior Members and former Cabinet Ministers and, astoundingly, my hon. Friend the Member for Worthing West (Sir Peter Bottomley). When I first discovered he had signed my early-day motion, I wondered whether it was perhaps by accident—

Sir Peter Bottomley (Worthing West) (Con): I acknowledge that I have signed a number of early-day motions—[ Laughter. ] I think we should consider the issue along with parliamentary questions. Questions take up more space in Hansard than early-day motions do, and most of them are pretty useless. Of the early-day motions that I have signed, one helped to get Krishna Maharaj off death row in Florida, and another helped to get cervical cancer vaccinations to include genital warts, which will save 125,000 people a year from having an unpleasant, antisocial disease. So there are purposes that can be met by early-day motions, but I am enjoying my hon. Friend’s speech.

Graham Evans: I am most grateful for that intervention.

There is considerable and growing support from colleagues from both sides of this House for this issue to be looked at. Personally, I am very much open to debate on whether we simply abolish or dramatically reform early-day motions. I have had a number of conversations with colleagues and the staff of the Table Office and there are plenty of ideas floating around

6 Feb 2012 : Column 137

about how early-day motions can be improved. They must be made more cost-effective, but we could also look at limiting the number that an individual Member can table and sign in a single Parliament and perhaps guarantee that the few early-day motions with the most support are guaranteed to be debated.

Sir Bob Russell (Colchester) (LD): Following the hon. Gentleman’s theme, would he also put a limit on the number of parliamentary questions an MP could table?

Graham Evans: I am not sure what the answer is to that question. Perhaps we could discuss it over a cup of tea in the Tea Room later.

It might be possible to formalise the mechanism of early-day motions within the framework of the Backbench Business Committee. The hon. Member for Nottingham North (Mr Allen) has suggested that Members should be able to add their name to only one early-day motion each week, with the most popular one being debated the following week. The remaining early-day motions would then fall off the agenda. That way, Members would be forced to think very carefully about which early-day motion to back, rather than mindlessly tabling and signing dozens at a time. Members would be most unlikely to want to waste their single early-day motion on something daft or a pro forma drafted by lobbyists.

As I mentioned, the current cost of EDMs could also be slashed dramatically. Last year, printing costs alone accounted for £776,000. On top of that, substantial staffing costs add up to more than £1 million a year. There is no need to print multiple copies of every EDM each sitting day. EDMs could be kept largely electronic, with paper lists printed only on request. That is nothing complicated, only common sense to help save the taxpayer substantial sums over the course of a Parliament.

I hope that I have set out a clear case why EDMs are unsustainable in their current form and how we might go about reforming them. I also hope that this debate will help inform constituents about the reality of EDMs. Perhaps many charities and businesses that spend millions hiring lobbyists will listen to tonight’s debate and be more sceptical when public affairs consultants try to convince them of their effectiveness by getting an EDM tabled. Most of all, I hope that members of the Procedure Committee are listening carefully and realise how much support there is for change. I urge them to consider EDMs carefully and begin the process of reform as soon as possible. If we get it right, we can improve Back-Bench Members’ ability to raise topical issues, get better value for taxpayers’ money and restore faith in the House. There is no better time than the present.

10.15 pm

The Parliamentary Secretary, Office of the Leader of the House of Commons (Mr David Heath): I congratulate the hon. Member for Weaver Vale (Graham Evans) on securing this debate, and on securing such a sparkling attendance by colleagues for a late-night Adjournment debate. Since entering the House in 2010, he has shown consistent interest in reforming early-day motions, most notably by tabling—with tongue in cheek, as he said— an early-day motion entitled “Early-Day Motions” in July 2010.

6 Feb 2012 : Column 138

I ought to begin by saying that there are, rightly, limits to the Government’s responsibilities for the matters under debate. That was not always so. Between 1994 and 2010, the Government had a very large element of control over whether motions tabled by Back Benchers could be debated on the Floor of the House. The Government were thus the proper recipient of requests for debates on or arising from early-day motions. I seem to recall that that was often a feature of the weekly business question.

Since the welcome advent of the Backbench Business Committee following a decision of the House in June 2010, it now rightly falls to that Committee to decide what subjects will be debated in Back-Bench time and what form motions for debate should take. Of course, the Government, and particularly my right hon. Friend the Leader of the House, continue to examine early-day motions as barometers of opinion on public policy and matters meriting debate.

When the Procedure Committee last considered early-day motions in 2007, seven categories or purposes for early-day motions were identified: first, to express opinions on matters of general public interest, often to assess the degree of support among Members; secondly, to continue a political debate, for example by criticising the Government or the Opposition; thirdly, to give prominence to a campaign or the work of some pressure group outside the House, and I will return to that in a moment; fourthly, to highlight local issues, such as the success of a local football team, the achievements of constituents or the need for a bypass; fifthly, to pray against a statutory instrument subject to the negative procedure, both to draw attention to opposition and to encourage referral of the instrument for debate; sixthly, to criticise individuals, including other hon. Members, whose conduct can be criticised only on a substantive motion, and I think that the hon. Member for Newport West (Paul Flynn) has raised that matter before now; and seventhly, to set out detailed criticisms, such as of a company or body, under the protection of parliamentary privilege.

As the above categories suggest, the scope for early-day motions is wide. Individual hon. Members’ freedom to table them is great. EDMs can be viewed in some ways as a safety valve when Members find their ability to express views limited by the availability of time or by the rules of the House.

Dr Julian Lewis (New Forest East) (Con): I am grateful to the Deputy Leader of the House for outlining that helpful list. Does he agree that many of those categories also apply to business questions every Thursday, when hon. Members ask for statements or debates on subjects close to their hearts in the full knowledge that no such statement or debate will follow but because it enables them to make a point? That is what the EDM does, but it has the additional feature that many Members can sign up to it, which enables them to make a point and show that it is widely supported. Would that not be a loss to hon. Members?

Mr Heath: It was for precisely that reason and connected reasons that the Procedure Committee in the previous Parliament decided against recommending the abolition of EDMs or their substantive reform. However—there are several “howevers”—a major area of discontent for many years, as reflected in the Procedure Committee’s

6 Feb 2012 : Column 139

report in the last Parliament, concerned the lack of connection between EDMs, whose ostensible purpose was to set down a motion for debate in the House on an unspecified day, and the provision of time on the Floor of the House. The House has taken a major step to respond to this problem with the establishment of the Backbench Business Committee, as I mentioned at the outset.

Robert Halfon: To be fair, the Backbench Business Committee is slightly different, because any MP can ask for a debate regardless of whether they have tabled an EDM. As I have suggested to my hon. Friend the Member for Weaver Vale (Graham Evans), is not the answer—I say this as someone who supports EDMs—to change their name to “MPs Books of Petitions” and to publish them online? That way, no one would be misled over whether they might be debated.

Mr Heath: I will return to that point in a moment. Yes, the Backbench Business Committee considers any matter brought forward by Back-Bench Members, but it has shown its willingness to enable EDMs to be debated. It demonstrated that by providing time for a debate, on 10 March last year, on an EDM concerning the work of UN Women.

Drawing on a Procedure Committee recommendation in 2007 that was endorsed by the House on 25 October 2007, the Committee also enabled an EDM to be tagged as “relevant” to the debate on parliamentary reform, which took place in Westminster Hall just over a year ago, on 3 February 2011. The Committee can also draw on EDMs to provide evidence of the breadth of support among Members for a subject of debate, as it did in the case of the Fish Fight campaign. Were they to be named something else, their effectiveness at introducing subjects, with the support of Members, for the Committee to consider would not be reduced. It is a fact that EDMs have that function.

Although the Committee has fundamentally changed how business in the House is determined—and changed it for the better, in my view—some myths about EDMs linger on, although the hon. Member for Weaver Vale exploded some of them this evening. We are concerned about the propensity of pressure groups effectively to mislead our constituents into thinking that EDMs are something that they are not—an avenue to a procedure in the House—and to suggest that there is a magical number of signatories on an EDM that will cause it to be debated, which of course there is not.

That notion has persisted over the years, despite the absence of evidence to support it. It might be expedient for some pressure groups and lobbyists to perpetuate that myth and to raise false expectations among our constituents. We have all received e-mails stating that such-and-such an EDM is of critical importance and that we must sign them—I, as a Minister, cannot sign them any more, so I have a ready excuse, but I know that other Members sometimes feel pressurised by that sort of campaign.

The new House, selected in 2010, seems to have many more Members sceptical about the value of adding their names to EDMs. The average number of new signatories per week fell from 3,704 in the last financial

6 Feb 2012 : Column 140

year of the previous Parliament, to 1,965 in the first financial year of this Parliament. More Members have decided to adopt a policy of not signing early-day motions—I think we heard an example earlier. Indeed, I understand that Members can record that view with the Table Office. Above all, the Backbench Business Committee has demonstrated through its work that the link between early-day motions and debates is not a crude numbers game. For those reasons, I hope that all Members agree that the myth of a magical number of signatories should be confined to the dustbin, where it belongs.

The hon. Member for Weaver Vale identified a further problem—others have amplified it—in the triviality of some early-day motions. He referred to what he saw as some examples of early-day motions that devalued the currency. I certainly do not want to comment on any individual cases, but I agree with him that it seems highly questionable whether some early-day motions are appropriate, and that Members should pause for thought about the reputational and cost implications of their actions.

Sir Peter Bottomley: Might not the same thing have applied to William Wilberforce when he first had the rather revolutionary idea of abolishing the slave trade, or Samuel Plimsoll and his idea of painting a white line on the side of ships so that they would not be overladen with sailors who would otherwise go down to Davy Jones’s locker?

Mr Heath: If I may gently say so, I think there is a difference of kind between those causes, which I think most people would consider to be serious causes, and the fortunes of the local football club on a Saturday afternoon. I think there is a difference, perhaps, in scale of import between those topics.

Sir Bob Russell: Will my hon. Friend give way?

Mr Heath: I will, but I will have to make progress soon.

Sir Bob Russell: Perhaps I can ask the Deputy Leader of the House to consider these examples: the Gurkha rights campaign and the Royal British Legion’s military covenant campaign, on which I tabled early-day motions, or indeed early-day motion 1—I think—in 2009, which I also tabled and which the then Conservative Opposition thought was so brilliant that they brought it to the House and we had a vote on it.

Mr Heath: There is no doubt that some early-day motions are of considerable importance in the topics they raise. What I think the hon. Member for Weaver Vale was saying is that there may be better ways of bringing those matters to the House than the current system. There are also things that, frankly, I would be amazed if the House spent its time debating in real life, as opposed to the application that an early-day motion purports to be.

There are ways in which the issue could be dealt with. The hon. Gentleman suggested that limits might be imposed on the number of early-day motions that an individual Member could table or sign. Those are matters for the Procedure Committee to consider, should it decide to do so, but numerical limits, which were also

6 Feb 2012 : Column 141

suggested in an intervention, might be seen as an unexceptional constraint on hon. Members’ freedom of action. The implementation of a limit might encourage the syndication of motions. Limits would certainly provide an incentive for hon. Members to ensure that they used their right to table or support motions wisely, but at a cost, in terms of the limitation of their action.

Chris Heaton-Harris (Daventry) (Con): Will the Deputy Leader of the House give way?

Mr Heath: I do not think I can really take any interventions at this point, because of the time.

Mr Greg Knight (East Yorkshire) (Con): Will the hon. Gentleman give way?

Mr Heath: I will give way to the Chairman of the Procedure Committee, because he has a role in taking this matter forward.

Mr Knight: Let me place on record the fact that I am here listening to the debate; I am not here as an advocate. I am happy to give an assurance that I will take hon. Members’ views back to the Procedure Committee.

Mr Heath: I am extremely grateful to the right hon. Gentleman, who rather pre-empts the final comment that I was going to make. I was going to ask him and his Committee to take this matter forward. I now know that when I make that request, the answer will be in the affirmative, for which I am grateful.

Chris Heaton-Harris: As there is now time, will the hon. Gentleman give way?

Mr Heath: All right, yes—very clever.

Chris Heaton-Harris: I am a Member who refuses to sign early-day motions, as I believe they are the tool of a very poor lobbyist. Will the Deputy Leader of the House reflect on whether a campaign is devalued if a vast number of Members do not sign the relevant early-day motion? If I were someone who signed these things, I would dearly like to sign early-day motion 2637, on diabetes care, which has achieved only 27 signatures. I would say that the EDM devalues that campaign, rather than adding to it.

Mr Heath: I understand the point that the hon. Gentleman makes, and I think there is some substance to it, as it in no way undermines the fact that it is an important issue that—

Dr Julian Lewis: Will the Deputy Leader of the House give way?

Mr Heath: I really cannot give way again, because we are coming to the end of what is normally an Adjournment debate between one Back-Bench Member and a Minister, and tonight we have had a cast of thousands.

The hon. Member for Weaver Vale mentioned the cost of early-day motions. The House service estimated that the cost of administering EDMs in 2009-10 was

6 Feb 2012 : Column 142

approximately £1 million. The annual cost may have fallen somewhat as a result of the decision not to print the weekly compilation of EDMs, but those costs should certainly give hon. Members pause for thought before they table motions.

One possible solution is the one suggested by the hon. Gentleman, who proposed that EDMs should only appear electronically. The cost estimate to which I referred earlier indicated that about three quarters of the costs of EDMs were attributable to printing. It is clear that the database is now the main means by which people outside this place, as well as many inside it, access EDMs. My own view is that the time is fast approaching when more categories of business papers can be made available primarily or exclusively in electronic form—I imagine that some will gasp with horror at that suggestion, but I believe that it is one way in which we can actually save the taxpayer money—and that early-day motions may be in the vanguard of change in that regard.

I think the debate has demonstrated that the time may soon be ripe for the Procedure Committee to look again at the subject of early-day motions, and we have just heard its the Chair, the right hon. Member for East Yorkshire (Mr Knight), say that he would be more than happy to put the matter to the Committee. It is for the Committee and for the House, rather than the Government and this Minister at the Dispatch Box, to specify the appropriate procedure. If proposals for reform were presented—either along the lines advocated by the hon. Gentleman, or in another form as a result of the Procedure Committee’s considerations—it would be for the House to decide on the appropriate solution following a debate in Back-Bench time. In the context of a reformed House with more control over its own affairs, it is not for the Government to present proposals for change in this area. However, the hon. Gentleman has raised an important issue relating to the way in which we as a House conduct our business.

Perhaps I might surprise the hon. Member for New Forest East (Dr Lewis) by telling him that I now have time to allow him to intervene, if he does so quickly.

Dr Lewis: What a marvellous Deputy Leader of the House we have! I just wanted to record the fact that my hon. Friend the Member for Daventry (Chris Heaton-Harris), who opposes the signing of EDMs, secured my signature, along with those of more than 100 other hon. Members, to a letter that he wanted to send to the press. If it is good enough to send a letter to the press, it is good enough to get a large number of MPs’ signatures on an early-day motion.

Mr Heath: The hon. Gentleman has done very well to get his intervention in.

Let me end by thanking the hon. Member for Weaver Vale for raising the issue. We have had an interesting debate, and I look forward to hearing the views of the Procedure Committee in due course.

Question put and agreed to.

10.32 pm

House adjourned.