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In America we see, perhaps, the way to square the circle. It is prosecutors who have brought the case for contempt of Congress. That will be tried within the courts system. We have determined that we have been lied to. A simple method, perhaps, would be that we

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could refer the matter to the Director of Public Prosecutions and a trial could proceed on the basis that defendants would have all the protections of the court.

After the referral to the Standards and Privileges Committee, perhaps there should be a wider debate in the House about what punishments ought to exist for serious contempt of Parliament. In the American system, the case against Mr Clemens is not merely that he lied to Congress. There is also a materiality test, as the hon. Member for Rhondda noted. The lies told to the US Congress must materially have affected the investigation that was ongoing. In the case of the Select Committee, that test would manifestly have been passed, as lies of substance were repeatedly told us by lawyers who should know better. There is a test of proportionality built into the offence.

Jim Sheridan (Paisley and Renfrewshire North) (Lab): The hon. Lady and others mentioned the situation in the Scottish Parliament. Depending how things evolve, the powers of the Scottish Parliament could be tested in the near future. I am concerned about the legal situation of witnesses who gave evidence via a video or conference link. Is that any different from witnesses who gave evidence face to face?

Louise Mensch: That is an interesting question. There ought to be no difference. People are testifying before the Parliament of the United Kingdom when they testify before a Select Committee, and Parliament has the right to expect that it is not materially lied to. In my opinion, the same sanctions should apply.

The whole House is familiar with the offence of contempt of court that is routinely used. Let us hope that it would not be so routinely used, but I believe an offence of contempt of Parliament ought to be created. It would be used only in the most exceptional circumstances and as with any other offence, it should be up to prosecutors to try it, and the protections of the court system and the defence system should kick in.

As the old joke says, I wouldn’t have started from here, yet that is where we are. We must rely on the Standards and Privileges Committee because there is nothing else for the House to do in the present circumstances. Perhaps we need to look at the wider powers of Parliament, the importance of Select Committee hearings, procedures for creating offences, and the material problem that Parliament has a right to be told the truth in serious inquiries, whether or not a witness is under oath. That is something that the House ought to consider in future deliberations. For now, I am delighted to commend to the House the motion to note and not to endorse the report.

4.38 pm

Mr Kevin Barron (Rother Valley) (Lab): If the House decides to refer this matter to the Committee on Standards and Privileges, we will ensure that all our processes are rigorously fair and impartial. It is likely that there will be widespread speculation before we are in a position to say more about the Committee’s plans, but we will not be rushing into making any hasty decisions and will consider our actions carefully, thoughtfully, and with professional advice from the appropriate sources.

At its meeting this morning, the Committee agreed that none of its members would discuss this matter outside the Committee, whether with colleagues or other

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third parties. I trust that Members and others will respect the Committee’s decision, and will not try to engage Committee members in discussions about this inquiry.

4.39 pm

Philip Davies (Shipley) (Con): I rise briefly to commend once again my hon. Friend the Member for Maldon (Mr Whittingdale) for the way in which he chaired what has been, at times, a challenging and difficult Committee, not just in this Parliament, but in the previous Parliament, when our conclusions were not always unanimous and we had a number of disagreements along the way. He, as ever, chaired the Committee expertly.

I would also like to take the opportunity to commend the other members of the Committee. We did not always agree on these matters, but everybody put a lot of hard work into the report. There was a lot of dedication over a long period, and even though we may well have had an honest disagreement at the end of it on some matters, people should not underestimate the efforts that Committee members on both sides of House put in to get to where we are today, not least the hon. Members for West Bromwich East (Mr Watson) and for Newcastle-under-Lyme (Paul Farrelly), who put in a lot of time and effort to uncover the wrongdoing that clearly took place at News International.

I absolutely endorse the case that was put by my hon. Friend the Member for Maldon at the beginning of the debate on why the matter should be passed on to the Standards and Privileges Committee. I want to emphasise that the Committee did not come lightly to the decision that Tom Crone, Colin Myler and Les Hinton had lied to the Committee in its previous inquiry, and, it might be said, in this one too. I do not think that any Select Committee would lightly decide overtly to state that certain named individuals lied to it in the course of its inquiry. I want to press that point to the Chairman of the Standards and Privileges Committee so that he appreciates that the decision was not entered into lightly. Those conclusions did not come flippantly, but after much serious consideration and deliberation.

I also want to emphasise how our inquiry was repeatedly impeded by News International, not just this inquiry, which, to be perfectly honest, showed for the first time elements of News Corporation co-operating with the Select Committee, but particularly the previous inquiry, when News International repeatedly, consistently and corporately made it clear that it was impeding our inquiry. In case people are not aware, I have to report that News International attempted to have the hon. Member for West Bromwich East and me thrown off the Committee during the last Parliament because it thought that we would not be particularly favourable to them in our deliberations. As the hon. Member for Wallasey (Ms Eagle) made clear, it would be absolutely unacceptable if people could come to Parliament and know that they could get away with repeatedly lying to the Committee. If that did happen, it would open the floodgates for witnesses not to tell the Committees about anything that might be inconvenient to them.

Let me make one brief point to emphasise how we did not enter into these matters lightly. The lies were not just little white lies, but deliberate attempts to mislead the Committee on serious matters. For example, my

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hon. Friends the Members for Maldon and for Folkestone and Hythe (Damian Collins) mentioned the letter that Clive Goodman sent to appeal against his dismissal to Les Hinton, saying that this practice was widespread in

News of the World

and that it was discussed on a daily basis. Yet Les Hinton made it clear that he had seen no evidence at all to suggest that the practice was more widespread, which was quite a palpable lie.

We must also remember that on the back of the letter that Les Hinton received, he was responsible for making sure that, one way or another, Clive Goodman received a payment totalling around £250,000. That happened only for him to say quite flippantly that there was no evidence at all; there was certainly sufficient evidence for him to authorise £250,000 to be paid out from News International to Clive Goodman—somebody who was convicted of a criminal offence, caused huge embarrassment to the company and could have been dismissed for gross misconduct. I would like to press upon the House, and the Standards and Privileges Committee, the fact that that was not only repeated, but very serious and blatant.

Finally, I would like the Standards and Privileges Committee to consider the motives of the people who lied to us—my hon. Friend the Member for Corby (Louise Mensch) touched on this in her contribution—because it is not entirely clear why certain people lied. Was it to protect themselves, which might have been the case for some people, to protect colleagues, or was it to protect the company and its reputation as a whole? The Committee might like to consider what motivated those people to lie and whether different motivations should come with different punishments. I am not offering any particular opinion, but I think that that is something that should be put on the record.

The reason I mention motives is that it was perfectly apparent during the previous inquiry in the last Parliament that witnesses from News International came to the Committee with a corporate game plan: nobody knew anything, nobody could remember anything, and nobody knew anybody who might know anything, and that was everybody’s defence at every possible turn. Whatever question was asked, that was the corporate defence from everybody who appeared before us under the News International banner, and it was particularly striking. I recall asking Les Hinton during that inquiry whether he had received any coaching before the evidence session so that we would know where we stood and whether News International had employed someone to advise them on how to answer the questions.

That is something the Standards and Privileges Committee might want to look at, because to my mind, and that of the Committee as a whole, the three individuals we named palpably lied to us, and it is very interesting to consider how on earth that came about. Were they told to give those answers, or did they make that decision themselves? I certainly have a feeling that on some occasions they were told what to say and that it was a corporate decision, rather than one they made themselves.

Alun Cairns (Vale of Glamorgan) (Con): I pay tribute to my hon. Friend, the Committee and its Chair for the way they have conducted their inquiry and today’s debate. Will he reassure me that, as this ever-changing situation evolves, if any other witnesses are found to

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have misled or lied to the Committee, it will take the same action and call for them to be referred to the Standards and Privileges Committee?

Philip Davies: I am grateful to my hon. Friend but fear that his question is slightly above my pay grade, as those are not decisions I can take for the Committee as a whole. I am sure that my hon. Friend the Member for Maldon, the Chair of the Committee, listened carefully to his intervention. He is probably the best person to direct that request to. I would certainly be sympathetic to the idea of the Committee looking again at certain individuals, if the legal situation allowed, who might also have lied to us, if that is what we conclude.

In conclusion, these are very serious matters, matters about which the Committee was absolutely unanimous, with regard to the three individuals concerned, and that we did not enter into lightly. We might have had some very well-publicised disagreements about parts of our report, but on this we were absolutely united. On the report as a whole, and on the inquiries as a whole, there was far more that united the Committee than divided it.

4.49 pm

Kevin Brennan (Cardiff West) (Lab): I, too, will attempt to be brief. Far from being critical of the Culture, Media and Sport Committee, I praise it for the work that it has undertaken on this matter over many years, dating back, as my hon. Friend the Member for West Bromwich East (Mr Watson) said at the beginning of his remarks, to the question that my hon. Friend the Member for Rhondda (Chris Bryant) asked way back in 2003 of the then Rebekah Wade about the payment of police officers, a practice that he and I were strongly convinced—shall I put it that way?—was not uncommon but was taking place at the time.

May I pick up on the matter, and slightly disagree with my hon. Friend the Member for Rhondda, regarding the Committee on Standards and Privileges? I support the motion before us, but it is unfortunate that we have to talk about referring the issue to the Committee on Standards and Privileges and about the possibility of Parliament imprisoning individuals because they have lied to a Select Committee. That is the essence of the point that I have made for some time, and to which the hon. Member for Corby (Louise Mensch) referred, about the need for evidence to be taken under oath by Select Committees.

The hon. Lady started by saying that taking evidence under oath would be a bad idea because, in effect, lawyers would make witnesses clam up, and she is absolutely right that, at the moment, a Select Committee chooses whether to do so, but, as in the case that she cited from the United States, it is common practice for committees of Congress to take evidence under oath, and that is exactly why Roger Clemens can be held accountable on a charge of contempt of Congress.

I do not mind whether the criminal charge that results from such practice is contempt of Parliament, because there is no question but that News Corporation and News International, in their attitude to our Select Committees, showed over many years utter contempt for the proceedings of Parliament. They did so because they thought that those Committees had no power, no authority and no teeth—exactly because they were not taking evidence under oath.

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Louise Mensch: The situation is not quite as simple as a simple perjury charge, which would apply on any occasion that one gave evidence under oath. The case in the United States refers specifically to contempt of Congress, which in respect of Parliament is the offence that we should create. As a corollary, does the hon. Gentleman not agree that there must be grave disquiet when a non-judicial body, such as Parliament, agrees to imprison a person? Does he agree also that the offence should be prosecuted by a prosecutor and decided by the courts in the normal way—after it has been committed against Parliament?

Kevin Brennan: I am not quite sure how the hon. Lady disagrees with me, to be perfectly honest. As I pointed out earlier, there is an Act of Parliament in place, the Parliamentary Witnesses Oaths Act 1871, which means that oaths can be taken before Select Committees, and any false evidence given under those oaths would be subject to prosecution under the Perjury Act 1911. If she would prefer to substitute a criminal offence of contempt of Parliament for that, I would be perfectly happy, but my point is that I feel uneasy that the only option available to us, because in the case before us an oath was not taken, is referral to the Committee on Standards and Privileges and the possibility of Parliament having to consider using that rarely used power of imprisonment.

Mr Bernard Jenkin (Harwich and North Essex) (Con): Will the hon. Gentleman allow me?

Kevin Brennan: I will, because the hon. Gentleman is the Chairman of the Public Administration Committee, but I will not take any further interventions.

Mr Jenkin: I am very grateful to the hon. Gentleman. I regret the fact that I have been in the Chamber for only part of the debate, but I heard the opening remarks. I feel it is appropriate for me to inform the House that the Liaison Committee has charged me with working with colleagues to investigate the whole question—it is very germane to this debate—of how Select Committee powers should be exercised.

Listening to these exchanges, I hear many matters that we have discussed and considered carefully, and I hope that the Chairman of the Standards and Privileges Committee will have regard to the findings that I hope we will produce in short order, which should provide not only some guidance on how the Committee should conduct its investigation into the matter, but some guidance to the House on what the consequences of contempt should be and, in future, on whether we will need to avail ourselves of the courts or of our own procedures. I am very grateful to my right hon. Friend the Leader of the House for emphasising that we are a House with a penal jurisdiction. That was a very important thing to put on the record.

Kevin Brennan: I am grateful to the Chairman of the Public Administration Committee for that intervention. He knows that I was a member of the Committee for many years, briefly under his chairmanship and in previous years under the chairmanship of Tony Wright, when we also considered a number of these issues.

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I have appeared, as the hon. Gentleman may and others will, both as a member of a Committee and as a witness, giving evidence to a Committee, and I have never understood why an oath, although it is implicit for a Member of Parliament, is not administered while giving evidence to a parliamentary Committee. I shall say nothing further, other than that I support the motion before the House.

4.54 pm

John Hemming (Birmingham, Yardley) (LD): We are elected here to represent our constituents, and the privileges of Parliament are their privileges. One of those privileges is their right to talk to us even if people bully them; the other is to get answers. If we do not act when people lie to Parliament, we are failing our constituents.

I agree with pretty well everything that the hon. Member for Rhondda (Chris Bryant) said. We need to take a particularly robust approach to this. Contempt of Parliament is a very detailed matter; a barrister, Kieron Wood, wrote a book about it recently. I gave a copy to the Library, so any hon. Member can take it out and read the details of what has happened in the past. It is important that we operate robustly to protect the rights of our constituents to have us act on their behalf to find out what is going on.

As the hon. Member for Rhondda said, if we had been more robust at an earlier stage, perhaps all this would have happened at an earlier stage. We need a separate jurisdiction. There are questions about how the police have behaved in respect of this situation, so simply passing the matter over to them is an inadequate response. If, as some people have suggested, there has been an issue with the activities of the Crown Prosecution Service, then we need a separate jurisdiction for that. I have concerns about people being banned from court proceedings, even criminal court proceedings, as has happened recently. At the end of court proceedings, Parliament must have the chance to find answers and to explain to citizens what is going on. In the interests of our constituents, and so that we can stand up and protect democracy, we must take robust action.

4.56 pm

Simon Hughes (Bermondsey and Old Southwark) (LD): I, too, will be brief in speaking in support of the motion. I repeat my tribute to the members of the Select Committee, all of whom have worked very effectively for us, including my hon. Friend the Member for Torbay (Mr Sanders), who made sure that all three parties were well represented.

The other day, we had a memorial service for Lord St John of Fawsley, who set up the Select Committee system back in the 1980s. This case has taken us to a crucial point in the development of Select Committees. We listened carefully to the right hon. Member for Rother Valley (Mr Barron), who said things that have been gratefully received about how his Committee proposes to do its business, and we have no doubt that it will do it appropriately.

Bluntly, though, it is no good having a Select Committee system that is the only way in which Parliament can interrogate people, quiz people and ask people questions on our collective behalf unless sanctions can be enforced when they do not follow the rules. The whole exercise

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has led us to this point. The Leader of the House made it clear, and Parliament is now clear, that we need to address the difficult questions of how we deal with breaches of the understandings or commitments that people undertake. Is it by our taking a criminal sanction? Is it, as the hon. Member for Corby (Louise Mensch) suggested, by our referring the matter to others to prosecute in the criminal courts? We cannot duck the question, and it needs to be picked up.

Colleagues know of my interest. I was the only Member of Parliament originally to give evidence in the trial that convicted Mr Goodman and Mr Mulcaire. Throughout the last part of the previous Parliament, I argued that we needed a public inquiry and needed to increase the criminal sanctions on those in the world of the press, not only those at the News of the World,who broke the law. Very recently—I wanted to leave it until late in the day—I took civil proceedings against the News of the World.

For me, there are two remaining substantive points. First, the serious issue is not so much that these individuals flaunted their positions, refused to co-operate with the Select Committee, and are found to have given dubious evidence, but that people from a very large national and international company did so. In Thomas Fuller’s famous phrase of 1733, which is oft used by lawyers,

“Be you never so high, the law is above you.”

We need to make sure that the law is above the News Corporations of this world and that Parliament is above the News Corporations of this world. The fact that someone is from a big company or an international company should not preclude them from telling the truth and from being answerable and accountable. We have remitted to the regulatory body, Ofcom, the duty of deciding who is a fit and proper person to hold a licence, and it is doing that. These are relevant matters, and corporate responsibility has to be accepted.

Finally, I am not at all vindictive about these things, but I am clear that we now have to bring the matter to a conclusion. The police are doing their job and Lord Justice Leveson is doing the job that we have asked him to do very well. Parliament has to complete its job, too. I trust that the motion represents the right way to do it and that the Standards and Privileges Committee will start its work unencumbered by pressure. We have to find ways of holding people to account when they abuse this place and ensuring that they understand that this is the Parliament of the people, and that they will be answerable and tell the truth.

4.59 pm

Mr Adrian Sanders (Torbay) (LD): I, too, congratulate the hon. Member for Maldon (Mr Whittingdale) on his chairmanship of the Culture, Media and Sport Committee during not just this inquiry but previous ones, including those for which I was a member of the Committee.

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I also thank members of the Committee past and present, and I thank the members of staff who have supported it for their patience and counsel. It has not necessarily been easy for them.

I will be brief, because much that needed to be said has already been said. I hope that the Standards and Privileges Committee will take into consideration one of the difficulties that the Culture, Media and Sport Committee had, which was that the circumstances were changing week by week as new evidence became available. That may also become a challenge for the Committee chaired by the right hon. Member for Rother Valley (Mr Barron). Ongoing inquiries and investigations may influence its decision making.

The most important issue, as has been mentioned, is the ability of Select Committees to seek out facts and uncover the truth. If there is no penalty for misleading a Committee, it affects our entire Select Committee system. I suspect that that concern lay behind the unanimity of the Culture, Media and Sport Committee on the relevant part of the report. Our experience has highlighted the need for Parliament to consider its powers and the procedures that we follow.

I end with a note of concern, although I fully support the motion. It is that the Standards and Privileges Committee meets in secret, which could be a difficulty. Those who, in our view, have misled the Culture, Media and Sport Committee could seek to challenge anything that the Standards and Privileges Committee does if it meets in secret.

Question put and agreed to .

Resolved ,

That this House notes the conclusions set out in chapter 8 of the Eleventh Report from the Culture, Media and Sport Committee, Session 2010-12, on News International and Phone-hacking, HC 903-I and orders that the matter be referred to the Committee on Standards and Privileges.

Business without Debate

EUROPEAN UNION DOCUMENTS

Motion made, and Question put forthwith (Standing Order No. 119(11)),

Posting of Workers and the Right To Take Collective Action

That this House considers that the draft Council Regulation on the exercise of the right to take collective action within the context of the freedom of establishment and the freedom to provide services (European Union Document No. 8042/12 and Addenda 1 to 3) does not comply with the principle of subsidiarity for the reasons set out in Chapter 1 of the First Report of the European Scrutiny Committee (HC 86-i); and, in accordance with Article 6 of Protocol (No. 2) of the Treaty on the Functioning of the European Union on the application of the principles of subsidiarity and proportionality, instructs the Clerk of the House to forward this reasoned opinion to the Presidents of the European Institutions.—(Angela Watkinson.)

Question agreed to.

22 May 2012 : Column 1015

Financial Services Bill

[2nd Allocated Day]

[Relevant documents: the Twenty-first Report from the Treasury Committee, Session 2010-12, Accountability of the Bank of England, HC 874, and the Government response, contained in A new approach to financial regulation: securing stability, protecting consumers, Cm 8268; the Twenty-sixth Report from the Treasury Committee, Session 2010-12, Financial Conduct Authority, HC 1574; the Twenty-seventh Report from the Treasury Committee, Session 2010-12, Accountability of the Bank of England: Response from the Court of the Bank to the Twenty-first Report from the Committee, HC 1769; and the Twenty-eighth Report from the Treasury Committee, Session 2010-12, HC 1857, Financial Conduct Authority: Report on the Government Response.]

Further consideration of Bill, as amended in the Public Bill Committee

Clause 7

Orders under section 22 of FSMA 2000

Amendment made: 4, page 39, line 36, after ‘25(1)’ insert—

‘(a) after “22(1)” insert “ or (1A)”, and’.—(Mr Hoban.)

Clause 9

Permission to carry on regulated activities

5.3 pm

Chris Leslie (Nottingham East) (Lab/Co-op): I beg to move amendment 75, page 43, line 16, at end insert—

‘(3) Within a year of Royal Assent to the Financial Services Act 2012, the Treasury shall publish a report on measures to improve the stewardship of institutional investments, which may require amendment under subsection (1).’.

Madam Deputy Speaker (Dawn Primarolo): With this it will be convenient to discuss the following: Amendment 45, in clause 14, page 64, line 8, at end insert—

‘(3A) In section 73, subsection (1), insert at end:

“(g) to foster ethical corporate behaviour, including respect for internationally-recognised human rights.”.’.

Amendment 38, in clause 22, page 82, line 10, at end insert—

‘(c) provide for a requirement that an employee representative should be a member of the remuneration committee of a relevant body corporate, and

(d) provide for a requirement that the remuneration consultants advising on remuneration policy shall be appointed by the shareholders of a relevant body corporate.’.

Government amendments 5 to 8.

Amendment 73, in clause 40, page 127, line 38, at end insert—

‘Complaints by small businesses

234I Small businesses—complaints and proceedings

‘(1) The Treasury and Secretary of State shall bring forward proposals within three months of Royal Assent to the Financial Services Act 2012 in the following areas—

(a) to introduce provision for collective proceedings before the court in respect of financial services claims made on an opt-out basis by small and medium sized enterprises; and

22 May 2012 : Column 1016

(b) to introduce provision for complaints by small and medium sized enterprises to the FCA that a feature, or combination of features, of a market in the United Kingdom for financial services is, or appears to be, significantly damaging the interests of small business.’.

Government amendment 9.

Amendment 74, in schedule 5, page 204, line 37, at end insert—

‘(2) In subsection (1) after “approved persons”, insert “and the standards of stewardship expected of approved persons who are institutional investors.”’.

Government amendments 13 to 17.

Chris Leslie: This important Bill took a considerable amount of time in Committee, but it was still insufficient to cover many of the amendments that will be necessary to ensure that it is fit for purpose and able to fulfil the job for which it was designed. The Opposition believe that the Bill can still be improved, so many of the proposals we did not reach in Committee or that were not addressed on day 1 on Report are in today’s amendment paper.

This long group of amendments under the generic title, “Stewardship, etc.” covers a few issues, so I would be grateful, Madam Deputy Speaker, if you would bear with me while I touch on the details. Although amendments 75 and 74 relate to stewardship, other amendments are on different topics, which I should also like to address under this group.

On amendments 75 and 74, it is important to take the opportunity to ensure that the Bill properly improves institutional investors’ stewardship of pension funds or other savings or investments. Such funds are looked after by others on our behalf. In an ideal world, those who have pensions or other savings would spend time considering where they are invested, and whether they are invested ethically or in sustainable organisations and so forth. For reasons of practicality, however, that is often impossible, and investments are often grouped together in a basket of different products, so following the detail of where funds are invested is incredibly difficult.

That is why many people choose to use institutional investors—to ensure their best interests are being served. That means ensuring a good and strong rate of return, but many people care about where their money is invested. Most of British industry is partly owned by the collective pension funds of our constituents. They have voting rights through the shares and equity they hold, but they are often exercised without reference to our constituents and delegated to institutional investors to make decisions on their behalf.

The previous Administration and this one have therefore sought to address the quality of stewardship by institutional investors. Amendment 75 is on the threshold tests in the Bill and the Financial Services and Markets Act 2000 on whether people are suitable or fit and proper, whether they have adequate resources to fulfil their responsibilities, whether they have close links with others in the sector, and so on. The Opposition felt it would be a good idea to ask Ministers to consider whether the array of reforms that should be made to corporate stewardship should be reconsidered in the light of those threshold tests.

Amendment 74 also looks to the 2000 Act and the general rules of conduct of approved persons and seeks to amend the Bill so that it addresses key aspects of the

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good stewardship agenda. We argued in Committee and earlier that the Bill is a missed opportunity radically to improve the stewardship of some of the key players in corporate Britain, especially those large firms—banks and institutional investors—that have such a direct impact on society at large.

The stewardship code was brought into force in 2010. We have had reasonable progress, with around 230 asset managers, asset owners and service providers signing up in the first 18 months, but sadly, the Bill does not reference the Financial Reporting Council, which is the UK’s independent regulator responsible for promoting, among other things, high-quality corporate governance. We want the Bill to do more to give regulators a proper and clear mandate to strengthen the stewardship code where appropriate and give them sufficient teeth to ensure that significant culture changes can happen. These things do matter. We have to build a framework that roots out bad habits and addresses what some people have called the principal agent dynamic—the fact that shareholders are often very fragmented and, when faced with unified managers, are often unable to make any headway. Senior executives can sometimes respond only if there is a 50% plus one coalition of shareholders.

We need to rekindle that dynamic. Some have said that it is time for a shareholder spring or awakening, and there have been some suggestions recently that certain company shareholders, at the annual general meetings and elsewhere, have begun to ask fundamental questions of the senior executives. It is the mismatch between the power that senior executives can have and the lack of power of—paradoxically—the owners of some of these large companies that needs addressing. In legislative terms, we often have debates about firm rules and fixed ways of doing business. Obviously, it would be preferable if the dynamic between owners and managers were able to ensure that we had a healthier, more open and transparent way of doing business.

I commend those institutional investors who show an active interest in how they use the voting rights of their investors and use that leverage to try and influence positive corporate behaviour by the relevant companies. It must be tempting for many institutional investors, when faced with a company perhaps with a management dysfunction or some behavioural failing, to sell up and walk away from that company. That is too often the history of such shareholding. It would often be far better if shareholders, as owners, could stay and try to fix the culture of the organisations that they own. It is that sort of change that we need to find a way of addressing. Yes, some shareholders will not want to say publicly that they disagree with senior executives, because that could affect the share price and they would therefore be affecting their own financial interests in some ways, but there are several ways in which institutional investors need to have the ability, directly or indirectly, to influence what is going on.

Protests in recent months have, in some cases, seen the rejection of some of the larger pay deals in big companies—for instance, the executive remuneration packages at Trinity Mirror, Pendragon and Aviva. The banking sector has also seen some significant shareholder disquiet, including at Citigroup with the rejection of the

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chief executive’s pay package. Nearly a third of Barclays shareholders voted against the pay policies in that particular company.

So there have been some signs that shareholders are becoming interested in that more active role. This is perhaps to commend the work of the Association of British Insurers, which has done good work recently in encouraging its members to take a more active role. Those members account for some 15% of the stock market, and they recently wrote an unprecedented letter to the chief executives of some of the major banks in particular, saying that they were not happy and would no longer tolerate a “business as usual” approach when it came to remuneration, especially for executive directors.

Those moves are very positive, but we should not feel that the balance between shareholders and executives is sufficient. The persistent imbalance needs addressing in a number of specific ways. For a start, a shadow is often cast across the Atlantic as many institutional investors feel that what are known as the “acting in concert” rules affect them here. To what extent can institutional investors come together and discuss with each other their ability to voice common concerns about the behaviour of managers? I have sometimes heard concerns expressed that this may somehow be in conflict with anti-trust regulations. If the Government could clarify the “acting in concert” rules, it would help to send a clear signal to institutional investors that it is possible to have those discussions, to come together to form a significant majority and to express a view about corporate behaviour.

5.15 pm

As I said, some progress has been made recently on the stewardship code, but the results of some surveys remain slightly depressing. In March, a business bellwether survey conducted jointly by the Financial Times and the Institute of Chartered Secretaries and Administrators canvassed the views of company secretaries from the FTSE 350. It found that 79% of FTSE 350 firms reported that the stewardship code had led to no difference in meaningful engagement, with only 21% reporting a slight difference. Only one in 10 firms had actually met their top 10 shareholders in the past 12 months.

The culture, then, is not changing radically enough. That is particularly clear with the bonus culture. On numerous occasions, we have debated bank bonuses and the fact that the culture there has not changed sufficiently. We still receive correspondence from many constituents totally aghast at the scale of some awards paid in the industry. The Department for Business, Innovation and Skills has reported on its efforts to curb excessive pay deals and talked, primarily, about the need for a binding shareholder vote on annual remuneration policy. That is welcome, of course, but insufficient, especially if the binding vote on future remuneration policy does not have enough teeth. It has been suggested by many, including some in the asset management industry—Fidelity Worldwide Investment, for instance—that a 75% super-majority might still be necessary. That would make companies consult shareholders far more widely prior to the vote and would maximise shareholder engagement.

There is a series of other reforms on the stewardship agenda, however, that the Minister needs to consider and encourage the regulators to consider. For example, there is a strong case for simplifying and clarifying how

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executive pay is composed. Just finding out what exactly is being paid in remuneration packages is sometimes itself a high science. A case can be made for a basic salary element to be supplemented with one additional performance-related element to help to ensure that shareholders can clearly comprehend the absolute levels of executive pay. We need greater transparency so that shareholders can understand what is being paid to managers.

It would be helpful if the reporting of pay packages was more standardised across a range of businesses and included single figures showing total remuneration. The Opposition believe that to increase transparency, shareholders should also be able to see awards that go beyond the boardroom, particularly in the banking sector. We have said that figures for the 10 highest-paid employees outside the boardroom need to be published, again so that shareholders can know what is happening. Let us bear it in mind that these things are not simply a matter of natural justice; they significantly affect the behaviour of those senior executives and the risks they take. If remuneration practices continue to reward excessive risk taking, linked to the exuberant activities that resulted in some of the more dangerous aspects of investments that took place ahead of the global financial crisis, it could ultimately lead to a significant liability for the taxpayer. This is relevant if we are to learn the lessons of the financial crisis.

There is also a case for ensuring that employees have a greater stake in what is happening within the companies in which they work. The proposal—put forward I think by the High Pay Commission—to publish the ratios of the pay of the highest-paid employees to that of the median would be a good way of ensuring a better sense of how a company was bringing all its stakeholders along in its business plan.

One of the key issues that still requires action is something basic: the mandatory disclosure of voting patterns by institutional investors. Many institutional investors are beginning to disclose their voting practices. That is a good thing, but in this day and age, that needs to be a basic, minimum requirement. A number of organisations, including FairPensions and others, have been pressing for the change, and the time for action has come. Not only would the mandatory disclosure of the voting patterns of institutional investors help to inform the owners of stock—the investors in companies—of what was being done in their name; it would also promote competition and choice, so that consumers could judge where their investments might best be placed to match their views, whether ethical or environmental.

My hon. Friend the Member for Wigan (Lisa Nandy) has an amendment in this group, and she will no doubt talk to it in a moment. It is of course important to ensure that regulators and the sector pay greater care and attention to ethical, human rights and sustainability questions. However, I also want the general public—pensioners, and other savers and investors—to have the information about what is being done in their name with their investments. That is why the mandatory disclosure of voting patterns is so important. The Minister therefore needs to trigger the powers in the Companies Act 2006, which are ready to go, so that they are brought into force and the stewardship agenda is promoted, and to do so as soon as possible.

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However, one of the most important reforms to stewardship must be the reform of remuneration committees in large corporations, in particular those in the financial services sector. I hope that amendment 38, standing in my name, will gain some traction with the Minister. Although we debated the matter in Committee, he must surely be persuaded by now of the virtues of ensuring an opportunity to appoint an employee representative as a member of a remuneration committee, and also that remuneration consultants—the specialists tasked with advising on the appropriate, going rate of pay for senior executives—should be appointed independently by the shareholders, not by the managers, who have a vested interest in the outcome of any review. Again, this is a pretty basic corporate governance reform, so I hope that the Government will accept the merits of it.

I cannot stress enough the importance of ensuring that employees have a better voice in addressing some of these questions. There is an incredible propensity for loss of morale in some of the big companies in this country if the employees feel totally disconnected from the continuous high pay, remuneration and bonus culture that they sometimes see in their own companies. When we have debated the issue in the past, the Minister has said, “We can’t possibly put an employee on a remuneration committee because that would involve a conflict of interest”—that is, because the employee would somehow be voting on their own pay and conditions. There are ample ways of dealing with conflicts of interest; the key thing is that the employee should have a voice to express a view about the ratios of the highest-paid to the typically-paid in a company, to ensure that we do not just have managers commenting on management pay, but that others can comment too. That would lead to a healthy dynamic on remuneration committees, and it is something that already happens in many of our European neighbour industries. We know that John Lewis and other UK companies already follow many of these best practices; I think the time has come for such arrangements to be broadened out.

It is also important to make sure that we move on from the perception that the remuneration consultants who are hired constantly make recommendations that please the highly paid management in some of these large banks and large corporations. Consultants will, like a sunflower, always face the sunlight and if they feel that their appointment will come by saying the things that please the people making the appointment, they will continue to say those things. There are some great consultants out there, and I do not, in any way, wish to denigrate their integrity, but, generally speaking, the culture can give rise to a perception that something is not quite right in how recommendations are made. So to ensure that those recommendations and the consultants’ behaviour are beyond reproach, it is important that we place this power more firmly and clearly in the hands of shareholders. That deals with amendment 38, and those are the points on the stewardship agenda that I hope the Minister will address.

Amendment 73 deals with a slightly different topic, as it seeks to amend clause 40. It has largely come about because of recent reports that small and medium-sized enterprises in the UK may have been mis-sold products by some of their bankers. In particular, some SMEs that might have taken out loan agreements were also told that they needed to take out an interest rate swap

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product—a hedge or an insurance against interest rates going too high—and therefore made such arrangements. Increasing concerns are coming to light about the way in which that practice occurred, with serious questions being asked of the commercial banks. This is obviously not of the scale of what happened with personal protection insurance, because that involved many millions of individual consumers being mis-sold a product. We are still in the early stages of finding out just what has happened, so this amendment seeks to bring forward powers giving small firms an ability to complain and to bring proceedings —court proceedings if necessary—to ensure that they could get proper adjudication on whether they were indeed mis-sold a particular product.

The amendment would do two specific things. First, it would require the Government to introduce proposals within three months of Royal Assent of this Bill to make it easier for groups of small firms to bring collective proceedings—class action suits, as they are often called—before the courts in respect of financial services claims, with the right to opt out for those companies not wanting to be party to the outcome of those cases.

I have written to the Minister on these points. Several years ago, he debated this issue when it came up during proceedings on the Financial Services Bill in 2009-10. He was then in a shadow role and he argued that the provisions could not go ahead because sufficient consultation had not taken place—the then Government undertook that consultation, partly at his behest. He has now been in office for a couple of years and we have another Financial Services Bill before us, yet still there is nothing in legislation on this.

In correspondence, the Minister tells me that

“legislating for collective proceedings through the Financial Services Bill would neither allow for the appropriate degree of consultation or take advantage of the opportunity to learn from the responses to the BIS consultation on private actions in competition law.”

All our amendment seeks to do is ask the Government to bring forward proposals within three months of Royal Assent. That would surely give ample time for proposals to be formed and for consultations to take place. If the Government cannot legislate now to help small businesses to ensure that, if necessary, they are able to undergo those collective proceedings to get justice in their cases, I do not know when a better time would be. The Minister needs to give us a little more information about the time scales he has in mind and the legislative vehicles he feels might be more appropriate than this Bill. The amendment would also empower SMEs to complain to the regulators, going beyond the collective proceedings in a court, and to give representative bodies the right to complain about market failures—in this case, to the Financial Conduct Authority—in the same way that consumers can complain.

5.30 pm

SMEs are consumers, just as individuals are; and just as individuals can be victims of mis-selling, so can small businesses. There will from time to time be vexatious or malicious complaints about particular products, but they can be dismissed by the regulator. The Minister has helpfully tabled an amendment to clarify that a small firm—it might be an independent financial adviser or an approved person—should not be deemed as a consumer when making a super-complaint. That is a perfectly good amendment, but we need to recognise

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that there is a gap in the legislation when it comes to small firms wanting to make complaints in their role as consumers of financial products.

Stewart Hosie (Dundee East) (SNP): Is the hon. Gentleman concerned that, if the amendment is passed, financial institutions might stop providing the hedge products against interest rate changes or forex changes that SMEs might need and from which they might benefit? Is there not a slight risk of those products no longer being available, adding to the risk for SMEs over a period of time during which interest rates and foreign exchange rates might change?

Chris Leslie: I am grateful to the hon. Gentleman, but no, I do not think that is a risk. Amendment 73 does not propose to outlaw interest rate swap products; indeed, it is not specifically related to those particular products. It is really about the powers of small firms to complain and to take proceedings if they feel that they have been mis-sold a particular product.

On the particular issue in the news about interest-rate swap products, there are some serious questions that the Financial Services Authority and the Minister need to answer. Were those interest-rate hedge products a requirement of loan agreements, or were they optional? Were the minimum and maximum parameters fair and balanced, or was the downside risk always likely to hit the consumer more than the banks? How frequently was there a mismatch between the term of the loan agreement and the term of the hedge product obligation? Sometimes the term of the hedge product obligation continued even though the loan term had concluded. Were there asymmetrical rights to cancel? In other words, could the banks cancel the arrangement for a particular product, with which the consumer or small firm had to continue? Those are some of the key questions.

David Mowat (Warrington South) (Con): The hon. Gentleman is right to raise this serious issue. What I do not understand in his amendment, however, is what additional powers it would effectively give to a small business, given that the Financial Services Authority can already investigate all these things. Am I missing something?

Chris Leslie: When it comes to complaints procedures, particularly about market failure, which the Financial Conduct Authority can look at, there is a trigger that small firms could have, but it is not available in the Bill. Just as the Minister has given super-complaint powers to a certain number of consumer bodies, so a case can be made for doing a similar thing for representative bodies of small firms. I am not claiming that the amendment is drafted to the perfection that the Minister’s officials might want, but I hope he gets the gist—that there is a gap here. Small firms might have written to him, expressing the fact that they feel that they have no power. I have certainly had some of them writing to me to say that they feel intimidated about complaining—to the regulator or to their bank—because of the sheer power that the bank has to withdraw lines of credit if it feels that the boat is being rocked.

There is an important underlying issue here, which the business community wants addressed. To what extent were small firms told to seek independent advice before signing up to the swap contracts? How widespread was

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the take-up of these particular agreements? I know that the Financial Services Authority is beginning to look at these questions, but I want to see more action and a swifter response from both the Government and the regulator.

David Mowat: Many of us want to see more action, but what I do not understand is the extent to which the hon. Gentleman believes that the FSA does not have the powers to investigate mis-selling of this type. If mis-selling has occurred—the hon. Gentleman provided some good examples of unfair and asymmetric contracts—surely the FSA is already able to investigate it.

Chris Leslie: Indeed it can, but it is the way of triggering an FSA investigation that is the case in point. The FSA can choose not to listen to the voices of dozens or hundreds of small businesses, not necessarily in regard to this product but in regard to other products in the future. It is a question of giving some power to small firms, as consumers, to trigger an investigation by the regulator. This is not just a pro-consumer amendment; it is a pro-business amendment, as I hope can be agreed on all sides.

I have spoken about the amendments tabled in my name; there are others on the list. I shall be interested to hear what the Minister has to say.

John Hemming (Birmingham, Yardley) (LD): Let me begin by referring Members to my entry in the Register of Members’ Financial Interests. I think that I should declare registrable holdings in RBS and Lloyds as regulated entities. I have just checked my entry in the register, and note that I have a declarable interest in Highway Capital. It is a stock exchange rather than a parliamentary interest, but I think that it should be declared because it is relevant to the debate. I also founded, and still chair, John Hemming and Company LLP, which supplies software to the financial services sector. Although it is not itself regulated by the FSA, it trades with FSA-regulated entities, so I think that interest should be declared as well.

My hon. Friend the Member for Solihull (Lorely Burt) sadly cannot be here today, although she attended 16 of the Committee’s sittings. She has, however, passed me certain comments that she has received from interested parties, which she wishes me to raise with the Minister.

Payday lending has been a substantial issue throughout the debate. My personal view is that it is not a good thing, because it traps people in many circumstances. The question of what is the best way of dealing with it is a complex one, and I think that the Government are entirely right to ask the University of Bristol to investigate it. However, I have spoken to companies in my constituency and have said that I do not think that it is a very good thing.

In Committee, my hon. Friend the Member for Solihull said that the Bill should explicitly encourage the Financial Conduct Authority to seek to maintain and extend consumers’ access to financial services that meet their needs, and that when making regulatory decisions, it should assess their impact on markets and consumers. It should place value on policy proposals and regulations that increase access to savings, protections and other financial products, and also on financial advice. In the absence of such a requirement, there would be a risk of

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the FCA always being steered towards a risk-averse regulation. Markets might be restricted to large groups of consumers to avoid any consumer getting sub-optimal products.

The Government seek to encourage the development of simple financial products. If we are to succeed, we must have a regulator working with the grain of the policy rather than acting as an obstacle to it, as appeared at times to be the case with the last Government’s stakeholder products initiative. Does the Minister agree that the FCA now has the “teeth” to engage with the industry and engage in issues such as the maximum number of rollovers that a payday lender should be permitted to allow? Could the FCA set a threshold for market entry? Could it impose on companies real penalties that hurt, rather than the £50,000 limit imposed on the Office of Fair Trading, and make lenders pay compensation to consumers who have suffered detriment?

Let me now turn to the reflections of industry practitioners. The smallest businesses are keen to ensure that the cost of the regulation to them is not disproportionate. Forty per cent. of credit licence holders are sole traders. What cost-benefit analysis has been carried out for the smallest practitioners?

What about the implementation time? The Finance and Leasing Association has observed that the less far-reaching Consumer Credit Act took four years to implement. It estimates that implementation of this legislation would take between five and seven years. I am sure that the Government will work with all the professional bodies in devising a sensible implementation plan, but I should be grateful for any reassurance the Minister can give.

The Association of Independent Financial Advisers is fearful about the lack of a limit on time for complaints, which it says will place a burden on provisions that it will need to make to cover this open-ended provision—

Madam Deputy Speaker (Dawn Primarolo): Order. The hon. Gentleman is speaking quite quickly, but I am trying to follow what he is saying. Will he explain how it is relevant to the amendments that we are discussing?

John Hemming: It is not.

Madam Deputy Speaker: In that case, it is out of order. Perhaps we should move on, unless the hon. Gentleman is going to speak in order.

John Hemming rose—

Madam Deputy Speaker: Order. I should like the hon. Gentleman to do it now. Otherwise I am going to sit him down straight away, given that he knows that he was out of order. Presumably that is why he was speaking so fast. I ask him to speak directly about the amendments.

John Hemming: The Opposition have raised interesting questions about the issues of shareholder activism and the interrelationship between shareholder activists and companies, and I would be interested to hear what the Government have to say in response.

Madam Deputy Speaker: Splendid; thank you. I call Lisa Nandy.

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Lisa Nandy (Wigan) (Lab): After that exchange, I rise to speak to amendment 45, which stands in my name and that of other Members, with some trepidation. I shall try to keep to the point.

The amendment places a duty on the Financial Conduct Authority, in its role as the UK listing authority, to require all applicants to the stock exchange to report on the human rights and sustainable development impacts of their operations. The Minister has said that the FCA needs to be a single-minded regulator. The amendment would not distract the FCA from its strategic objective, but would serve to uphold the integrity of the market and the London Stock Exchange in the fullest sense of that term. As the hon. Member for Hereford and South Herefordshire (Jesse Norman) has said, we must uphold honour and morality in the markets, but we must also maintain Britain’s international competitiveness. The amendment will achieve both objectives.

Conveniently, the amendment is also in line with the Government’s policy commitments. In June last year, the UK, along with every other member of the United Nations Human Rights Council, endorsed the UN framework on human rights and transnational corporations, which for the first time provides a framework for business and human rights. It was an historic agreement, and the Government are very supportive of it. The Foreign and Commonwealth Office has been particularly enthusiastic in its support for its principles, but so far the Government have not spelled out how they intend to fulfil them. Listing requirements specifically relating to human rights and sustainable development will be a very strong first step. As some Members may be aware, the LSE is currently host to a number of companies that have been found guilty of gross violations of human rights, particularly in countries that are in conflict or deemed high risk, yet very few companies have been held properly to account for such actions.

Last June, Richard Lambert, former director general of the CBI, wrote an opinion piece for the Financial Times. He said:

“It never occurred to those of us who helped launch the FTSE 100 index 27 years ago that one day it would be providing a cloak of respectability and lots of passive investors for companies that challenge the canons of corporate governance such as Vedanta…Perhaps it is time for those responsible for the index to rethink its purpose.”

Our amendment would clarify rather than rethink the purpose of the stock exchange, allowing the FCA to take into account an applicant’s respect for human rights and sustainable development, in protecting the integrity and respectability of the exchange. That has been done elsewhere, such as in Hong Kong, and Istanbul, Brazil, Indonesia, Shanghai, Egypt, Korea and South Africa have all taken steps in that direction.

Such regulation would not be burdensome on applicants. Publicly listed companies already report on their social and environmental impacts as part of the requirements under the Companies Act 2006. This amendment would simply make explicit the requirement to include human rights and sustainable development in their reports and demonstrate to applicants that the Government do not tolerate or accept failure to respect human rights.

Apart from the moral argument, there is a strong business case for such requirements. There is increasing recognition that environmental and social factors can have a material impact on business returns and a wider

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impact on reputation. The gulf of Mexico oil spill—which forced BP to cancel its dividend for the first time since the second world war and to report its first annual loss in 19 years—should have removed any doubt that environmental and social issues can be vital to company success.

One of the virtues of London’s financial services sector is its sustainability, security and stability, yet we are falling behind other countries in our commitment to sustainability. The Bill provides a great opportunity for Ministers to get on the front foot in respect of this agenda. The FCA’s purpose is to uphold the integrity of the markets. I ask Ministers to consider that term in its fullest sense in respect of companies’ environmental and social impacts.

This is a probing amendment, so I shall not press it to a Division, but I will listen very carefully to the Minister’s response.

John McDonnell (Hayes and Harlington) (Lab): I apologise, Madam Deputy Speaker, for coming and going from the Chamber during the debate; I have been chairing another meeting.

I congratulate my hon. Friend the Member for Wigan (Lisa Nandy) on the way in which she has promoted the debate on the issue and on her amendment. She has approached the matter articulately and with considerable compassion. She has demonstrated that ability to the House on a number of issues, and I congratulate her on her promotion to the Labour Front Bench.

5.45 pm

I was the Member who assisted in the launch in the House six weeks ago of the report, “UK-listed Mining Companies and the Case for Stricter Oversight”. The report was produced by the London Mining Network and supported by Amnesty International and a range of other organisations. It brought together examples of the operation of companies in the mining sector listed on the London stock exchange and the role that they played in the abuse of human rights, the environmental degradation of vast tracts of countries within the developing world and the overriding of the cultural values of local people.

The various organisations that came together to launch the report included human rights groups and environmental groups, as well as a number of community and religious groups, and they are looking to the Government for some movement on that issue. As my hon. Friend the Member for Wigan argued, those human rights, environmental and cultural abuses should not take place in the name of British companies listed on the British stock exchange. Any effort the Government can make to give this country’s financial authorities the powers to exert some influence on the operation of such companies is critical. As my hon. Friend has said, such actions are causing such long-term reputational damage not just to the individual companies but to the British financial system that they will eventually rebound on us. The matter needs to be addressed, and it needs to be addressed now.

When we launched the report, I was moved when I met the groups campaigning on the issue in Peru. I want to give this example not to delay the House but to demonstrate the significance of the amendment and the debate, as well as to suggest a possible route through for

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the Government. This example has gone unchecked by the financial authorities in this country. In 2005, Minera Majaz, a wholly owned subsidiary of the British company Monterrico Metals, was working hard in the northern highlands of Piura in Peru to get its social licence and start the operation of its first copper project. The concerns held by local people about possible environmental degradation as a result of such mining led 1,000 people to march on 1 August 2005 to protest against the mine. They were met by hired thugs who beat a large number of them up; 29 people were held within the mining camp, where they were tortured, and one person was killed. That was done in the name of a mining company that is listed in this country and is therefore considered to be a British company. A number of the women who were detained were sexually abused by the thugs with whom the company had armed itself. There have been some prosecutions and, thanks to the activities of Leigh Day and Co. Solicitors, the human rights lawyers, there has been some compensation. The case was exposed within the British media, too.

The operation of that company has damaged the reputation of this country in Peru in the long term, so the Government must be seen to act to put in place a regulatory system to prevent that from happening again. The least we can do is take on board the amendment tabled by my hon. Friend the Member for Wigan, which states that one factor to consider when overseeing the operation of a company listed in this country is its “ethical corporate behaviour”. In fact, the UN recently suggested that that was the role of member states, which should put place the necessary legislation and structures. My hon. Friend’s amendment is in line not only with the best interests of human rights and environmental sustainability but with the international obligations being placed on us and preserving the long-term reputation and viability of our financial services industry.

Steve Baker (Wycombe) (Con): The hon. Gentleman makes a compelling case, but are not directors already responsible under the Companies Act 2006 for many of the matters he raises? Would it not be more expedient to pursue directors?

John McDonnell: I understand where the hon. Gentleman is coming from but we have tried that and it has not worked. We sought under the recent Companies Act to increase the responsibilities on directors, but unfortunately we were unsuccessful. The evidence that came to the London Mining Network report, which I shall send to the hon. Gentleman, clearly shows that the existing system is not working, and this Bill provides an opportunity to enhance the powers of the regulatory authorities in this country.

My hon. Friend the Member for Wigan will not push the amendment to a vote. I understand why, although I am a bit more proactive on these matters. May I suggest to the Minister that the Government usefully look at the report and bring together the relevant representatives, including the existing authorities and the new individuals who will sit on the various authorities when the Bill has gone through, to discuss where we go from here? How do we ensure that we have an effective mechanism that includes the monitoring of corporate ethical behaviour within companies that are listed in this country and that gain all the advantages from that,

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such as reputational advantage, but that are doing our country a disservice through their operations in the developing world?

The Financial Secretary to the Treasury (Mr Mark Hoban): I am grateful for the opportunity to reply to this debate. The hon. Members for Wigan (Lisa Nandy) and for Hayes and Harlington (John McDonnell) have raised some very important issues and there is a lot of truth in what they say. The reputation of the UK listing regime depends partly on the behaviour of companies, and we need to think about that quite carefully. However, there are other forums in which these issues should be explored—I do not believe that the Financial Services Bill is the place for it. In the regulatory reforms we have brought forward, we have tried to be very clear about the responsibilities and focus of the new regulators, the Financial Conduct Authority, the Prudential Regulation Authority, and the macro-prudential body the Financial Policy Committee.

Matters of stewardship and corporate behaviour are predominantly the responsibility of the Financial Reporting Council, which is responsible for the stewardship code and corporate governance issues. I encourage both hon. Members to engage with the FRC on this issue. Of course, it is not only the FRC that is relevant. The hon. Member for Hayes and Harlington talked about the mining sector, and the Government are engaged in that debate. We are a strong supporter of transparency in the extractive sector and we are pressing for requirements to be placed on EU extractive companies to disclose the payments they make to Governments. That is flowing from the accounting and transparency directives. We are also very supportive of the extractive industries transparency initiative, under which companies publish the payments they make to companies in resource-rich countries, so we are aware of the need to increase transparency.

Lisa Nandy: I am grateful to the Minister for giving way, but I urge him to speak to his colleagues, particularly in the Foreign and Commonwealth Office, because this amendment is supported by a wide range of organisations. They include investors and members of the business community, as well as non-governmental organisations that represent those whose lives have been so appallingly blighted by some of the companies that my hon. Friend the Member for Hayes and Harlington (John McDonnell) and I have been discussing.

Mr Hoban: The hon. Lady makes a good point, and if my colleagues in the Foreign and Commonwealth Office are not reading this debate carefully I shall certainly raise the matter with them and ensure that they think carefully about their role. I encourage her to speak to the FRC about these issues.

Mr Andrew Love (Edmonton) (Lab/Co-op): The Treasury Committee interviewed members of the Financial Reporting Council this morning. They explained to us that their powers are about implementing or explaining and that they do not have powers to deal with companies that break the rules in this regard. Would it not therefore be appropriate to involve a body such as the FCA, which really could deal with implementation?

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Mr Hoban: As my hon. Friend the Member for Wycombe (Steve Baker) highlighted, there is a responsibility on directors and there are criminal sanctions for criminal behaviour. We need to be very careful that we do not duplicate powers that already exist elsewhere and that we do not confuse the role of the regulators. It was the Treasury Committee that highlighted some of the problems in the existing regulatory system with the confusion of roles and remits. We want to be very clear in these reforms about what we seek to achieve.

The FSA—and in future the FCA—has a role to play. The FSA supports the FRC’s stewardship code through mandatory requirements on asset managers to disclose the nature of their commitment to the stewardship code or to explain their alternative investment strategy. Those powers will transfer to the FCA.

John McDonnell: I hope that what the Minister just said was helpful. Is he saying that the stewardship role that he envisages for the FCA will include an element whereby judgments can be made about behaviour in terms of corporate ethics?

Mr Hoban: I am saying that what we need to ensure in terms of the stewardship code, and what the FCA does, is to require asset managers to disclose the nature of their commitment to the stewardship code or to explain their alternative investment strategy, so the obligation is on asset managers rather than necessarily on companies themselves to disclose their adherence to stewardship matters.

John McDonnell: Will the Minister give way?

Mr Hoban: Yes, but I want to make some progress.

John McDonnell: All right, I will not be a pain any further. To be frank, that does not move the matter on. The Minister need not give an answer on this tonight, but it would be incredibly helpful if he or one of his colleagues met my hon. Friend the Member for Wigan (Lisa Nandy), me and representatives from the London Mining Network to talk this issue through because there is clearly a gap between the different institutions, which corporate ethics seem to fall down when it comes to their being pragmatically adhered to.

Mr Hoban: I am always loth to offer meetings on behalf of colleagues, because it has happened to me, but the hon. Gentleman may wish to approach the Minister with responsibility for consumer affairs, who is also responsible for corporate governance and the role of the FRC. That might be the most productive furrow to plough.

On amendment 38, the hon. Member for Nottingham East (Chris Leslie) is absolutely right that we have heard it before. It is identical to amendment 150, which we discussed at some length in Committee before rejecting it. I do not think his arguments today were any more persuasive than they were a few months ago. I know that he will find that personally disappointing but I am sure he will get over it. In short, the objectives of each authority are broad enough to enable them to make the rules suggested in the amendment.

More generally, these issues are better considered in other forums, including those concerned with governance across the corporate sector. I also point out gently to

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the hon. Member for Nottingham East that the Department for Business, Innovation and Skills recently consulted quite widely on executive remuneration and that it included in that consultation both the suggestions that have been made, neither of which received significant support.

[

Interruption.

]

The hon. Member for Nottingham East says that it depends whom we consulted but it was an open consultation. Views were encouraged from across a wide range of bodies, including investor organisations, and I am sure that institutions such as the TUC and others would have taken part. I know that the Treasury Committee is also looking into this matter, so perhaps the hon. Member for Edmonton (Mr Love) can illuminate us about the conversations he has had this afternoon with Baroness Hogg.

Mr Love: I thank the Minister. What we were told today was that remuneration committees draw from a very select pool and are heavily influenced by the argument that their chief executive has to be at or above the average of all chief executives and that comparisons are made directly with the United States, which may be inappropriate. It was also made clear to us that we should widen that pool. One suggestion of how that could be done was to put an employee on the remuneration committee. If that is not acceptable, how is the Minister going to address this problem?

6 pm

Mr Hoban: That is why the Government have embarked upon a consultation to look at ways to enhance the accountability of boards to their shareholders, looking particularly at the issue of executive pay. That is a welcome move and the Government will shortly respond formally to the responses to that consultation. I agree with the hon. Member for Nottingham East that shareholders must play a more powerful role in these issues, and in recent months they have put across their views more powerfully.

The hon. Member for Nottingham East spoke about the disclosure of voting patterns. As he mentioned, there is provision for such a power in the Companies Act 2006. The previous Government made it clear that they would use the power only if market practice did not improve. The outcome of the stewardship code has been to encourage institutional investors to vote more and to disclose that. The latest Investment Management Association survey of institutional investors shows that 66% of those surveyed now publish their voting records. That is up from 21% in 2004. Professor John Kay, in his review of equity markets and long-term decision making, is considering the issue and will report in the summer.

Let me move on to Government amendments 7 and 8 and Opposition amendment 73. Amendment 8 makes two minor technical corrections and allows firms and the Financial Ombudsman Service to make referrals to the FCA on matters of mass detriment. Amendment 7 deals with super-complaints. The new provision in the Bill for the FCA to receive super-complaints from designated consumer bodies has been widely welcomed. I am grateful for the scrutiny provided in Committee and in particular for the arguments made by the hon. Member for Makerfield (Yvonne Fovargue), who is in her place, who tabled an amendment in this connection.

22 May 2012 : Column 1031

It has never been the Government’s intention that the super-complaints mechanism could be made available to bodies whose purpose is to represent professional investors, but the debate in Committee highlighted the fact that the drafting would allow that. The amendment therefore revises the definition of “consumer” used in the super-complaints mechanism to exclude representatives of authorised firms.

Amendment 73 seeks to require the Government to introduce a provision allowing for collective proceedings for small and medium-sized firms and to give them access to super-complaints. The amendment has created confusion in the minds of hon. Members about the rights currently available to businesses to make complaints. Paragraph (b) of the amendment suggests that small and medium-sized businesses cannot make complaints. That is not the case, but I shall return to that.

I deal first with collective proceedings. The Government are consulting on a range of proposals to make it easier for consumers and small businesses to bring private actions in competition law, including on whether to extend to businesses the current right of consumers to bring a collective action following a breach of competition law, and whether to make it easier to bring such actions. We should take the opportunity to learn from the outcome of that consultation and reflect on what the implications might be for the financial services sector before proceeding to legislation. It would not be appropriate to legislate today in haste, without having consulted.

On access to super-complaints, the provisions in the Bill will not prevent bodies representing small and medium-sized enterprises which fit the relevant definition of consumers from making super-complaints. Within the new statutory framework the issue of what type of consumer body should have access to super-complaints is complex and will require more detailed criteria than can be set out in the Bill. These criteria will be of interest to parliamentarians and to organisations seeking to become super-complainants. I can therefore announce to the House that the Treasury will publish draft criteria for consultation later in the year.

On paragraph (b) of amendment 73 about the rights of small and medium-sized businesses to make complaints to the FSA, there has been much discussion about the mis-selling of interest rate hedges. I do not want to comment on that directly, as it is a matter for the FSA. However, I can point out that the FSA already has a powerful toolkit that can be very effective. That includes its powers to establish industry-wide or firm-specific redress schemes under section 404 of FSMA, which was recently used in the case of Arch Cru. The FSA is consulting on such an arrangement to help people who lost out as a consequence of the issues at Arch Cru.

The FCA will have the powers that the FSA already has to refer firms to enforcement, to use supervisory measures, to agree with or require a firm to undertake the necessary remedial action, including carrying out a past business review, and the payment of redress, or obtaining redress for firms through their use of their restitution powers under section 384 of FSMA. There are therefore provisions in place that will help the FSA to tackle complaints of mis-selling that businesses as well as consumers have brought to it. I hope that provides the clarity and reassurance that my hon. Friends are looking for.

22 May 2012 : Column 1032

My hon. Friend the Member for Warrington South (David Mowat) picked up in his interventions the confusion that amendment 73 has created. The FSA has the power to take action to help businesses which feel that they have been mis-sold products and to ensure that restitution can take place.

Steve Brine (Winchester) (Con): I am listening carefully to what the Minister says, and I agree that paragraph (b) has caused some confusion and may have planted some hope that did not need to be planted in some of my constituents, who have some sympathy with amendment 73, as do I. The Minister said that the FSA or FCA has a toolkit at its disposal, and I am sure it has been listening carefully to what he has said at the Dispatch Box this afternoon. Will he consider writing to the FSA to make that crystal clear, giving clarity to Members and constituents listening to the debate today?

Mr Hoban: I would not say that amendment 73 sowed seeds of hope. Rather, it sowed seeds of doubt by suggesting that those powers were not available. Of course they are available. I have written to hon. Members in respect of Arch Cru and also about interest rate swaps recently, setting out the work that the FSA is doing in this regard. It is looking carefully at the sales practices of a number of institutions in respect of interest rate swaps and will take action, as appropriate. I can reassure my hon. Friends and those who take a close interest in these matters on behalf of their constituents and businesses in their constituency that the FSA has the powers that it needs to tackle these issues properly and fully and to get to the bottom of them.

Mike Freer (Finchley and Golders Green) (Con): Sadly, I am none the wiser. I have three constituency cases in front of me on this very issue. Two of them include a letter from the FSA which clearly states that this is a matter for the courts to decide and is not part of its remits under the complaints procedure. Can my hon. Friend clarify why the FSA is telling constituents that it is a matter for the courts, but he says it is a matter for the FSA?

Mr Hoban: There are two issues here. There is a route through the courts that any type of consumer, whether retail or a business, can use if they have been mis-sold a product. That is a normal commercial right. What the FSA has identified as a consequence of the number of complaints on the issue that it has received from businesses is that it needed to undertake more work. It started that work in mid-March. It was looking at products that were sold in the run-up to the financial crisis, and as a consequence of its investigations it believed that more work was needed to establish the scale of the problem and to determine what action should be taken.

There is nothing contradictory about the letter that the FSA sent. Thanks to the efforts of a number of hon. Members who raised with the FSA the concerns of businesses in their constituency, it recognised that they were not just isolated examples and that there was a wider issue that needed to be addressed. Its powers under FSMA enable it to address the problem in the right way. That is a welcome step forward by the FSA.

Mr Love: Looking at the issue from a small business perspective, small businesses are not allowed, as the amendment proposes, to take collective action on these

22 May 2012 : Column 1033

matters through the courts, which is frustrating. They feel that the FSA is not responding to them adequately. There are great delays in the system. The Minister has commented on the legal aspect of collective actions currently going through. May we have some reassurance today that the FSA will act more promptly in dealing with these matters?

Mr Hoban: As a consequence of the reforms that we are introducing, we are giving the FSA, and now the FCA, tougher powers to tackle these problems. The FSA has a much-reduced appetite for risk and a more interventionist approach to tackling matters where there appears to be consumer detriment. Some people feel very uncomfortable with this, but it is right for the FSA to act vigorously in defence of consumers and to take the necessary action to ensure that consumers get a fair deal. The Bill takes that one step forward and that is why we have been keen to ensure that we give the FCA more powers, which it has demonstrated the appetite to use.

Amendments 5 and 6 require the FCA and the PRA to publish a statement explaining how they consider making the proposed rules compatible with the principles of regulation set out in new section 3B. Given the important framing role of these principles, I agreed with the suggestion made by the hon. Member for Nottingham East in Committee that the Bill should be explicit about the regulator’s duty in that regard, and I committed to tabling the appropriate amendments when the Bill returned to the House. I am sure that the hon. Gentleman will be keen to support them.

Amendments 13 and 14 are minor and technical and are designed to maintain a position currently provided for in FSMA whereby the FSA is not required to make rules for the FSCS that provide cover over all regulated activities. The amendments ensure consistency with section 214(1)(g), which provides that the scheme may in particular provide for a claim to be entertained only if it is the type of claim specified by the scheme. These are technical changes and I hope that hon. Members will support the Government amendments and reject those tabled by the Opposition.


Chris Leslie: I am sorry that the Minister has not reacted to the importance of the issues in the amendments that we have tabled today, particularly when it comes to the need for small firms to have a greater capacity to complain or to make collective proceedings when there is lack of clarity about their capability to do so. The issues were raised not only by the Opposition; Government Members also felt it necessary to clarify these issues. The Minister should at the very least have committed to write to hon. Members so that they could pass on to the businesses in their constituencies a clear route map for communicating some of these questions, such as interest rate swap mis-selling. All we sought was that small firms that feel aggrieved should have their concerns taken seriously as consumers of financial products, but hopefully the point has been made in the debate.

I am sorry that the Minister felt it necessary to reject our amendments on stewardship issues. It is not good enough for the Government to rebut such questions. The Prime Minister had plenty of warm words in January

22 May 2012 : Column 1034

when this issue was high on the media agenda, but we have seen precious little action subsequently. The Government are not taking the stewardship issue seriously and it is important that they do so, particularly with regard to the remuneration committees of some of the largest corporations and our banks and the idea that these obscene bonuses and excessive pay packages can continue to roll on. As my hon. Friend the Member for Edmonton (Mr Love) said, the remuneration committees are self-perpetuating. Would it not be a good idea to broaden them out and try to put an employee voice on their panel, and make sure that they appointed consultants in a way that did not conflict with their own management’s vested interests?

After we have voted on amendment 40, which we debated on day one of Report, on the need to regulate some of the excessive high-cost credit arrangements, I will press to a Division amendment 38 on remuneration committees, because it typifies one of those areas on the stewardship agenda where we need to see action most swiftly. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 22

Rules and guidance

Amendment proposed: 40, page 80, line 2, at end insert—

‘(2A) The FCA may make rules or apply a sanction to authorised persons who offer credit on terms that the FCA judge to cause consumer detriment. This may include rules that determine a maximum total cost for consumers of a product and determine the maximum duration of a supply of a product or service to an individual consumer.’.—(Stella Creasy.)

Question put, That the amendment be made.

The House divided:

Ayes 225, Noes 266.

Division No. 8]

[6.15 pm

AYES

Abbott, Ms Diane

Abrahams, Debbie

Ainsworth, rh Mr Bob

Alexander, rh Mr Douglas

Alexander, Heidi

Allen, Mr Graham

Anderson, Mr David

Ashworth, Jonathan

Austin, Ian

Bailey, Mr Adrian

Bain, Mr William

Balls, rh Ed

Banks, Gordon

Barron, rh Mr Kevin

Beckett, rh Margaret

Benn, rh Hilary

Benton, Mr Joe

Berger, Luciana

Betts, Mr Clive

Blears, rh Hazel

Blenkinsop, Tom

Blomfield, Paul

Blunkett, rh Mr David

Brennan, Kevin

Brown, Lyn

Brown, rh Mr Nicholas

Brown, Mr Russell

Bryant, Chris

Buck, Ms Karen

Burnham, rh Andy

Byrne, rh Mr Liam

Campbell, Mr Alan

Campbell, Mr Gregory

Campbell, Mr Ronnie

Caton, Martin

Clark, Katy

Clarke, rh Mr Tom

Clwyd, rh Ann

Coaker, Vernon

Coffey, Ann

Connarty, Michael

Cooper, Rosie

Corbyn, Jeremy

Crausby, Mr David

Creagh, Mary

Creasy, Stella

Cruddas, Jon

Cunningham, Alex

Cunningham, Mr Jim

Cunningham, Tony

Curran, Margaret

Dakin, Nic

Danczuk, Simon

David, Mr Wayne

Davidson, Mr Ian

Davies, Geraint

De Piero, Gloria

Denham, rh Mr John

Dobson, rh Frank

Docherty, Thomas

Dodds, rh Mr Nigel

Doran, Mr Frank

Dowd, Jim

Doyle, Gemma

Dromey, Jack

Durkan, Mark

Eagle, Ms Angela

Edwards, Jonathan

Efford, Clive

Elliott, Julie

Ellman, Mrs Louise

Engel, Natascha

Evans, Chris

Farrelly, Paul

Fitzpatrick, Jim

Flello, Robert

Flynn, Paul

Fovargue, Yvonne

Francis, Dr Hywel

Galloway, George

Gilmore, Sheila

Glass, Pat

Glindon, Mrs Mary

Godsiff, Mr Roger

Goggins, rh Paul

Goldsmith, Zac

Goodman, Helen

Greatrex, Tom

Green, Kate

Greenwood, Lilian

Griffith, Nia

Hain, rh Mr Peter

Hanson, rh Mr David

Harman, rh Ms Harriet

Harris, Mr Tom

Havard, Mr Dai

Healey, rh John

Hendrick, Mark

Hepburn, Mr Stephen

Heyes, David

Hodge, rh Margaret

Hodgson, Mrs Sharon

Hoey, Kate

Hollobone, Mr Philip

Hood, Mr Jim

Hopkins, Kelvin

Hosie, Stewart

Irranca-Davies, Huw

Jackson, Glenda

Jamieson, Cathy

Jarvis, Dan

Johnson, rh Alan

Johnson, Diana

Jones, Graham

Jones, Helen

Jones, Mr Kevan

Jones, Susan Elan

Jowell, rh Tessa

Kaufman, rh Sir Gerald

Keeley, Barbara

Kendall, Liz

Khan, rh Sadiq

Lavery, Ian

Lazarowicz, Mark

Leslie, Chris

Lewis, Mr Ivan

Lloyd, Tony

Llwyd, rh Mr Elfyn

Long, Naomi

Love, Mr Andrew

Lucas, Caroline

Lucas, Ian

MacNeil, Mr Angus Brendan

MacShane, rh Mr Denis

Mactaggart, Fiona

Mahmood, Shabana

Mann, John

Marsden, Mr Gordon

McCann, Mr Michael

McCarthy, Kerry

McClymont, Gregg

McCrea, Dr William

McDonagh, Siobhain

McDonnell, John

McFadden, rh Mr Pat

McGovern, Jim

McGuire, rh Mrs Anne

McKechin, Ann

McKenzie, Mr Iain

McKinnell, Catherine

Mearns, Ian

Michael, rh Alun

Miliband, rh David

Miliband, rh Edward

Miller, Andrew

Mitchell, Austin

Moon, Mrs Madeleine

Morden, Jessica

Morrice, Graeme

(Livingston)

Morris, Grahame M.

(Easington)

Mudie, Mr George

Murphy, rh Paul

Murray, Ian

Nandy, Lisa

Nash, Pamela

O'Donnell, Fiona

Onwurah, Chi

Osborne, Sandra

Owen, Albert

Pearce, Teresa

Perkins, Toby

Phillipson, Bridget

Pound, Stephen

Raynsford, rh Mr Nick

Reckless, Mark

Reeves, Rachel

Reynolds, Emma

Riordan, Mrs Linda

Robertson, John

Robinson, Mr Geoffrey

Rotheram, Steve

Roy, Mr Frank

Roy, Lindsay

Ruane, Chris

Ruddock, rh Dame Joan

Sarwar, Anas

Sharma, Mr Virendra

Sheerman, Mr Barry

Sheridan, Jim

Shuker, Gavin

Simpson, David

Skinner, Mr Dennis

Slaughter, Mr Andy

Smith, rh Mr Andrew

Smith, Angela

Smith, Nick

Smith, Owen

Straw, rh Mr Jack

Stringer, Graham

Sutcliffe, Mr Gerry

Thomas, Mr Gareth

Timms, rh Stephen

Trickett, Jon

Turner, Karl

Twigg, Derek

Twigg, Stephen

Umunna, Mr Chuka

Vaz, Valerie

Walley, Joan

Watson, Mr Tom

Watts, Mr Dave

Weir, Mr Mike

Whiteford, Dr Eilidh

Whitehead, Dr Alan

Williams, Hywel

Williamson, Chris

Wilson, Phil

Wilson, Sammy

Winnick, Mr David

Winterton, rh Ms Rosie

Wishart, Pete

Wood, Mike

Woodward, rh Mr Shaun

Wright, David

Wright, Mr Iain

Tellers for the Ayes:

Mrs Jenny Chapman and

Mr David Hamilton

NOES

Adams, Nigel

Afriyie, Adam

Aldous, Peter

Amess, Mr David

Andrew, Stuart

Arbuthnot, rh Mr James

Bacon, Mr Richard

Baker, Norman

Baker, Steve

Baldry, Tony

Baldwin, Harriett

Barclay, Stephen

Barker, Gregory

Barwell, Gavin

Bebb, Guto

Beith, rh Sir Alan

Benyon, Richard

Beresford, Sir Paul

Berry, Jake

Bingham, Andrew

Binley, Mr Brian

Birtwistle, Gordon

Blackman, Bob

Blackwood, Nicola

Blunt, Mr Crispin

Boles, Nick

Bone, Mr Peter

Bottomley, Sir Peter

Bradley, Karen

Bray, Angie

Brazier, Mr Julian

Bridgen, Andrew

Brine, Steve

Brokenshire, James

Browne, Mr Jeremy

Bruce, Fiona

Bruce, rh Malcolm

Buckland, Mr Robert

Burley, Mr Aidan

Burns, rh Mr Simon

Burrowes, Mr David

Burstow, Paul

Burt, Lorely

Cairns, Alun

Campbell, rh Sir Menzies

Carmichael, Neil

Carswell, Mr Douglas

Cash, Mr William

Chishti, Rehman

Clappison, Mr James

Clarke, rh Mr Kenneth

Clifton-Brown, Geoffrey

Coffey, Dr Thérèse

Collins, Damian

Colvile, Oliver

Cox, Mr Geoffrey

Crockart, Mike

Davey, rh Mr Edward

Davies, David T. C.

(Monmouth)

Davies, Glyn

Davies, Philip

Davis, rh Mr David

Djanogly, Mr Jonathan

Dorrell, rh Mr Stephen

Doyle-Price, Jackie

Duddridge, James

Duncan Smith, rh Mr Iain

Dunne, Mr Philip

Ellis, Michael

Ellison, Jane

Elphicke, Charlie

Eustice, George

Evans, Graham

Evans, Jonathan

Evennett, Mr David

Fallon, Michael

Farron, Tim

Featherstone, Lynne

Field, Mark

Fox, rh Dr Liam

Freer, Mike

Fullbrook, Lorraine

Gale, Sir Roger

Garnier, Mark

Gauke, Mr David

George, Andrew

Gibb, Mr Nick

Gilbert, Stephen

Glen, John

Goodwill, Mr Robert

Graham, Richard

Grant, Mrs Helen

Gray, Mr James

Grayling, rh Chris

Green, Damian

Greening, rh Justine

Griffiths, Andrew

Gummer, Ben

Gyimah, Mr Sam

Halfon, Robert

Hammond, Stephen

Hancock, Matthew

Hands, Greg

Harper, Mr Mark

Harrington, Richard

Harris, Rebecca

Hart, Simon

Harvey, Nick

Haselhurst, rh Sir Alan

Heald, Oliver

Heath, Mr David

Heaton-Harris, Chris

Hemming, John

Henderson, Gordon

Hinds, Damian

Hoban, Mr Mark

Hollingbery, George

Horwood, Martin

Howell, John

Huhne, rh Chris

Hunt, rh Mr Jeremy

Hunter, Mark

Huppert, Dr Julian

Jackson, Mr Stewart

Javid, Sajid

Jenkin, Mr Bernard

Johnson, Gareth

Jones, Andrew

Jones, Mr David

Jones, Mr Marcus

Kawczynski, Daniel

Kelly, Chris

Kennedy, rh Mr Charles

Kirby, Simon

Knight, rh Mr Greg

Kwarteng, Kwasi

Laing, Mrs Eleanor

Lamb, Norman

Lancaster, Mark

Latham, Pauline

Leadsom, Andrea

Lee, Jessica

Lee, Dr Phillip

Leslie, Charlotte

Lewis, Brandon

Liddell-Grainger, Mr Ian

Lord, Jonathan

Loughton, Tim

Luff, Peter

Lumley, Karen

Macleod, Mary

Main, Mrs Anne

Maynard, Paul

McCartney, Jason

McCartney, Karl

McIntosh, Miss Anne

McLoughlin, rh Mr Patrick

McPartland, Stephen

McVey, Esther

Mensch, Louise

Menzies, Mark

Mercer, Patrick

Metcalfe, Stephen

Miller, Maria

Mills, Nigel

Moore, rh Michael

Morgan, Nicky

Morris, Anne Marie

Morris, David

Morris, James

Mosley, Stephen

Mowat, David

Munt, Tessa

Murray, Sheryll

Murrison, Dr Andrew

Neill, Robert

Newmark, Mr Brooks

Nokes, Caroline

Norman, Jesse

Nuttall, Mr David

Ollerenshaw, Eric

Opperman, Guy

Ottaway, Richard

Patel, Priti

Pawsey, Mark

Penning, Mike

Penrose, John

Perry, Claire

Phillips, Stephen

Pincher, Christopher

Poulter, Dr Daniel

Pritchard, Mark

Pugh, John

Raab, Mr Dominic

Redwood, rh Mr John

Rees-Mogg, Jacob

Reevell, Simon

Reid, Mr Alan

Rifkind, rh Sir Malcolm

Robathan, rh Mr Andrew

Robertson, Mr Laurence

Rogerson, Dan

Rudd, Amber

Ruffley, Mr David

Russell, Sir Bob

Rutley, David

Sandys, Laura

Scott, Mr Lee

Selous, Andrew

Shapps, rh Grant

Sharma, Alok

Shelbrooke, Alec

Shepherd, Mr Richard

Simmonds, Mark

Skidmore, Chris

Smith, Miss Chloe

Smith, Henry

Smith, Julian

Smith, Sir Robert

Soames, rh Nicholas

Soubry, Anna

Spelman, rh Mrs Caroline

Spencer, Mr Mark

Stephenson, Andrew

Stevenson, John

Stewart, Bob

Stewart, Iain

Streeter, Mr Gary

Stride, Mel

Stuart, Mr Graham

Sturdy, Julian

Swayne, rh Mr Desmond

Swinson, Jo

Swire, rh Mr Hugo

Syms, Mr Robert

Tapsell, rh Sir Peter

Teather, Sarah

Thurso, John

Tomlinson, Justin

Truss, Elizabeth

Turner, Mr Andrew

Tyrie, Mr Andrew

Uppal, Paul

Vaizey, Mr Edward

Vara, Mr Shailesh

Vickers, Martin

Villiers, rh Mrs Theresa

Walker, Mr Charles

Wallace, Mr Ben

Walter, Mr Robert

Ward, Mr David

Watkinson, Angela

Webb, Steve

Wharton, James

White, Chris

Whittingdale, Mr John

Wiggin, Bill

Willetts, rh Mr David

Williams, Mr Mark

Williamson, Gavin

Wilson, Mr Rob

Wollaston, Dr Sarah

Wright, Jeremy

Wright, Simon

Yeo, Mr Tim

Young, rh Sir George

Tellers for the Noes:

Stephen Crabb and

Jenny Willott

Question accordingly negatived.

22 May 2012 : Column 1035

22 May 2012 : Column 1036

22 May 2012 : Column 1037

22 May 2012 : Column 1038

Amendment proposed: 38, page 82, line 10, at end insert—

‘(c) provide for a requirement that an employee representative should be a member of the remuneration committee of a relevant body corporate, and

(d) provide for a requirement that the remuneration consultants advising on remuneration policy shall be appointed by the shareholders of a relevant body corporate.’.—(Chris Leslie.)

Question put, That the amendment be made.

The House divided:

Ayes 224, Noes 285.

Division No. 9]

[6.29 pm

AYES

Abbott, Ms Diane

Abrahams, Debbie

Ainsworth, rh Mr Bob

Alexander, rh Mr Douglas

Alexander, Heidi

Allen, Mr Graham

Anderson, Mr David

Ashworth, Jonathan

Austin, Ian

Bailey, Mr Adrian

Bain, Mr William

Balls, rh Ed

Banks, Gordon

Barron, rh Mr Kevin

Bayley, Hugh

Beckett, rh Margaret

Benn, rh Hilary

Benton, Mr Joe

Berger, Luciana

Betts, Mr Clive

Blears, rh Hazel

Blenkinsop, Tom

Blomfield, Paul

Blunkett, rh Mr David

Brennan, Kevin

Brown, Lyn

Brown, rh Mr Nicholas

Brown, Mr Russell

Bryant, Chris

Buck, Ms Karen

Burnham, rh Andy

Byrne, rh Mr Liam

Campbell, Mr Alan

Campbell, Mr Gregory

Campbell, Mr Ronnie

Caton, Martin

Chapman, Mrs Jenny

Clark, Katy

Clarke, rh Mr Tom

Clwyd, rh Ann

Coaker, Vernon

Coffey, Ann

Connarty, Michael

Cooper, Rosie

Corbyn, Jeremy

Crausby, Mr David

Creagh, Mary

Creasy, Stella

Cruddas, Jon

Cunningham, Alex

Cunningham, Mr Jim

Cunningham, Tony

Curran, Margaret

Danczuk, Simon

David, Mr Wayne

Davidson, Mr Ian

Davies, Geraint

De Piero, Gloria

Denham, rh Mr John

Dobson, rh Frank

Docherty, Thomas

Dodds, rh Mr Nigel

Doran, Mr Frank

Dowd, Jim

Doyle, Gemma

Dromey, Jack

Durkan, Mark

Eagle, Ms Angela

Edwards, Jonathan

Efford, Clive

Elliott, Julie

Ellman, Mrs Louise

Engel, Natascha

Evans, Chris

Farrelly, Paul

Fitzpatrick, Jim

Flello, Robert

Flynn, Paul

Fovargue, Yvonne

Francis, Dr Hywel

Galloway, George

Gilmore, Sheila

Glass, Pat

Glindon, Mrs Mary

Godsiff, Mr Roger

Goggins, rh Paul

Goodman, Helen

Greatrex, Tom

Green, Kate

Greenwood, Lilian

Griffith, Nia

Hain, rh Mr Peter

Hanson, rh Mr David

Harman, rh Ms Harriet

Harris, Mr Tom

Havard, Mr Dai

Healey, rh John

Hendrick, Mark

Hepburn, Mr Stephen

Hermon, Lady

Heyes, David

Hodge, rh Margaret

Hodgson, Mrs Sharon

Hoey, Kate

Hood, Mr Jim

Hopkins, Kelvin

Hosie, Stewart

Irranca-Davies, Huw

Jackson, Glenda

Jamieson, Cathy

Jarvis, Dan

Johnson, rh Alan

Johnson, Diana

Jones, Graham

Jones, Helen

Jones, Mr Kevan

Jones, Susan Elan

Kaufman, rh Sir Gerald

Keeley, Barbara

Kendall, Liz

Khan, rh Sadiq

Lavery, Ian

Lazarowicz, Mark

Leslie, Chris

Lewis, Mr Ivan

Lloyd, Tony

Llwyd, rh Mr Elfyn

Long, Naomi

Love, Mr Andrew

Lucas, Caroline

Lucas, Ian

MacNeil, Mr Angus Brendan

MacShane, rh Mr Denis

Mactaggart, Fiona

Mahmood, Shabana

Malhotra, Seema

Mann, John

Marsden, Mr Gordon

McCann, Mr Michael

McCarthy, Kerry

McClymont, Gregg

McCrea, Dr William

McDonagh, Siobhain

McDonnell, John

McFadden, rh Mr Pat

McGovern, Jim

McGuire, rh Mrs Anne

McKechin, Ann

McKenzie, Mr Iain

McKinnell, Catherine

Meacher, rh Mr Michael

Mearns, Ian

Michael, rh Alun

Miliband, rh David

Miller, Andrew

Mitchell, Austin

Moon, Mrs Madeleine

Morden, Jessica

Morrice, Graeme

(Livingston)

Morris, Grahame M.

(Easington)

Mudie, Mr George

Munn, Meg

Murphy, rh Paul

Murray, Ian

Nandy, Lisa

Nash, Pamela

O'Donnell, Fiona

Onwurah, Chi

Osborne, Sandra

Owen, Albert

Pearce, Teresa

Perkins, Toby

Phillipson, Bridget

Pound, Stephen

Raynsford, rh Mr Nick

Reed, Mr Jamie

Reeves, Rachel

Reynolds, Emma

Riordan, Mrs Linda

Robertson, John

Robinson, Mr Geoffrey

Rotheram, Steve

Roy, Mr Frank

Roy, Lindsay

Ruane, Chris

Ruddock, rh Dame Joan

Sarwar, Anas

Sharma, Mr Virendra

Sheerman, Mr Barry

Sheridan, Jim

Shuker, Gavin

Simpson, David

Skinner, Mr Dennis

Slaughter, Mr Andy

Smith, rh Mr Andrew

Smith, Angela

Smith, Nick

Smith, Owen

Straw, rh Mr Jack

Stringer, Graham

Sutcliffe, Mr Gerry

Thomas, Mr Gareth

Timms, rh Stephen

Trickett, Jon

Twigg, Derek

Twigg, Stephen

Umunna, Mr Chuka

Vaz, Valerie

Walley, Joan

Watson, Mr Tom

Watts, Mr Dave

Weir, Mr Mike

Whiteford, Dr Eilidh

Whitehead, Dr Alan

Williams, Hywel

Williamson, Chris

Wilson, Phil

Wilson, Sammy

Winnick, Mr David

Winterton, rh Ms Rosie

Wishart, Pete

Wood, Mike

Woodward, rh Mr Shaun

Wright, David

Wright, Mr Iain

Tellers for the Ayes:

Mr David Hamilton and

Nic Dakin

NOES

Adams, Nigel

Afriyie, Adam

Aldous, Peter

Amess, Mr David

Andrew, Stuart

Arbuthnot, rh Mr James

Bacon, Mr Richard

Baker, Norman

Baker, Steve

Baldry, Tony

Baldwin, Harriett

Barclay, Stephen

Barker, Gregory

Barwell, Gavin

Bebb, Guto

Beith, rh Sir Alan

Benyon, Richard

Beresford, Sir Paul

Berry, Jake

Bingham, Andrew

Binley, Mr Brian

Birtwistle, Gordon

Blackman, Bob

Blackwood, Nicola

Blunt, Mr Crispin

Boles, Nick

Bone, Mr Peter

Bottomley, Sir Peter

Bradley, Karen

Bray, Angie

Brazier, Mr Julian

Bridgen, Andrew

Brine, Steve

Brokenshire, James

Browne, Mr Jeremy

Bruce, Fiona

Bruce, rh Malcolm

Buckland, Mr Robert

Burley, Mr Aidan

Burns, Conor

Burns, rh Mr Simon

Burrowes, Mr David

Burstow, Paul

Burt, Lorely

Cable, rh Vince

Cairns, Alun

Campbell, rh Sir Menzies

Carmichael, rh Mr Alistair

Carmichael, Neil

Carswell, Mr Douglas

Cash, Mr William

Chishti, Rehman

Clappison, Mr James

Clarke, rh Mr Kenneth

Clifton-Brown, Geoffrey

Coffey, Dr Thérèse

Collins, Damian

Colvile, Oliver

Cox, Mr Geoffrey

Crockart, Mike

Crouch, Tracey

Davey, rh Mr Edward

Davies, David T. C.

(Monmouth)

Davies, Glyn

Davies, Philip

Davis, rh Mr David

Djanogly, Mr Jonathan

Dorrell, rh Mr Stephen

Doyle-Price, Jackie

Duncan Smith, rh Mr Iain

Dunne, Mr Philip

Ellis, Michael

Ellison, Jane

Elphicke, Charlie

Eustice, George

Evans, Graham

Evans, Jonathan

Evennett, Mr David

Fallon, Michael

Farron, Tim

Featherstone, Lynne

Field, Mark

Fox, rh Dr Liam

Francois, rh Mr Mark

Freer, Mike

Fullbrook, Lorraine

Gale, Sir Roger

Garnier, Mark

Gauke, Mr David

George, Andrew

Gibb, Mr Nick

Gilbert, Stephen

Gillan, rh Mrs Cheryl

Glen, John

Goldsmith, Zac

Goodwill, Mr Robert

Gove, rh Michael

Graham, Richard

Grant, Mrs Helen

Gray, Mr James

Grayling, rh Chris

Green, Damian

Greening, rh Justine

Griffiths, Andrew

Gummer, Ben

Gyimah, Mr Sam

Halfon, Robert

Hammond, rh Mr Philip

Hammond, Stephen

Hancock, Matthew

Hancock, Mr Mike

Hands, Greg

Harper, Mr Mark

Harrington, Richard

Harris, Rebecca

Hart, Simon

Harvey, Nick

Haselhurst, rh Sir Alan

Heald, Oliver

Heath, Mr David

Heaton-Harris, Chris

Hemming, John

Henderson, Gordon

Hinds, Damian

Hoban, Mr Mark

Hollingbery, George

Hollobone, Mr Philip

Horwood, Martin

Howell, John

Huhne, rh Chris

Hunt, rh Mr Jeremy

Hunter, Mark

Huppert, Dr Julian

Jackson, Mr Stewart

Javid, Sajid

Jenkin, Mr Bernard

Johnson, Gareth

Jones, Andrew

Jones, Mr David

Jones, Mr Marcus

Kawczynski, Daniel

Kelly, Chris

Kennedy, rh Mr Charles

Kirby, Simon

Knight, rh Mr Greg

Kwarteng, Kwasi

Laing, Mrs Eleanor

Lamb, Norman

Lancaster, Mark

Latham, Pauline

Laws, rh Mr David

Leadsom, Andrea

Lee, Jessica

Lee, Dr Phillip

Leslie, Charlotte

Letwin, rh Mr Oliver

Lewis, Brandon

Liddell-Grainger, Mr Ian

Lord, Jonathan

Loughton, Tim

Luff, Peter

Lumley, Karen

Macleod, Mary

Main, Mrs Anne

Maynard, Paul

McCartney, Jason

McCartney, Karl

McIntosh, Miss Anne

McLoughlin, rh Mr Patrick

McPartland, Stephen

McVey, Esther

Mensch, Louise

Menzies, Mark

Mercer, Patrick

Metcalfe, Stephen

Miller, Maria

Mills, Nigel

Moore, rh Michael

Mordaunt, Penny

Morgan, Nicky

Morris, Anne Marie

Morris, David

Morris, James

Mosley, Stephen

Mowat, David

Munt, Tessa

Murray, Sheryll

Murrison, Dr Andrew

Neill, Robert

Newmark, Mr Brooks

Nokes, Caroline

Norman, Jesse

Nuttall, Mr David

Ollerenshaw, Eric

Opperman, Guy

Ottaway, Richard

Parish, Neil

Patel, Priti

Pawsey, Mark

Penning, Mike

Penrose, John

Perry, Claire

Phillips, Stephen

Pincher, Christopher

Poulter, Dr Daniel

Pritchard, Mark

Pugh, John

Raab, Mr Dominic

Randall, rh Mr John

Reckless, Mark

Redwood, rh Mr John

Rees-Mogg, Jacob

Reevell, Simon

Reid, Mr Alan

Rifkind, rh Sir Malcolm

Robathan, rh Mr Andrew

Robertson, Mr Laurence

Rogerson, Dan

Rudd, Amber

Ruffley, Mr David

Russell, Sir Bob

Rutley, David

Sanders, Mr Adrian

Sandys, Laura

Scott, Mr Lee

Selous, Andrew

Shapps, rh Grant

Sharma, Alok

Shelbrooke, Alec

Shepherd, Mr Richard

Simmonds, Mark

Skidmore, Chris

Smith, Miss Chloe

Smith, Henry

Smith, Julian

Smith, Sir Robert

Soames, rh Nicholas

Soubry, Anna

Spelman, rh Mrs Caroline

Spencer, Mr Mark

Stephenson, Andrew

Stevenson, John

Stewart, Bob

Stewart, Iain

Streeter, Mr Gary

Stride, Mel

Stuart, Mr Graham

Sturdy, Julian

Swayne, rh Mr Desmond

Swinson, Jo

Swire, rh Mr Hugo

Syms, Mr Robert

Tapsell, rh Sir Peter

Teather, Sarah

Thurso, John

Tomlinson, Justin

Truss, Elizabeth

Turner, Mr Andrew

Tyrie, Mr Andrew

Uppal, Paul

Vaizey, Mr Edward

Vara, Mr Shailesh

Vickers, Martin

Villiers, rh Mrs Theresa

Walker, Mr Charles

Wallace, Mr Ben

Walter, Mr Robert

Ward, Mr David

Watkinson, Angela

Webb, Steve

Wharton, James

White, Chris

Whittingdale, Mr John

Wiggin, Bill

Willetts, rh Mr David

Williams, Mr Mark

Williams, Stephen

Williamson, Gavin

Willott, Jenny

Wilson, Mr Rob

Wollaston, Dr Sarah

Wright, Jeremy

Wright, Simon

Yeo, Mr Tim

Young, rh Sir George

Tellers for the Noes:

James Duddridge and

Stephen Crabb

Question accordingly negatived.

22 May 2012 : Column 1039

22 May 2012 : Column 1040

22 May 2012 : Column 1041

22 May 2012 : Column 1042

Amendments made: 5, page 93, line 43, leave out ‘section 1B(1)’ and insert

‘its duties under section 1B(1) and (5)(a)’.

Amendment 6, page 95, line 9, leave out from ‘with’ to end of line 10 and insert ‘its duties under—

(i) section 2B(1) or, as the case requires, section 2C(1) or 2D(3), and

(ii) section 2G, and’.—(Mr Hoban.)

Clause 40

Provisions about consumer protection and competition

Amendments made: 7, page 125, leave out line 7 and insert—

‘(4) Sections 425A and 425B (meaning of “consumers”) apply for the purposes of this section, but the references to consumers in this section do not include consumers who are authorised persons.’.

Amendment 8, page 126, line 16, leave out from ‘that’ to end of line 18 and insert—

(i) if the complaint would fall within the compulsory jurisdiction or the consumer credit jurisdiction, the ombudsman would be likely to make an award under section 229(2)(a) or give a direction under section 229(2)(b), or

(ii) if voluntary jurisdiction rules made for the purposes of section 227 provide for the making of an award against a respondent or the giving of a direction that a respondent take certain steps in relation to a complainant, and the complaint would fall within the voluntary jurisdiction, the ombudsman would be likely to make such an award or give such a direction.’.—(Mr Hoban.)

Clause 45

Interpretation of FSMA 2000

Amendment made: 9, page 128, line 30, at end insert—

‘() omit the definition of “notice of control”;’.—(Mr Hoban.)

Clause 47

Mutual societies: power to transfer functions

Chris Leslie: I beg to move amendment 72, page 130, line 38, at end insert—

‘(g) making provision for the increased diversity of the financial services sector and promotion of mutual societies, including arrangements to measure the number of members of mutual societies, and the market share for mutual societies as a proportion of the UK financial services sector.’.

This simple amendment suggests that within six months of Royal Assent the Treasury should bring forward proposals to foster diversity in financial services and promote mutual societies. For the avoidance of doubt, Mr Deputy Speaker, I should declare that I am not only a Labour Member of Parliament but a Labour and

22 May 2012 : Column 1043

Co-operative party MP. Inasmuch as there are interests involved in that, I am proud to support the Government’s stated intention to promote mutuals. I have before me page 9 of the coalition agreement—I am sure that all hon. Members have it emblazoned on the walls of their offices—where it says:

“We will bring forward detailed proposals to foster diversity in financial services, promote mutuals and create a more competitive banking industry.”

It is perhaps not clear that the Prime Minister, the Chancellor and the Minister remember that they made that commitment. Therefore, in an act of generosity—the Minister will recognise the positive spirit in which we have tabled the amendment—we felt it important to suggest that the Treasury might want to enshrine that coalition pledge in statute and to make arrangements to measure the progress that it is making in promoting the mutual societies model. For example, each year the Treasury could publish the number of members of mutual societies so that we could see whether good progress was being made, and publish the market share of the mutual society sector as a proportion of UK financial services.

The amendment is fairly innocuous, and I hope that it can gain some cross-party support. After all, let us not forget that the mutual sector is all about ensuring that members own and govern their own financial institutions, have a stake in their future, and can set their agenda. That member-owned and member-governed ethos rightly ought to be promoted. Sadly, we have a small mutual sector, but it should be encouraged to grow, and that is the purpose of the amendment.

6.45 pm

Mr Gareth Thomas (Harrow West) (Lab/Co-op): My hon. Friend is right to say that the Government made that commitment in the coalition agreement. Following their decision not to take seriously the case for Northern Rock to be converted into a mutual, many people, like him, doubt the coalition’s commitment to financial diversity. Is that not a further reason for the Government to take seriously his amendment to put right what they might see as a mistake in the public mind?

Chris Leslie: I thank my hon. Friend, who is entirely correct. He is an assiduous campaigner for the mutual sector and the mutual model, and he knows more than most about the Government’s failures over the past two years to make headway on this issue, on which they made a promise that remains to be fulfilled. Indeed, he recently wrote an article about how the Queen’s Speech could have been an opportunity to promote the mutual agenda in which he talked about ways in which the sector could be put more at the heart of banking reform. He said that we should consider expanding the credit union and CDFI—community development finance institution—sectors to reconnect banking with its local communities, and that we should look beyond the financial services sector to think about energy co-operatives, employment ownership measures, and co-operative housing tenure.

It is an important time for us to be debating the issue, because, as you will know, Mr Deputy Speaker, this is the international year of the co-operative.

22 May 2012 : Column 1044

David Rutley (Macclesfield) (Con): The part of the Bill before us is mainly about transferring powers between the FSA, the FCA and the Prudential Regulatory Authority, and adding new powers, so I am not sure that it sits very well with the hon. Gentleman’s amendment. Will he explain in more detail why legislative measures are required when such objectives can be measured in other ways?

Chris Leslie: We are trying to ensure that the Government fundamentally address the question. These provisions give the Minister and the Treasury the power to make by order amendments to many of the rules, statutory instruments and suchlike that affect mutual societies. We think that they should have the capability to measure progress on mutuality in order to help to smooth progress towards fulfilling the coalition’s pledge.

Given that we have before us a financial services Bill, our constituents would expect us to be talking about firm and defined measures to make progress on diversifying the financial services sector. Unfortunately, they would be disappointed by the Treasury’s progress on that. The Treasury website has a very scant, short set of paragraphs stating the coalition agreement’s desire to promote mutuals. It says:

“The Treasury is developing policy and delivering legislative changes to…meet this aim.”

That is basically it—a statement but no substance. I want the Minister to tell us what progress is being made in fulfilling that objective. It is not good enough merely to talk about consolidating existing rules or legislation and wrapping that up as though the Law Commission’s recommendations somehow fulfil Government promises. We want to see more action.

Geraint Davies (Swansea West) (Lab/Co-op): Given that there is an appalling sovereign debt crisis in Europe affecting Greece, Spain, and so on, with the possibility of contagion, and given that we learned the lessons about the stability of mutuals following what happened in 2008, does my hon. Friend agree that it is remarkable that the Government are not pressing forward to reduce such risks by increasing diversity and promoting co-operatives?

Chris Leslie: My hon. Friend is entirely correct. When the Government have an opportunity to return to the market state-owned assets that the Treasury took in the height of the financial crisis, they simply look for a return to the vanilla plc model. They take a business-as-usual approach rather than taking the opportunity to rethink how we might have diversity in the financial service sector and in business operations. Yes, we need some organisations run on a plc model, and we have plenty of those, but why not think about opportunities to promote the non-profit or mutual sector? Northern Rock was a classic case in point. No adequate consideration was given to that option. A member buy-out suggestion would have been entirely feasible, but it was not considered seriously enough.

At this point, I pay tribute to the all-party group on building societies and financial mutuals. It made a series of recommendations a year ago, urging the coalition to adopt

“a comprehensive policy strategy to implement its Coalition Agreement commitment to promote mutuals.”

22 May 2012 : Column 1045

It stated that the Treasury should be proactive in promoting the interests of financial mutuals within the Government. One of the first conclusions in the summary of its report was:

“HM Treasury appears to have taken a reactive stance to the mutual sector beginning to deal with important issues such as building society capital, but little else of substance.”

I do not want to labour that point, because time is short.

Mr Mike Weir (Angus) (SNP): For cross-party purposes, may I say that we will support the hon. Gentleman’s excellent amendment? It is important to push forward credit unions, in particular, as an alternative to high street lenders, which are currently not lending to many people. The Treasury needs to take a more proactive approach to building up existing credit unions as well as creating new ones.

Chris Leslie: The credit union sector deserves far more support and encouragement than it receives, and previous Governments of all parties have failed to do enough to promote it. The demutualisation agenda of the 1980s and early 1990s significantly reduced the size of the building society sector, and compared with other developed countries mutual providers have a very small market share, particularly in the financial services sector.

Geraint Davies: We used to hear about the share-owning democracy, but there have been tidal shifts in people’s desire to take risks and own shares. Does my hon. Friend agree that we have a moment in time at which we can change direction and have more diverse ownership among the population and a new culture of business? The Government are missing a trick.

Chris Leslie: Now is the time to think about the culture change that we want to see in the financial services sector. Yes, there are some good plc structures, but we have an insufficiency of good mutuals, building societies and so on. There should be new entrants of that type, and current ones should grow to provide some proper competition to the big banks.

Mr Thomas: Will my hon. Friend give way?

Chris Leslie: How can I fail to give way to my hon. Friend?

Mr Thomas: My hon. Friend is being characteristically generous. One big concern examined in some detail in the all-party group report that he mentioned was about the future of friendly societies. Does he agree that the debate provides the Financial Secretary with a good opportunity to set out how the Treasury is responding to concerns about the effect that a particular interpretation of case law by the Financial Services Authority is having on the future of friendly societies? Their proportion of the insurance market is at risk of going into reverse because of how the FSA has approached the matter, and the amendment may well help to achieve a culture change in the FSA and get its lawyers to adopt a slightly more helpful mindset.

22 May 2012 : Column 1046

Chris Leslie: It is important that we have some metrics by which to measure the Financial Secretary’s performance on his coalition promise. After all, it is there in black and white—the Government said they would bring forward not just proposals but detailed proposals for promoting the mutual sector. This is his moment. We want him to explain to us what those measures will be. I am sure he does not believe in putting such promises in an agreement straight after an election and then letting them drift as though they did not need to be attended to. Many people want to see greater diversity in the financial services sector, and it is important that he is held to account.


Steve Baker: Looking at the amendment, I wonder whether it illustrates the tensions in the contemporary labour movement. On one hand, this should be a time of celebration for all those who believe in mutuality, co-operatives and voluntary self-help, because Members of all parties are signed up to the idea. There is a Conservative co-operative movement, and many of us are very serious about it. On the other hand, Labour insists on top-down control and state direction. It wants to enshrine in legislation measurement, management and the direction of Ministers’ performance.

Is it not time that, rather than insisting on the production of numbers and pretending that the Financial Secretary can direct people to help one another voluntarily and mutually, we eliminated barriers to entry, accepted spontaneous order and encouraged people to build up the bonds of friendship and mutual co-operation? Ministers cannot direct or legislate for those bonds.

Mr Thomas: Perhaps the hon. Gentleman could describe how the amendment would in some way create a barrier to entry to the financial services market.

Steve Baker: I was not suggesting that it would create a barrier to entry. I was suggesting that it would put in place measurement and management. That may well appeal to some people, but if we want spontaneous order, mutual societies and bonds of friendship, we cannot get them by state direction. There is very little point in measuring the Financial Secretary’s performance when we want spontaneous order and the bonds of mutuality. I do not support the amendment, but like many other Government Members, I certainly support the thrust of the Government’s policy.

John Healey (Wentworth and Dearne) (Lab): I congratulate my hon. Friend the Member for Nottingham East (Chris Leslie) on tabling the amendment. He is doing the job that the coalition parties promised to do in the coalition agreement but are failing to do.

I shall remind the House of a quotation from the coalition agreement. That is the benchmark for the action that the Government have pledged to take, so the House and others can judge them on it. It states:

“We will bring forward detailed proposals to foster diversity in financial services, promote mutuals and create a more competitive banking industry.”

I applaud the aim of greater diversity and competition, but missing from that statement is the aim of greater confidence and trust in financial services. My hon. Friend’s amendment captures the aims of diversity, the promotion of mutuals and greater growth in mutuals.

22 May 2012 : Column 1047

Crucially, it would also require an action plan from the Government within six months. We have not had one after two years. It would also require regular public reports and stock-takes of progress. I say to the hon. Member for Wycombe (Steve Baker) that those reports would be about not the Minister’s progress but the growth of mutuals, the diversity of the industry and the growth of competition in the sector—all the aims that the Government set for reform.

Mutuals bring something quite special—a concern about values, not just valuation. That is the root of the consistently greater levels of confidence and trust demonstrated by those who deal with and borrow from building societies and mutuals compared with those who deal with their corporate competitors. Mutuals display a prudence born of concern for and knowledge of their members. If we look back over the past several years, we see that building societies and mutuals have not run the reckless risks that banks and other financial services have. They have not lost their core business purpose and their sense of what they are there to do and who they are there to serve, as many banks and other financial service companies have. Mutuals did not need a public bail-out and did not cost the UK taxpayer billions of pounds to make up for their mistakes like others in the banking and financial services sector did.

7 pm

With that caution, however, there is also innovation. Some of the small, local building societies that are active in many of our constituencies across the country have seen their market share increase since the global financial crash. They have been ready to lend to local people—the people they know and serve best in housing markets they know best—in a way that many large, commercial multinationals cannot. They have innovated by linking with local house builders—companies with which they have an established relationship and of which they have a knowledge that cannot be matched by many of their big competitors.

It is not only the smallest of our local building societies that has demonstrated innovation in recent years; the largest of our national building societies—the Nationwide—was one of the founder lenders in the Government’s NewBuy scheme to support first-time buyers who do not have the capital that family members sometimes provide to help people meet the deposit requirements of many lenders. There are problems and flaws with the scheme, but I want it to work, and I welcome the fact that Nationwide was one of the founder lenders to get that innovation up and running.

Building societies and mutuals are the unsung success of our British financial services—they are unsung by a Government who promised to do the opposite.

Mr Thomas: Is not one of the unsung successes of the building society movement that it has sought to maintain an effective and broad-based branch network in the communities from which they grew, which sadly is not necessarily something that can be attributed to the major banks? There were wholesale bank branch closures in the last generation, and they are beginning again.

John Healey: My hon. Friend, who knows far more about this matter than me and many in the House, is absolutely right. At a time when a loss of trust and

22 May 2012 : Column 1048

confidence in financial services is evident across the board, that local presence and face-to-face relationship counts for a great deal.

John Hemming: Amendment 72 is a permissive amendment, and yet clause 47(3)(f) mentions

“making provision that appears to the Treasury to be necessary or expedient in consequence of the provisions of this Act.”

What will the amendment enable the Government to do by order that is not already possible under that measure?

John Healey: I am disappointed in the hon. Gentleman, because he, too, has a strong track record on this matter, and that sort of nit-picking misses the point of the amendment. The point of the amendment is to hold the coalition parties in the Government to their coalition pledge, which he is unable to do. It is a way of making public two years of failure and saying, “Within six months, you must do better.”

John Hemming: The amendment does not make the Government do anything, because clause 47 states that the

“Treasury may by order amend the legislation”.

If the Treasury does not want to do so, it does not have to do so. The amendment does not hold the Government to account. No wonder you are failing as an Opposition; your amendments are badly drafted.

Mr Deputy Speaker (Mr Lindsay Hoyle): Order. I am not failing as an opposition, so I do not think that is parliamentary.

John Healey: I have not seen the hon. Gentleman’s amendments to make the measure not permissive, but a requirement of the Government—Mr Speaker must not have selected it. Clearly, anything in statute would be a significant step forward, as the shadow Minister, my hon. Friend the Member for Nottingham East, has argued. Those on both sides of the House who have an interest could use a permissive measure in future.

John Hemming: Does the right hon. Gentleman believe that we make a man any taller by measuring his height?

John Healey: No, but by measuring height, one makes a statement that height matters. The amendment makes a statement that the coalition pledge on mutuals, and on greater diversity and competition in financial services, matters. That is the purpose of the amendment and the debate. I hope that my hon. Friend presses it to a Division because it will expose the Government’s complacency in making promises and failing to live up to them.

Mark Durkan (Foyle) (SDLP): I wanted to respond to the hon. Member for Birmingham, Yardley (John Hemming), who seems to rest everything on clause 47(3)(f), on the basis that it could easily include what the amendment proposes. In the same vein, paragraph (f) could mean that there is no need for paragraphs (a) to (e) because it is all encompassing.

John Healey: I am grateful to my hon. Friend, who has an eye for detail that I cannot match—it almost matches the eye of the hon. Member for Birmingham, Yardley (John Hemming).