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Greg Clark: I do not believe there is a loophole. Firms are required to be regulated for those aspects of their business that provide credit to consumers. They therefore fall squarely under the FCA’s powers.

The Government tabled a number of amendments in the Lords to ensure a smooth transfer of consumer credit regulation from the OFT to the FCA, and to ensure that the FCA regime is proportionate and gives the right protection to consumers. We also introduced amendments in response to concerns raised by the House of Lords Select Committee on Delegated Powers and Regulatory Reform. For example, Lords amendment 136 requires the Treasury to have regard to the importance of securing an appropriate degree of protection for consumers and for the principle of proportionality.

Lords amendment 130 responds to the Committee’s concern about double jeopardy. It provides that when criminal sanctions under the Consumer Credit Act 1974 and regulatory sanctions under the Financial Services and Markets Act 2000 are available to the FCA in relation to the same act or omission, a person may not be convicted if he has already been subject to sanctions under FSMA.

Lords amendment 233 and associated technical amendments address a possible loophole that might otherwise emerge as a result of moving from a CCA-based regime to a FSMA-based regime. Under FSMA, it is an offence to carry on a regulated activity without authorisation, whereas under the CCA it is an offence to lend money or collect debts without the right category of licence. The Government tabled amendments in the Lords to make it a criminal offence to lend or collect money without the correct permission. That addresses the risk of sophisticated illegal money lenders seeking authorisation for a lower-risk activity, only to use that as cover to engage in lending or debt collection, to the potential detriment of consumers. Lords amendment 233 also ensures that any agreements entered into or being enforced by a person without the necessary permission become unenforceable, meaning that important protections in the CCA for victims of illegal money lenders or debt collectors are replicated in the new regime.

Lords amendments 63 and 232 make changes to how the appointed representatives regime under FSMA will operate when firms carry out a credit-related activity—for example, by acting as ancillary credit brokers. The amendments create a limited carve-out from the provision in FSMA that firms cannot be both an appointed representative and authorised at the same time. They provide that if a firm is authorised for a particular category of consumer credit activity, it would also be able to become an appointed representative.

Consistent with CCA provisions, the Bill allows the Treasury to enable trading standards to prosecute offences under FSMA. Government amendments enable the Treasury to confer similar powers on the Department of Enterprise, Trade and Investment in Northern Ireland. They enable the Treasury to confer powers on trading standards and DETI to investigate offences under FSMA.

The amendments to which I have spoken so far have been concerned with the new regime, but the transfer to the FCA will not take place until April 2014, and it is clear that there are problems in the sector that the OFT needs to address in the meantime. The findings of the recent OFT report into compliance standards in the payday lending market show that compliance levels are

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low and that a number of practices that clearly cause consumer detriment are rife in the sector. To empower the OFT to operate as effectively as possible in the interim period, Lords amendments 138 and 147 give the OFT a new power to suspend consumer credit licences with immediate effect if it considers that necessary urgently to protect consumers.

Finally, on social investment, the Government tabled Lords amendments 24 and 41 to ensure that the particular needs of different sectors and the consumers that use them are taken into account—they are not specific to social investment but apply to alternative and innovative business models more generally. Lords amendment 24 requires that, when the FCA is considering its consumer protection objective in future, it will be required to have regard to the different expectations of consumers in relation to different types of financial service. In other words, if people with their eyes open go into a social investment model, it will be entirely appropriate for advisers to advise on such products.

Lords amendment 41 adds a new regulatory principle to clause 3B—the principle applies to both the Prudential Regulation Authority and the FCA. The measure requires them to have regard to the different nature and objectives of different financial services businesses. It is intended to make clear that there should not be a one-size-fits-all approach to regulation, because sectors such as social investment have an important part to play.

Mr Thomas: I apologise for interrupting the Minister’s strand of thinking on the social investment measures, but may I take him back to payday lenders? The noble Lord in the other place introduced a series of Government amendments designed to deal with the problem. Will the Minister offer the House a definition of payday lenders, so that we have a sense of who the Government seek to tackle with the amendments?

Greg Clark: I will not do that for much the same reasons I gave in response to the previous intervention. The Lords amendment clarifies that across all regulated lenders the FCA has broad and powerful powers, if I can put it that way, to intervene to protect consumers, including on the price or rates of interest they are charged, according to its assessment of the detriment faced by consumers. It is right to frame it in that way, and to empower the regulator to pursue sometimes even novel forms of credit that might be operating to the detriment of consumers, rather than to risk specifying in the Bill detail that might be overtaken by time or the ingenuity of people seeking to cause damage to our constituents.

7.30 pm

Mr Thomas: Will the Minister reflect on that answer? It would be helpful, in the context of the debate and understanding whether the amendments he supports today are effective enough to deal with the problem of payday lenders, if he considered providing a definition of what the Government see as being the problem with payday lenders. The Opposition might have different views on what constitutes a payday lender. It would be good to hear the Minister’s views, so we might determine whether the amendments will achieve the objectives he has set out.

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Greg Clark: The hon. Gentleman knows that the term, “payday lender” is relatively informal and loose. It is important for the FCA to have the powers it needs to protect consumers. Its focus should be on the consumer, rather than on a current definition of a practice pursued by a supplier. That is the way it is cast and it is the right power. From the discussions in the House of Lords last week—as he might imagine, I paid close attention to them—it was apparent that everyone who has taken a close interest in the past weeks, months and, in some cases years, was content that the powers vested in the FCA, which are clarified in the amendment, address all the concerns shared by Members on both sides of the House.

Stella Creasy (Walthamstow) (Lab/Co-op): I encourage the Minister to broaden his comments to encompass all our concerns about high-cost credit companies. Having seen the wonderful damascene conversion to the need to tackle these companies, many of us want to ensure that we do not inadvertently miss out on not just those payday or short-term lenders, but doorstep lenders, logbook loans and hire purchase agreements. High-cost credit encapsulates all those issues, and I think it would be welcome to the regulator to know that the intention of Parliament is precisely to tackle the whole industry.

Greg Clark: I am grateful to the hon. Lady for her point, which makes the point I was making to the hon. Member for Harrow West (Mr Thomas). To use the term “payday lenders” exclusively is to miss a broader range of potential practices that may cause detriment to consumers, and that is why this approach is about the powers vested in the regulator.

Yvonne Fovargue (Makerfield) (Lab): Will the FCA be able to look at other concerns such as the misuse of continuous payment authority by both high-cost lenders and fee-charging debt management companies? The unrestrained use of continuous payment authority causes one of the biggest detriments to consumers that I have seen.

Greg Clark: The short answer to that is yes. The FCA’s powers will be broad, and defined by practice rather than activity. We have been clear that it might not be just the level of interest charged, but other practices associated with the lenders that come within the ambit of the regulator. It is clear that it will use those powers vigorously to promote the interests of all our constituents.

I will leave my introductory remarks on that point. I am sure that Members wish to contribute and I will seek to respond to any points raised when I make my winding-up speech.

Chris Leslie: There is a large number of amendments in this group, that focus on consumer credit and the best interests of consumers. I want to concentrate on two in particular—Lords amendments 25 and 78.

Lords amendment 25 was extracted from the Government and we are glad that they gave way on it. The amendment will henceforth make it clear that the new Financial Conduct Authority will have a requirement to ensure basic access to financial services particularly in deprived areas and neighbourhoods where some of our banks and financial institutions do not necessarily

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think that they can make millions and millions of pounds. That is the hope placed on the shoulders of the FCA. The key question is whether the regulator will roll up its sleeves and use the full extent of the powers that the Bill should provide. I, for one, will be seeking a very early meeting with the new chief executive of the FCA to extract commitments on how it intends to use the new powers.

It should not have taken months of persuading and cajoling Treasury Ministers for them to accede to the changes. Perhaps it was the fresh air provided by the new broom, the Financial Secretary to the Treasury, sweeping clean with perhaps more of an open mind than his predecessor on some of these issues. If that is the case, I commend him for it. We need to begin to look at the detail, so I have a series of questions for him, starting with Lords amendment 25.

There are already what some people call lending deserts. In some communities, bank branches are not as readily available as they are in other, more affluent areas. In some deprived areas of the country, it is hard for consumers to access affordable credit. The key word—affordability—is of course now well known. If people want to be completely ripped off, they can pay for high-cost credit, often on a very short-term basis, with immense interest rate charges that can accumulate and get them into severe jeopardy. That will lead to further financial exclusion if they cannot keep up with the repayments, and to them being trapped in a spiral of poverty.

It is important to hold the big five banks to account. As large institutions, they are not just private companies with no obligations beyond and above those that rest on the shoulders of any other private company. In this day and age, they are a social utility and have a duty to the community to ensure that all parts of the country have access to basic banking facilities. The work of the financial inclusion taskforce, under the previous Administration, sought to ensure that basic bank account facilities were available. With the onset of universal credit in April 2014, it will be even more important for everybody to understand and have access to those facilities. However, I am increasingly worried about the fragile deal put together under the previous Administration to support and extend those basic services. There are signs of a creeping onset of charges. As banks come out from the era where the taxpayer was essentially keeping them going, they are now starting to look to the consumer to extract more charges. I do not want a situation where banks get together and think about introducing basic charges on current accounts, especially for those who are taking care to ensure that they are in credit. There are worrying signs that that might be in the air. Even the regulators have started to say, “Well, let’s start charging a little bit for in-credit current accounts. It might be a way of ensuring we don’t have to charge such high costs for unauthorised overdrafts.”

Sheila Gilmore (Edinburgh East) (Lab): My hon. Friend talks about regulating to ensure that these bank accounts remain available. Sometimes, if people find themselves being charged for an account, they simply give up, because it is too expensive, and sometimes they cannot open another account, because they have got into difficulty. That has been the experience in the past few years. I hope that the regulators will be alive to those issues.

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Chris Leslie: Indeed, that is the case. Anxiety is spreading and rumours are circulating that people with credit impairments or county court judgments against them are finding it increasingly difficult to access basic bank account services. One of the most shocking changes has been the way some of the big banks have started gradually to pull out of the LINK cash machine network. That network depends on all the banks taking part, because, if some big banks withdraw, as has happened, more of the cost of maintaining the network falls on a minority of banks, which, as a result, are more likely to walk away. I have worries, therefore, not just about the basic bank account networks, but about the LINK cash machine system, and I would be grateful if the Minister set out to those banks in no uncertain terms that, given their social duties and responsibilities as a utility, we expect—as a de minimis requirement—that they maintain those basic, fundamental activities.

Alison McGovern: Will my hon. Friend slightly broaden his comments about the LINK system? In too many of our towns and cities, cash machines in the most deprived areas are the ones that charge. Unfortunately, the principle that those with the least pay the most is creeping back into financial services. If we do nothing else this evening, let us send the message to the financial services industry that such a principle is wholly unacceptable.

Chris Leslie: That is true. The Opposition take the view that the financial services sector needs to move away from the old model of essentially extracting profit on the basis either of the ignorance or lack of awareness of customers—basically taking advantage of the inertia in the system—or of the fact that the consumer has no other choice. We need to support a financial services sector that genuinely adds professional value and acumen to products fairly and transparently. That is the modern sort of financial services sector that this country deserves and can have. We need to get away from that old era, in which the banking system essentially raked in multiples of small penny packets of income and profit off the backs of people who were not necessarily aware they were being charged 25p or 50p for cash withdrawals. That is the sort of bad practice we need to move away from.

The Opposition have called for action to ensure that pockets of the country are not left isolated and on their own. In the United States, they have clear safeguards requiring banks to reinvest in communities and provide basic coverage. That counts not only for consumers, but for small businesses, which, as we know, also struggle to access affordable loans.

Mr Thomas: My hon. Friend is making an extremely important point. He will be aware that President Obama, in backing stimulus legislation in Congress, ensured that it required banks to disclose their lending to businesses across the USA, allowing us to see the lending deserts not only for individual financial consumers, but for individual business financial consumers. Surely that is something the FCA might usefully consider requiring of our banks.

7.45 pm

Chris Leslie: In Labour’s view, amendment 25 ought to allow that. If we are talking about ease of access to affordable financial services, it should be a responsibility

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of the FCA to think of new ways to map what is happening across the country and to ensure that there are not these deserts or vacuums of poor availability or no availability. That is why there should be a requirement for a map to be drawn up of where and what lending is available, perhaps on a postcode-by-postcode basis. It would provide transparency and enable hon. Members to find out what is happening in their constituencies. Anecdote is not adequate; we need a more rigorous system of regulation and monitoring. That is how it is often done in other developed countries, such as the US, as my hon. Friend said.

In the past, Ministers have said that they are opposed to that level of transparency. I am not sure about this Minister—I know he will want to take a fresh perspective—but previous Ministers said: “It’s too burdensome to require transparency in respect of lending patterns, and there might be anti-competitive issues as well.” It would be entirely feasible to collect anonymised data in the way suggested, however, and I hope that Lords amendment 25 could be so interpreted.

Mark Durkan: Like my hon. Friend, I welcome amendment 25, which, I note, was something he laboured on valiantly when we spent our Lent in Committee. Does he recognise, however, that in one part of the UK —Northern Ireland—the five high street banks he referred to are not part of the banking profile? In Northern Ireland, we are facing a twilight zone of banking, with changes happening almost by default squared—as a result of changes here and in Dublin—and that will change further in the context of banking union. That is why we need to question how the FCA would use the powers being given to it under amendment 25.

Chris Leslie: Exactly. I imagine that what my hon. Friend describes is absolutely correct. Incidentally, I pay tribute to him for his endeavours in trying to improve the legislation, month after month after month, as we proceeded through Committee and on Report. The situation in Northern Ireland will be compounded by different factors, so how much more useful would it be if he and his neighbouring parliamentary colleagues had access to data about lending availability in a more rigorous form? That is how we want to interpret amendment 25 and how we will press the FCA to interpret it.

Mr Thomas: Is there not a danger that the Minister might see amendments 25 and 78 as a “Get out of Jail” card when it comes to taking real action to tackle the problem of payday lenders and the lack of access to financial services in many of our most deprived communities? Might he not say, “Well, 2014, when the FCA comes in, will be the time to act”? Does he not need to adopt the same initiative as my hon. Friend mentions by having a meeting with the chief executive of the FCA and saying, “We want action on these issues. We want you to set out clearly before you take office what you’re going to do about the problem of payday lenders and what steps you’re going to take to require better access to financial services in the most deprived communities”?

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Chris Leslie: That is correct. The Minister ought to be meeting the FCA regularly, and clearly those are the questions the House expects Treasury Ministers to put to the new regulators.

Lords amendment 78 was another concession that had to be dragged from the Government at great effort. I do not expect too much sympathy from you, Madam Deputy Speaker, but it is quite difficult for the Opposition to win votes in this House. Occasionally we have the odd success, such as on the EU budget—I do not want to talk about these things too much, as I know the Minister is a bit raw on that point—but by and large we try our best, we make our suggestions and we do not get very far. However, on this issue the Government were faced not just with the weight of argument by many hon. Members—including, of course, my hon. Friend the Member for Walthamstow (Stella Creasy)—but with the spiritual hand of assistance from the new Archbishop of Canterbury-designate in the other place, the Cross-Bench Bishop of Durham, as is. The Government had no choice but to make that historic concession when faced with the overwhelming moral and political case and the breadth of cross-party agreement.

The Commercial Secretary to the Treasury admitted that amendment 78 would not be a silver bullet for the problem of high-cost credit—payday lending or however we characterise these things. Although we are slightly disappointed that the new expanded Lords amendment 78 does not refer to “consumer detriment”, we hope that some of the provisions will open the door to enabling the Financial Conduct Authority to take urgent action to clamp down on some of the high costs involved, as well as the duration and rolling over of some payday loans or high-cost credit arrangements again and again, getting people into a spiral of dependency with massive credit costs, which are severely damaging to very many people.

My questions for the Minister are these. If the legislation no longer contains the “consumer detriment” litmus test, what will trigger intervention by the regulator? What will be the test? We are keen on many of the ideas in the amendment. The power to recover funds for consumers, the power to strike down enforcement action by an unreasonable lender and the power to insist on compensation for customers are all good, but we need the Minister to explain in slightly more detail how the Financial Conduct Authority will trigger those powers. Will individual complainants ring up the FCA hotline? Will litigation or a set of class-action cases be needed to get the FCA to take note, or might it send mystery shoppers around the country to undertake proactive investigations and say, “This is not good enough; we will see action”?

We are glad that Lords amendment 78 also makes changes on unlawful communications. That is welcome. Hon. Members will be looking at the clock and thinking, “Well, usually about now”—some time between 7.30 pm and 8 o’clock—“we get text messages from companies trying to convince us that all our debts can be written off in a voluntary arrangement under new Government legislation.” We might get spam or a cold caller saying, “Did you realise you’ve got £2,500 overdue, if only you put in your PPI claim before Christmas?” It is around this time in the evening that people will be getting these sorts of automated calls. There are all sorts of advertising, text and cold-call arrangements proliferating across the country.

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Many of our constituents are totally baffled about what is being done and what can be done by the relevant authorities to stop such exploitative behaviour. Apparently, some of the companies trying to exploit vulnerable individuals use mechanised arrangement to poll thousands and thousands of people, and even if only 1% pick up the phone and say, “Oh well, I’d like more information”, the volume of calls means that they can make significant profits. A lot of these automated telephone arrangements are routed through foreign jurisdictions—often not even in the European Union—as a way of skating around advertising regulations.

We want amendment 78 to get a grip on some of those questions. I know that financial services companies are not always the ones directly involved—it could be what are known as claims management companies. There are also organisations peddling debt management plans that have high fees associated with them. People are sold a product by a company that says, “Let’s consolidate all your expensive loans and we’ll take a single payment instead.” People think, “That sounds rather good,” and they start making payments. Perhaps months go by, during which they pay, thinking that they are defraying their debts, but when the company goes bust, they find that they have paid down absolutely none of their debts. All they have been doing is paying for the profits taken by a fee-charging DMP provider. Those are the sorts of services we want the Financial Conduct Authority to tackle.

We have had a lot of shilly-shallying on these issues. Quite frankly, it should not have taken nine months of hard effort to extract this concession from the Government since we first tabled an equivalent amendment in Committee back in March. We are glad for small mercies—this is a step in the right direction—but it is now for the Minister to explain how Lords amendments 25 and 78 will bite and how they will help people in their daily lives. I look forward to hearing his response.

Helen Goodman: I want to speak to Lords amendment 25. The Minister was not terribly clear in his opening remarks about whether it concerned consumers as individuals or whether it would be interpreted more widely, to address the branch networks that the main clearing banks operate. When he winds up, I urge him to say something about the significance of having a nationwide branch network to ensure that all communities can be financially included.

This issue came to my attention in July, when I received a letter from HSBC, which wanted to close its branch in Shildon in my constituency. Shildon is a town of slightly more than 10,000 people, many of whom have been banking with HSBC for a long time. Many local businesses—600 of them—bank at the Shildon branch. It is much cheaper for everybody to have a local branch than to get on the bus, go down to Bishop Auckland, put money into the bank or take it out, and then come back again. The round trip on the bus costs £4. It is absolutely ridiculous that people should face such barriers. We mounted a great campaign and a huge petition, but of course HSBC has paid no attention whatever to the needs of the people of Shildon. I happened to come across a man at the Labour party conference who revelled in the title of “Director for wealth management”, and who was apparently the person responsible for the branch network. It is true that there

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is not a lot of wealth to manage in Shildon; none the less, people in Shildon need a proper banking service, just like those in other parts of the country.

As well as thinking about that need, we need to think about the impact on the rest of us. Let us suppose that somebody who lives in a perfectly well-banked part of Durham wishes to make payments in Shildon, belong to an organisation there or make transactions with people there. It is far easier and better for everybody if they know that there is a proper national network of bank branches. I urge the Minister to comment on the branch network in his closing speech.

I remind the Minister that over the last four years taxpayers have given the major banks a considerable amount of support through subsidies and guarantees, yet although they are too big to fail, they are not too big to fail their customers, which is exactly what they are doing. HSBC claims in its slogan to be “the world’s local bank”, but it is not very local in my constituency.

8 pm

We were fortunate to have the divine intervention of the Bishop of Durham, who seems to have succeeded in reaching parts of the Government that we were unable to reach, but I want the Minister to understand that if we are to build a successful economy in the north of England, we need to support small businesses and the communities that are currently being marginalised. If we do not do that, and if we simply concentrate on investing in high-tech, high-success areas, we will end up with pockets of success in a sea of deprivation. That is not the kind of country that we want to live in.

We want to see one-nation banking that will provide an opportunity for everybody to avail themselves of banking services. In a modern economy, people simply cannot function without a proper bank account. Without one, they cannot have a job, get a good deal from the utility companies or receive money from other people. A bank account is now an essential part of modern life, and I hope that the Minister will take this matter to heart, talk to the FCA about it and say more to us about it this evening.

Mr Gareth Thomas: I am grateful for this opportunity to take part in the debate tonight. I echo some of the concerns that have been expressed by my hon. Friends the Members for Bishop Auckland (Helen Goodman) and for Nottingham East (Chris Leslie). I hope that the Minister will see his response to the debate as an opportunity to convince the House that Lords amendments 25 and 78 are not part of an attempt to put off action on payday lenders or on lending deserts.

I want to offer the House the example of the community of Thamesmead and Abbey Wood. It is a community of about 55,000 people in south-east London. The houses there were built in the 1960s in response to what was then seen as London’s housing crisis. There is no bank branch in the whole of that community. Not one of the big five banks has a branch there. The nearest branch is 30 to 45 minutes away by public transport. This is not for want of trying by a whole series of people to convince the big five banks to establish themselves in the area. An excellent organisation, the Thamesmead Trust, has tried to persuade the banks to set up there. The former Member of Parliament for Erith and Thamesmead, John Austin, has also tried many times,

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and the present Member, my hon. Friend the Member for Erith and Thamesmead (Teresa Pearce), has made a number of efforts as well, but there is still no bank in the area.

The community of Thamesmead and Abbey Wood is clearly not the only area without a bank, as my hon. Friend the Member for Bishop Auckland illustrated, but I worry that many of the lending deserts in this country are not yet out of the closet, if I can use that term. We do not have the necessary information to chronicle by postcode the lending that is taking place to businesses and to individual consumers. As my hon. Friend the Member for Nottingham East said, many of the banks in question are established in the United States, where they have to provide those data. As I said in an earlier intervention, President Obama supported calls for business lending to be publicised, on a postcode basis, so that people could see where lending was taking place and where it was not. That provision has now been written into American law.

We have called not only for the publication of lending data by postcode but for an obligation to be placed on banks to lend into every community. If they are not prepared to do that themselves, there should be an expectation that they will do so through community development finance institutions, through charity banks or through credit unions, but the obligation should be on the banks to demonstrate that they were providing lending into communities through those alternative sources if they were not prepared to do so directly themselves.

Helen Goodman: My hon. Friend reminds me that I asked HSBC, when it was closing its branch in my constituency, if it would instead put £10,000 into the local credit union. I received a letter from the bank today saying that it would not.

Mr Thomas: My hon. Friend gives a good example of the lack of joined-up thinking in our financial services markets. It would be good to see the big beasts of the financial services jungle supporting the newer players that want to address the problem of lending deserts.

Numerous websites offer comparisons between banking products, but the Centre for Responsible Credit has highlighted how, in practice, the banks release very little information about their lending at community level, either for businesses or for personal customers. Data on lending to and deposits from small businesses and third sector organisations, by postcode or at neighbourhood level, are not routinely available in the UK, even though much of that information is held by the banks and could be released.

The last time I spoke to representatives of the British Bankers Association, they told me that they were looking at this issue. It would be good to hear what the Financial Secretary thinks about it. My hon. Friend the Member for Nottingham East clearly thinks that the Minister will be a new broom sweeping through the fusty ways of the Treasury, and I hope that he will use his considerable influence to maintain the pressure on the British Bankers Association to step up the release of those data. I also hope that he will use his meetings with the chief executive and board members of the Financial Conduct Authority

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to require them to initiate similar pressure, in private before the FCA is properly established, and in public thereafter.

Susan Elan Jones (Clwyd South) (Lab): My hon. Friend has been talking about bank deserts. Would he also accept that there is also a problem when small branches in rural communities close? We accept that some of those communities are very small, but there is a sense that once a bank has deserted a community, almost nothing can be done to support the businesses there. That is also something that we need to look at.

Mr Thomas: My hon. Friend makes a very good point. The situation is particularly stark in rural communities, but it is increasingly stark in many urban areas. North Harrow, in my constituency, no longer has a bank, and businesses in that area are extremely disappointed by the lack of easy access to banking services and the inability to have a proper discussion with a local bank manager about their finance needs.

I hesitate to suggest that the Minister might enjoy and benefit from a foreign trip, but should he find time in his diary, he might like to go to Washington and spend a little time with the National Community Reinvestment Coalition. He would find a considerable amount of expertise there on the disclosure of lending data by banks to businesses and individual consumers. He might like to bring back to the House, and to his conversations with those in the financial services industry, the benefits of the US legislation, the most recent update of which has happened since 2010.

Let me return briefly to the definition of payday lenders. If I may say so, I thought the Minister quite skilfully used an intervention made by my hon. Friend the Member for Walthamstow (Stella Creasy) to avoid defining payday lenders. I gently encourage the Minister to look again, not necessarily in the context of this debate, but separately, at how payday lenders should be defined. Even with the power proposed by the Lords, the question of definition is still ducked. If there is to be the interest rate cap for which so many Members, led by my hon. Friend the Member for Walthamstow, have campaigned, we must have clearer definitions of which financial services businesses are included within the term “payday lenders” or the high-cost credit definition that was just mentioned, so that proper action can be taken.

I fear that many of the payday lenders who have looked at the amendment that the new archbishop has helped to force over the line, perhaps, in the House of Lords will recognise that there is no definition as yet, and so will not feel sufficiently worried to change their practices.

Tracey Crouch (Chatham and Aylesford) (Con): I had not intended to speak in this debate, but I rise briefly to talk about Lords amendment 78. I want to speak partly so that I can place on the record my recognition of the hard work done by the hon. Member for Walthamstow (Stella Creasy) on this issue. She has been recognised already across the House in winning many awards for her campaigning. It is true to say that she has been tireless on this issue, on which she has achieved a huge success—at the early stages of what will no doubt be a long and distinguished career in the House.

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I want to thank their Lordships for the work they did the week before last on this issue, and to congratulate the Government on listening to the concerns across the House. This issue concerns many of us on both sides of the House, even though there may be an urban myth that those of us who represent south-east Conservative seats do not face many of the concerns about deprivation and the impact that the high-cost credit industry is having on our constituents.

Chatham has two significantly deprived areas. One problem seen by the local citizens advice bureau is an increase in the number of people from the more affluent wards in the area coming in to talk to their debt advisers. In Medway we now have average personal debt levels of nearly £43,000, which I think is incredibly high. We in Medway have therefore joined up, across all the parties, to try to provide a solution to some of the problems. First and foremost, I joined the local citizens bureau to chair an inquiry to try to establish precisely what is driving people into increased personal debt. We have done so by, rather controversially, partnering with Wonga to do a proper survey across all the wards in the Medway authority, looking into what is causing people to increase their levels of debt. However, let there be no hesitation about the fact that, as I have already made clear, if it is payday loan companies that are driving people, particularly the more vulnerable members of society, towards debt, we shall make strong representations to ensure stricter regulation of these companies.

The hon. Member for Nottingham East (Chris Leslie) raised what I thought were interesting issues about the definition of high-cost credit lending. One of the organisations that has not yet been debated here is the pawnbroking industry. I recently saw an advert placed outside both a pawnbrokers and a payday loan company, inviting people to take out loans of up to £50,000. It turned out that this was for businesses. I have real concerns about businesses taking out payday loans where they are securing the entire company against such credit. I recognise an asset is being secured in pawnbroking, but entire businesses could suddenly be lost if they are unable to meet their repayments.

I have some concerns about whether this regulation will cover pawnbroking companies, as there is a bit of a loophole in the credit regulations when it comes to pawnbrokers. I would like to see us take a proper look at how pawnbroking companies are offering increasing amounts to help with short-term cash supply. Although there are some limitations and I do not think it is recommended that businesses take a loan of more than £25,000, the fact is that pawnbroker loans can go up to £100,000. It is incredibly irresponsible for companies to be lending that to businesses, particularly when it is unlikely that the businesses are going to be able to meet their repayment plans.

8.15 pm

I welcome the Government’s concession on this issue, which is hugely important for many vulnerable people across my constituency. I look forward to the Minister’s response to some of the questions raised, particularly on issues such as advertising and the definition of high- cost credit. I also look forward to the publication of the university of Bristol research, which I think will play an incredibly important part in how we take this issue forward for the future.

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Stella Creasy: I shall speak to amendments 78, 137 and 148, which deal with the role of the Office of Fair Trading. Before I do, I want to place on record my gratitude to Members in the other place who, along with the hon. Member for Chatham and Aylesford (Tracey Crouch) have been so supportive of the sharkstoppers campaign. I mention Lord Mitchell, Lord Kennedy, the Right Reverend Welby—I think that is the appropriate term; apologies if it is not—Baroness Howe and Baroness Grey-Thompson. They have all been fantastic in championing a measure that I know has widespread support across the country.

I also put on record my gratitude to many organisations that have been helping make the case for action on high-cost credit, whether it be R3, the insolvency practitioners, the co-operative movement and co-operative party, Unite, Community and the thousands of concerned citizens who been involved in part of the campaign. I thank the hon. Member for Chatham and Aylesford for her kind words and for using the term “tirelessly” rather than “tiresome”, which is how some people might have interpreted the doggedness with which we have persisted in campaigning on this issue. In that sense, this amendment and the damascene conversion of the Government to the need to act on the cost of credit is very welcome. Throughout this campaign, we have all said that when the Government accepted that we were right all along, we would be grateful and would take it within the spirit of cross-party agreement that something needs to be done about these companies and about the impact of debt on our constituents.

With that in mind and in genuine appreciation of the fact that this moment has happened, I now want to press the Minister, as have many others, about the nature of the amendment and what will happen in the next year. Many of us are concerned that there is still a window of opportunity driven both by the delay in the implementation of these powers for the Financial Conduct Authority until April 2014 and by the continuing pressures that many in our constituencies will face, which might mean a bonzer Christmas for many of the legal loan sharks.

We started to campaign on this issue because we could see that toxic mix in Britain of a crisis in the cost of living, of families struggling, having lost jobs or facing wage freezes in Britain and, indeed, of the lax regulation in the UK of the cost of credit. We know that those pressures have got worse, not better, for British families over the last couple of years, so we know that one in three of those families in Britain have suffered a pay freeze over the last 12 months at the same time as they have seen the cost of basics rise and continue to rise. We know that many consumers have borrowed about £2,000 on top of their secured debts—their mortgages—to try to make ends meet in the last year, but only a quarter of them have managed to pay that money back.

The concern I bring to the House tonight is that when we look ahead to 2013, many of those pressures will not just increase, but explode over the course of the next year. The consequences for many, particularly those in the poorest communities, will be severe. We know that the pressures on the cost of living are not evenly distributed in British society. We know that the poorest 10% spend up to a quarter of their incomes on basics such as housing, fuel and energy, and we know that the prices of

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those commodities will become higher, not lower, in the coming year. Today we heard from E.ON—the last of the big six companies to announce it—about the increase in the cost of energy that consumers will face in the new year. The companies’ average increase of between 6% and 11% means that the average annual household energy bill will reach an all-time high of £1,300 next year.

I started to campaign on this issue because I could see the impact of debt on my community in Walthamstow, in north-east London. It gives me no pleasure to say that over the past 18 months many Members on both sides of the House, representing a range of communities, have approached me to discuss cost-of living issues, but I also know that London is a harbinger of the pressures that are to come. I know, because I have seen research-based predictions that London rents will increase by 26% over the next five years, that unless we do something about the cost of credit—unless we do something to help those who are struggling with the everyday cost of living—we shall face a society in which debt is just a way of life, with all the consequences that that will have for people.

However, this is not just about the cost of housing or, indeed, the cost of energy. It is also about the everyday cost of getting to work, which is having a great impact in my local community. I have talked to people in Walthamstow who have managed to secure apprenticeships but are forced to travel around London because there are so few apprenticeships in my area. A travelcard covering zones 1 to 3 costs £35 a week. Only people who are able to live at home can afford to take the opportunity to become an apprentice earning £100 a week, and we now learn that rail fares are to rise next year.

Those are pressures on the working poor in our community, but so are changes in the benefits system. Given that there is no spare supply of housing, it does not take a genius to recognise that the 1,000 families in my community who have been told that their housing benefit will be capped in April will have to borrow to make ends meet and keep a roof over their heads. The pressures that the legal loan sharks have decided to increase are the pressures that the amendment seeks to address.

It is clear that these companies are stubbornly resisting what are now widespread concerns about them and the profits they are making. Last year the industry was worth £1.7 billion in the UK; it is predicted that next year one company alone, Wonga, will be worth £1 billion, and it is just one of more than 200 companies that are now operating here. Moreover, the companies are clearly targeting young people, including students, and they have begun to change the terms of their loans. We became aware this week that Wonga is now offering what are supposed to be short-term loans on a 60-day basis. As the Office of Fair Trading has pointed out, the companies are abusing even the most basic consumer protections in the industry. That is why we need the amendment as a starting point, but it is also why we need to look at what else the OFT can do in the year ahead.

If we allow the pressures on consumers and their cost of living to continue and do nothing to curb the legal loan sharks now, we shall see another year in which

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millions of people are pushed into debt by them. We already know that a third of payday loan users take out loans that they know they cannot repay, and that 50% of people who have taken out loans have missed a payment. Given the additional pressure that those people will face next year, it will be a disaster for Britain if we do not act, and that means that we should think about what the OFT itself can do. I hope that the Minister will tell us tonight whether he will support measures enabling action to be taken now.

We know that the OFT will present new proposals in the new year, and that will present an opportunity for change that could set the tone for the new Financial Conduct Authority. I agree with my hon. Friend the Member for Nottingham East (Chris Leslie) and my hon. Friend the Member for Harrow West (Mr Thomas)—who is not in the Chamber now—that there should be regular meetings with the FCA to consider the industry now, but let us use the OFT to put down those markers.

First, as was pointed out by the hon. Member for Chatham and Aylesford (Tracey Crouch), we must pin down the question of irresponsibility in lending. What is an irresponsible rate at which to lend to people? The irresponsible lending guidance should be redrafted to make clear precisely what the cap should be and precisely what constitutes consumer detriment, in terms of both duration and the amount lent and including the total cost of a loan. Secondly, it should be made clear that it is irresponsible for lenders not to use a real-time credit register and ensure that every loan is recorded.

Justin Tomlinson (North Swindon) (Con): The hon. Lady is delivering a categorical and passionate speech about a very important subject, and she has just made one of the most important points that can be made about that subject. Does she agree that the sharing of credit information in the UK car industry has, to an extent, transformed what was a very murky market, and that lessons can be learned from that?

Stella Creasy: I pay tribute to the work that the hon. Gentleman has done in raising issues about debt and credit, and about the way in which companies such as this operate. We know that many of them use a get-out clause, arguing that they could not possibly have known that someone had eight or nine loans at the same time. That is partly because there is no register specifying rates of interest and the number of loans that people are taking out. The OFT should make it clear that that constitutes irresponsible lending, and that loans should be made on a real-time basis. It is no good for supposedly short-term credit to be provided on a monthly basis. I also agree with all those who have expressed concern about continuous payment authorities. I hope that, in the new year, the OFT will make it clear that we must end both the fraud and the debt that they cause.

Yvonne Fovargue: Continuous payment authorities also militate against affordability checks. As was established by the OFT’s last review, once companies know that they can dip into someone’s bank ad infinitum, they simply do not bother to carry out the checks .

Stella Creasy: My hon. Friend is right. I pay tribute to the work that she has done in this regard, and also in regard to debt management plans.

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Bad practice is widespread in this industry. The Financial Conduct Authority will have an opportunity to set the tone when it comes to the sort of consumer credit industry that we want in the future, but let us use the opportunity presented by the OFT to do something about the problems now, and to prevent 2013 from being boom time for the legal loan sharks.

The Minister must be aware that three quarters of consumers are looking towards Christmas with severe financial concerns, and that 10 million of us in Britain feel financially squeezed. Will he state explicitly whether he will support my proposals and take them to the OFT, so that we can be certain that 2013 will be a time for legal loan sharks rather than consumers to be worried? I urge him to read the Bristol research findings—which are already in the pocket of the Department for Business, Innovation and Skills—in order to understand how measures such as this, and total cost-capping, can work, so that we can finally say that Britain is a legal loan shark-free zone.

Damian Hinds (East Hampshire) (Con): It is an honour to follow the hon. Member for Walthamstow (Stella Creasy), and to speak in favour of the spirit of Lords amendment 78.

The problems of high-cost sub-prime debt are widely acknowledged. Although they have come much more to the fore through opinion-formers of late because of payday lenders, they are not, of course, new, and by extension—this is somewhat at variance with what the hon. Lady said—it is not new that Government are not capping the cost of problem credit. It worries me slightly that we use the term “payday” as a catch-all shorthand for all these problems, and I hope that the Minister will reassure us that we are not just talking about payday lenders.

Dealing with problems of this kind requires an integrated approach involving financial capability and the provision of alternatives for people who need access to credit, but it also requires regulation. Disclosure is not enough in this market, especially as it often involves very vulnerable consumers and the ready, easy availability of credit. It could be said that supply sometimes creates its own demand. Some people tend to opt not for the solution that best suits their needs, but for the most recent that they have seen. In seeking to address these costs, however, we need to look at costs in the broadest sense. This is not just about interest rate charges.

Justin Tomlinson: On the question of percentage charges, if we displayed everything in cash terms it would be far easier for even the most vulnerable consumer to make an informed decision.

Damian Hinds: Yes, total cost of credit information is a good way forward—although, ironically, that would please a lot of payday lenders because, relatively speaking, they would not look quite so bad.

This is not only about interest rates; it is also about ensuring that credit is eventually paid down, and about behavioural charges, which can be difficult to pin down under the annual percentage rate as they apply to some consumers, but not others. An APR cap on its own might seem like a panacea, but, as Members on both sides of the House realise, it is not. Unfortunately, there are ways around caps. The experience of some states in

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the United States where there has been a 30% cap on payday loans is that the rent-to-own sector gets a great boost, because money can be made in another way: by whacking up the base price of the goods.

If there is to be a cap—and I think there can be a place for a cap—we must talk about what sort of cap it will be. I have always argued that a blunt general cap is a bad idea, because it can only be set either so high as to make no difference or so low as to put some parts of the market out of existence entirely and thereby run the risk of driving more people into the unlicensed part of the market, where someone’s idea of a late payment penalty is a cigarette burn to the forearm.

8.30 pm

Some people say, “Well, let’s go for a product-specific cap”, under which there would be a different cap for payday loans, home credit and so forth. That is sensible in some respects, as it acknowledges the fundamental cost drivers in the market, such as that it costs more to make a short-term loan, that it costs more in percentage terms to make a small loan, and that it costs more to loan to riskier customers. The danger is that we then get cliff edges, however, and all sorts of distortions in the market, with operators shifting around between different categories in search of the most favourable regime.

My preference is to have a more flexible type of cap that is, in fact, more like a curve, and which can operate effectively in all parts of the market without putting any of them entirely out of business. I discussed one version of that in a debate instigated by the hon. Member for Walthamstow (Stella Creasy) in February 2011. I called it a twin-cap approach, with a cap on interest rates—30%, perhaps—and also an arrangement fee cap, perhaps of 15%. Under such a regime, it would be possible to make money in very short-term loans—what we today call payday loans—but only in a responsible manner and at a decent level, and where operators were making longer term loans, the amounts they would be able to charge would fall.

Stella Creasy: It is wonderful to hear the hon. Gentleman talking about the positive aspects of capping. I suggest he look at total cost capping, because arrangement fees are not the only issue; there are also issues to do with late payment fees and the incentive they give lenders to push people to keep rolling loans over. Like the hon. Gentleman, I want this to be a future-proof—that is a dreadful term—proposal. We must also ensure lenders cannot get around it, however, which is why we need to cover all the costs involved.

Damian Hinds: The hon. Lady is entirely right, and I alluded to that point when I talked about behavioural charges. It is wrong to think we can legislate perfectly for all eventualities in advance, however. This market has an amazing ability to shapeshift and find its way around any regulation we might put in place, as has been seen in the United States.

I would like to hear an assurance from the Minister that under the new regime it will be possible to have a flexible capping regime that allows for all parts of the market to operate while also insisting that they do so in a responsible way. I also seek an assurance that we will not just address “payday” loans, which are a relatively new phenomenon in this country. Home credit is massive,

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and it has been with us since Victorian times, and has been a problem for quite a long time. There is also pawnbroking, which my hon. Friend the Member for Chatham and Aylesford (Tracey Crouch) mentioned. Logbook loans are a big market in the United States; they have not appeared in a major way here, but we can bet our bottom dollar that they would get a big boost if other parts of the market were capped. Rent-to-own is another area.

On the basis of the Minister’s conversations across Government, can he assure us that the Government will continue with an integrated approach that addresses not just regulation but boosting financial capability, starting with children’s capability with mathematics in school? Will they also continue to support operators that provide responsible credit, in particular credit unions? I pay tribute to the work the Government are doing in supporting that sector, and would like them to go further in modernising it and making credit union services more widely available, such as through the post office network.

Andrea Leadsom (South Northamptonshire) (Con): I want to speak briefly on Lords amendments 25 and 36, both of which deal with the issue of competition in respect of the new regulators: the Prudential Regulation Authority that will supervise the banking sector and the Financial Conduct Authority that will supervise business conduct in the banking sector. I seek reassurance from the Minister that having regard to the quality and level of competition in the marketplace will be sufficient to drive a radical improvement in respect of the new challenger banks.

As the Minister knows, the five oligopoly banks in the UK currently have over 80% of all small and medium-sized enterprise bank accounts and personal current accounts. That means access to finance is very limited in respect of choice and types of finance, and as bank balance sheets are currently in a difficult position, it is extraordinarily hard for small businesses to get hold of the financing they need to grow, which in turn will help our economy to recover. So the Bill gives us a once-in-a-lifetime opportunity to ensure that the regulators are, in future, incentivised to ensure not only that banks do not fail, but that we encourage new entrants to the market. At the moment, many would-be bankers find that they are set enormous hurdles, such as having to set up a dealing room just to provide evidence of their ability to do so, yet at the end of an enormous obstacle course the FSA tells them that they cannot have a banking licence. What we cannot have in the future is the PRA and the FCA combining to make it as difficult or more difficult to encourage new entrants into the market. So I hope that the Minister will set out how the regulators of the future will not only tolerate, but encourage new competition.

Greg Clark: This excellent debate has covered a number of issues that colleagues from all parts of the House feel passionately about, and correctly so because they are of huge importance to all our constituents, especially the most vulnerable in our society.

In the short time available, I wish to address some of the points that have been made directly by hon. Members. The shadow spokesman, the hon. Member for Nottingham

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East (Chris Leslie), asked how the powers would be exercised by the Financial Conduct Authority. The powers come directly from the FCA’s remit, and he will be aware that the Bill establishes a far-reaching consumer protection objective. The overall objective is

“securing an appropriate degree of protection for consumers.”

The Bill goes into detail to require the FCA to consider the following: the different degree of risk to be tolerated by different types of consumers; the different needs of different types of consumers for the provision of information; and the general principle that those providing financial services should be expected to provide consumers with a level of care appropriate to their needs. I think that colleagues would recognise that this is a far-reaching objective which gives quite general powers to protect consumers, and it is right that that should be so.

The hon. Gentleman mentioned basic bank accounts, on which some progress continues to be made. There is no universal legal right to a basic bank account, but the industry guidance still stands. It states that if a consumer asks to open a basic bank account and meets the qualifying criteria, the firm should offer them an account and that banks can refuse to open an account for a customer only where the customer has a history of fraud or is an undischarged bankrupt. Those provisions continue.

Sheila Gilmore: The previous Government had proposed creating exactly such an obligation, but the Minister’s predecessor, in a debate I had with him in Westminster Hall, refused to contemplate any such provision. Has there been any change of mind on the part of the Government?

Greg Clark: I did not have the privilege of participating in that debate, but I can tell the hon. Lady our policy. I also wanted to talk about the very important matter that the hon. Member for Nottingham East and several others raised about the transparency of the information that should be provided, as is the case in the United States, on the actual practice rather than just the intentions of lenders. This is a particularly important point, and what we have said in public—I mentioned this to the Chairman of the Treasury Committee earlier—is that the Government are working with the industry to get a commitment from the banks that they will publish granular data on their lending, particularly in deprived communities. We are meeting the British Bankers Association shortly on that. We have been absolutely clear that if we are not satisfied with that information we will use the forthcoming banking reform Bill to legislate to that effect. That will concentrate minds and I think everyone will be aware of the importance of that question.

It is important to address the context in which we are operating. The Financial Conduct Authority must not regard itself simply as a regulator of incumbents, although it has important responsibilities in that regard. It also has the important objective that my hon. Friend the Member for South Northamptonshire (Andrea Leadsom) mentioned, which is to promote competition. I regard the degree of competition in retail banking as unacceptable. I would like to see more new entrants and I would like them to concentrate, in particular, on reaching those parts of the market that existing incumbents find it difficult to reach. I have made it absolutely clear in the

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meetings I have had with the shadow Financial Conduct Authority that the competition objective is to be taken extremely seriously, and I and my colleagues in the Treasury will be looking for progress on that.

George Freeman (Mid Norfolk) (Con): I am extremely grateful to the Minister for giving way, and I want to endorse his sentiments and those of my hon. Friend the Member for South Northamptonshire (Andrea Leadsom). Constituents in my area have come to wonder whether there is a danger of our regulating after the horse has bolted. They look to America, where there are more than 20,000 high street banks, and wonder whether we could be doing more to encourage an insurgency, as it were, of new banks to provide the high-street banking service that we need at a time when the old banks are locked up, dealing with the legacies of their mistakes. I echo the Minister’s remarks and wonder whether we can look to the Government to do anything—perhaps not in this Bill but in the coming years—to make that a reality.

Greg Clark: I completely agree with my hon. Friend. The Bill has a role to play, because it is very important that the authorities do not put insuperable barriers in the way of new banking bodies and entrants to the market that are seeking approval, because such prospective competitors could offer new services to consumers who are not well served at the moment.

The hon. Member for Nottingham East raised questions about the scope of the FCA’s rule making. That relates to a point made by my hon. Friend the Member for Chatham and Aylesford (Tracey Crouch) too, so let me confirm that the FCA will be able to make rules on the cost of credit from payday lenders, as well as pawnbrokers and any other provider of consumer credit. It is important that the FCA’s discretion allows it to protect the consumer and the consumer’s interest in all these matters.

The hon. Member for Bishop Auckland (Helen Goodman) is not in her place, but she was concerned about the branch network, as were certain others. It is not possible or right for the Government to require particular branches to be kept open and I am sure that no hon. Member would expect that. Lords amendment 25 will require the FCA to have regard to

“the ease with which consumers…including consumers in areas affected by social or economic deprivation, can access”

the services they wish to use. The FCA might wish to consider that.

The hon. Member for Harrow West (Mr Thomas) is also not in his place, but I think I have addressed his concern about whether the information provided by the banks on their practice in lending will be sufficient. I have commented on the remarks made by my hon. Friend the Member for Chatham and Aylesford, and Lords amendment 78 also applies to the lenders about whom she was concerned.

I join the tributes paid to the hon. Member for Walthamstow (Stella Creasy), who has been energetic in pursuing this issue. She was slightly unfair to refer to a damascene conversion, as some of us on the Government Benches have always regarded the powers that were going to be invested in the FCA as necessary. We have been pleased to clarify that. She will understand that the transition to the new regime will take some time during the next year. The Chairman of the Select Committee

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chided me earlier for introducing these provisions in a hurry. It is necessary to have a degree of pace. The hon. Lady is absolutely right that during its remaining supervision of these matters the OFT in particular will have the opportunity and the power, given the amendments, to suspend a credit licence if it thinks it is necessary. The discussions that we will have, and I am sure she will have with it, will cause it to be forward-looking rather than simply regulate what has been in place so far. My hon. Friend—

8.45 pm

Debate interrupted (Programme Order, this day).

The Deputy Speaker put forthwith the Question already proposed from the Chair (Standing Order No. 83F), That this House agrees with Lords amendment 24.

Question agreed to.

Lords amendment 24 accordingly agreed to.

The Deputy Speaker then put forthwith the Questions necessary for the disposal of the business to be concluded at that time (Standing Order No. 83F).

Lords amendments 25 to 58 agreed to.

Clause 6

Extension of scope of regulation

Greg Clark: I beg to move, That this House agrees with Lords amendment 59.

Mr Deputy Speaker (Mr Lindsay Hoyle): With this it will be convenient to consider the following:

Lords amendment 60, and amendments (a), (b) and (c) thereto.

Lords amendment 61, 62, 79, 115 to 121, 139, 140, 142, 146, 182, and 203 to 205.

Greg Clark: I come now to the Government’s implementation of the independent review of LIBOR conducted by Mr Martin Wheatley. I announced the Government’s response to the Wheatley review in mid-October and three sets of amendments to the Bill have been made to implement those recommendations that require legislation. The first is to enable activities in relation to benchmarks, such as LIBOR and potentially others, to be brought within the scope of regulation under FSMA. The second is to create criminal offences designed to tackle misconduct in the financial sector, including a new criminal offence for making false or misleading submissions in connection with the determination of a benchmark. The third is to provide the FCA with a rule-making power to require banks to submit to LIBOR and other benchmarks. Those amendments complement the market-led reforms to LIBOR as recommended by the Wheatley review. Martin Wheatley recommended that submission to, and the administration of, LIBOR become regulated activities, and amendments 59 to 62 create a framework to enable activities in relation to benchmarks to be specified as regulated activities under FSMA.

Amendment 60 defines “ benchmark” as an “index, rate or price”, defined from time to time by reference to the state of the market and used in relation to investments. A benchmark is capable of being regulated only if it meets that definition. The precise benchmarks that are

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subject to regulation will be specified by way of statutory instrument. The Government recently published a consultation paper on this legislation. Initially, the activities to become regulated will be LIBOR submission and administration, as recommended by the Wheatley review. However, further benchmarks can be added and the Government are considering and consulting on whether additional benchmarks should be brought within the regulatory perimeter. The types of benchmarks that could be eligible include equity or bond indices, derivatives and commodity or energy benchmarks. The definition of benchmark, as drafted, requires that it be used for one or more purposes that relate to section 22 of, and schedule 2 to, FSMA.

The hon. Member for Nottingham East (Chris Leslie) has tabled an amendment that would extend that definition to include commodities. Let me say first that I totally understand the requirement that we should be able to address some of the alleged abuses that have taken place and have the powers in statute to include those benchmarks that are relevant to some of the concerns that have been expressed recently. We do not believe that there is any requirement to extend the legislation on that. In fact, the Bill was drafted to anticipate the Wheatley review and the work going on in other benchmarks. Benchmarks can represent many things, including commodities or energies, provided that they are traded financially in the way we often see. Under the definition, regulation by the FCA extends to benchmarks that involve financial matters consistent with FSMA and the objectives of the FCA as the financial services regulator.

The Wheatley review also recommended that banks should be encouraged to participate in LIBOR—participation is currently voluntary. In the absence of such submissions, LIBOR would cease to be a representative benchmark and, in an extreme scenario, would not be published at all. Therefore, Lords amendment 79 allows the FCA to require firms to participate in particular benchmarks, while making reference to a “code or other document”. That allows the detail of the requirement to be determined by the benchmark administrator, not by the FCA. It might not be necessary for the FCA to use that power immediately, if at all, and it has recently opened a discussion on how and when the use of that power could be considered.

The Wheatley review also recommended the creation of a new criminal offence in relation to the manipulation of benchmarks such as LIBOR and the re-examination of the criminal sanctions for market manipulation under FSMA. Although such conduct could already be a criminal offence under legislation, this is a helpful clarification of some of the powers. There will be three criminal offences: first, we are re-creating the offence of making a false or misleading statement; secondly, we are widening the offence in section 397(3) to include creating a false or misleading impression as to the market in, or the price or value of, an investment for the purposes of making a profit or avoiding a loss; and thirdly, we are creating a new criminal offence related to misleading statements and impressions in respect of specified benchmarks.

The amendments also replicate the penalties for existing offences: a person found guilty might face a prison sentence of up to seven years and an unlimited fine. The

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detail of the investments, agreements and benchmarks for which those criminal offences apply will be set out in secondary legislation. That is included in the public consultation currently under way.

Under the current arrangements, where enforcement action results in a firm paying a financial penalty, that is applied as a discount to fees paid by other firms the following year. Without reform, unprecedented fines, such as those relating to the attempted manipulation of LIBOR, would have represented a significant windfall to regulated firms. In future, regulatory fines revenue in excess of enforcement case costs will go to the Consolidated Fund. The hon. Member for Nottingham East and I had an exchange about that earlier. The regulators will be able to net off enforcement case costs before handing over the penalties to the public purse. The new arrangements will apply to FSA fines received from 1 April 2012, so the measure will include the penalty imposed on Barclays in relation to the attempted manipulation of LIBOR.

The Government have announced that £35 million of fines imposed from attempted LIBOR manipulation and other unacceptable behaviour received this year will be used to support Britain’s armed forces community. In addition, £5 million will go to the creation of new, groundbreaking first world war galleries at the Imperial War museum. I hope that the House will agree to these amendments but, of course, I stand ready to respond to any points Members make.

Chris Leslie: We have moved on to another series of amendments that have arisen largely as a result of the scandal that was discovered this summer, when it was found that some of the largest banks—obviously, we have heard about the concerns in relation to Barclays—had been manipulating LIBOR, the benchmark from which flows billions, if not trillions, in financial services products and investments worldwide.

The scandal had massive ramifications across the banking sector. It was as though having gone through three or four years of attempted reform following the global financial crisis, after which it was clear that the risks that many in the banking sector had been taking were not properly understood or accounted for, the sector was again knocked sideways. It turns out that it was not just about exuberant risk-taking; it was, in fact, about corrupt manipulation of what people had thought was a trustworthy index. What is worse, it hit the reputation of the City of London in particular. It was all in the name: the London interbank offered rate. This was taken by many other international financial centres to be a moment of weakness for the UK financial services sector, and we saw several examples of other jurisdictions taking action swiftly to capitalise on the disarray in which many in the financial services sector found themselves. It was therefore important that the Government took urgent action and commissioned a review of what happened in the LIBOR scandal.

At the time, we felt that the matter was of such significance that we called for an independent judicial inquiry into the whole question of banking standards and ethics. As I am sure you will recall, Mr Deputy Speaker, we had a very heated debate in which the Government said, “We’ll have a parliamentary banking commission,” while we said, “Go for an independent judicial variant.” Of course, the Government won the day, and hence the Chairman of the Treasury Committee

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is now demonstrating his stewardship of that commission, which is due to report shortly. I hope that it has an opportunity to look into the wider issue of ethics and standards in banking. The Government have been keen that it starts to focus, almost in pre-legislative mode ahead of the banking reform Bill, on the Vickers reforms, but these questions of standards, ethics and culture also matter tremendously.

The Government made several amendments to the Bill in the House of Lords. In amendment 79, it is envisaged that there will be new provisions for a benchmark administrator, but it is not certain that a private sector organisation, even if it has a certain amount of experience, will be totally immune from conflicts of interest. Did the Government give any consideration to establishing a more independent body or entity for that administrative process? It is vital that the process of finding a new benchmark administrator is open and transparent. Will the Minister give more details about the process that he is undertaking and how the tender process is happening?

On amendment 115, it is important to ensure that the new criminal offences have a strong effect in respect of misleading statements on benchmarking and in general. In terms of its jurisdiction, is the amendment limited to British banking and financial services activities, or does it cover activities undertaken by UK organisations or UK-approved persons in operations in countries beyond our shores? Clearly, in a globalised world, that is relevant to how we see the behaviour of those in the sector.

The Government’s proposals to regulate benchmarking currently apply only to investments. We want to ensure that the regulatory net is also cast around commodities, including oil trading, gas market trading, silver, gold, foodstuffs, and so on. I am sure, Mr Deputy Speaker, that you can think of a range of potential commodities. Therefore, in the marvellous parliamentary way in which we do these things, we are seeking to amend a Lords amendment to ensure that the definition is focused not only on investment but, for clarity’s sake, puts commodities into the Bill. The Government say that they are consulting on this arrangement and might have the power to include those things later down the line but do not believe that there is a requirement to do so at this stage. However, it is time that we got ahead of these issues early on.

In the Public Bill Committee in March, after several hours of debate—it had been a bit of a long day—I asked the Minister’s predecessor, in relation to LIBOR and the benchmarking of these arrangements, “Do the Government have a view about whether there is manipulation and whether changes need to be made to the regulatory arrangements?” He stood up and answered with the single word, no. Of course, he came to regret that stance and several months later—I think it was in June—we learned that a tremendous scandal had taken place. If we have these legislative vehicles, it is important that we take the opportunity to deal with any potential issues.

9 pm

Alison McGovern: My hon. Friend mentioned ethics a moment ago. Although we need a financial services system that is internally ethical and that has the right culture, there is a broader problem. The LIBOR scandal bit in the way it did not because it was a usual Whitehall story, but because the Government rely on LIBOR, among other indices, to know what is going on in financial

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services. This might not be the part of the Bill that has been most hotly debated this evening, but we are all reliant on these indices. Is that why my hon. Friend is suggesting that we should cast the net a little wider and try to get ahead of the problem rather than constantly chase ourselves?

Chris Leslie: My hon. Friend makes an excellent intervention. She is right. In our debates about financial services we sometimes talk in rarefied or esoteric technical terms, but this issue is certainly of relevance to all our constituents, whose mortgage rates, the interest they pay on loans, and, in the case of oil markets, the price they pay for petrol at the petrol station and the price they pay to heat their homes, as well as prices in the gas and food markets—the price of a loaf of bread, for example—are all too often rooted in the costs of these commodities and investments, as determined by the global trading environment.

This is what it boils down to: it is a question of trust. Hitherto, people assumed that all the market benchmark arrangements were simply transparent exchanges of data and prices that showed the true value of an investment, product or commodity, and that people were buying and selling in an open and fair process. It turned out that those in the know, who were often highly paid traders in the bigger banks—incidentally, even more revelations will come out over the coming months about the banks that might have been involved in LIBOR—knew how to wangle the system and play the market in a way that helped not only the profits of their particular company, but that boosted their own personal bonus arrangements. It was a question of using other people’s money in order to shift massive volumes of trades. Even if the changes in price were fractional and seemed irrelevant, when they were multiplied by the billions of trades that were taking place they could have massive financial advantages to those traders involved.

It was alleged recently that banks rigged electricity markets in the United States and record fines have been issued. That involved British institutions, so British regulators should be explicitly equipped to tackle attempts to rig commodities trading, whether it be spot trading, forward contracts, futures contracts or hedging arrangements. Global commodities markets include a vast range of products, such as grains, fibre, other food, precious and industrial metals, energy, carbon offsets and so on.

As I have said, British households are affected by commodity market manipulation—perhaps even more than attempts to rig LIBOR. Commodity speculation has contributed to the record costs of staple foods in recent years. In fact, some people argue that the riots and social unrest in Egypt, Tunisia and other countries were influenced by pricing issues and distortions.

Last month, after the Energy Secretary made a statement to Parliament, the Financial Services Authority and Ofgem confirmed that they were conducting an inquiry into claims that British companies manipulated the wholesale gas market on 28 September. The Government have said that it would not be appropriate to use legislation to cover pure commodities, such as gas, but that if commodities are referenced by derivatives or other financial instruments, it is covered by the definition of investments. However, a derivative instrument may essentially be a traded instrument and there is no

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reason for it to fall within that definition. It could be regarded as an insurance product and so does not fall clearly within the definition of investments in Lords amendment 119.

Total, the French oil company, recently made open allegations against one of the PRAs. That is not the PRA as we know and love it—the Prudential Regulatory Authority—but another acronym. Price reporting agencies are companies or organisations that essentially gather information, almost as a journalist might do, and figure out broadly what is happening in the market. However, it is not necessarily a true reflection of what is happening. Total alleged that there were erratic processes involved and that it was not a true reflection of the state of the market. There were also questions over the methodologies of the price reporting agencies. Does the Minister think that price reporting agencies need to be within the regulatory ambit? Again, they are important component players in the financial services sector, but are not familiar to all our constituents—but by goodness, they would become familiar to all our constituents if they were not trusted or were seen to be failing in some way.

Mike Freer (Finchley and Golders Green) (Con): Much commodity trading is still focused on trading on the floor, rather than on the screen. Does the shadow Minister not accept that as the trend moves towards trading on the screen, that should drive transparency? Should we not let the transparency of the market work first, before we rush to regulate?

Chris Leslie: I do want to see more transparency. Electronic data exchanges certainly have the potential to provide the regulators, including the Bank of England, with more real-time transactional information about what is actually happening. I do not necessarily want to see regulators wading through reams of information, but I want to ensure that, if need be, they have the scope to act. It is not clear that the Financial Services Bill, as it first entered Parliament in February, would have captured the LIBOR benchmarking situation within the regulatory perimeter. There were suggestions from the FSA that it was not something that it could deal with. That was not good enough and the Government have come forward with amendments. I want to ensure that those amendments allow the regulators to trigger inquiries and oversight for all benchmarking indices and arrangements, especially in the commodities market.

The hon. Member for Harlow (Robert Halfon), who has been campaigning on oil and petrol prices, has called for an OFT and FSA investigation into manipulation by oil firms in recent times. The United States Commodity Futures Trading Commission has raised questions about price fixing and manipulation in the silver market. That study was inconclusive, but questions linger over metals markets more broadly. The Minister’s good friend, the European Commissioner for Internal Market and Services, Commissioner Barnier, has suggested that all commodity indices should be covered in this way. Rather than waiting for European regulators to ensure that this happens, why do we not take this opportunity to deal with the issue?

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We should not just say that benchmarking means investments; it is vital that we put it beyond doubt that the question of commodities is included. It is a stitch in time to ensure that we cast the regulatory perimeter correctly. I commend amendments (a), (b) and (c) to Lords amendment 60 to the House.

Alison McGovern: I promise not to test your patience, Mr Deputy Speaker, or that of the House by speaking for too long. Some, I know, will be of the view that indices and benchmarks are dry, dull, technical subjects—[Hon. Members: “Never!”] Hon. Members may say that, but I suspect them of sarcasm.

I begin with an explanation of why I think this part of the legislation so important, and why the amendments tabled by my hon. Friend the Member for Nottingham East (Chris Leslie) are crucial. In my view, they relate directly to the subject that currently fills our newspapers and television screens—the indignity and horror of food banks. The reason my constituents, and those of other hon. Members, cannot just pop to the shops and buy food is that food costs more than the amount of money in their pockets. In the long term, the answer to that problem is not charity—grateful though we are for those efforts—but a food system that provides sustenance for people to buy in shops at a price they can afford. Price is not a technical, dry issue that ought to be left to economists in the academy; it should be of importance to every family, as I know it is to every MP.

Food prices unite those who are finding life difficult at the moment both at home and far away. Although I applaud the efforts of those who try to help people out, in the end we must seek a better solution. Whether we like it or not, since the 18th century this country has taken part in global trade. We had a strategic role in that which I will not bore the House with, but part of it means that we, more than others, have a special responsibility to understand global trading systems, not least the one that ensures there is enough food for us to buy here at home, and that farmers in this country and far away get paid a fair price.

This morning I was with the UN Secretary-General’s special representative for food security. He described two current problems in the commodity market that I hope will help people to realise why we must understand that phenomenon. First, global food prices are currently extremely volatile. Secondly, although prices are moving sharply up and down, they are trending upwards. That means that those most vulnerable to the price change in that commodity face an ever-worsening scenario as they try to feed themselves and their families. How can benchmarks and a better understanding of the data help? Well, when we understand those movements we can try to find out what is behind volatility in global prices.

Briefly, let me take hon. Members back in time to about 2005 until the end of 2007. Economists around the world were busy writing papers on derivatives and what we now call shadow banking, and saying that sharing risk in that way was a good idea and helped to manage investment and the finance markets globally. We now know that facts and information were available that we could not see, and my question concerns what is going on now that we cannot see, specifically in relation to food prices. Is there an issue with derivatives based on commodities? My hon. Friend has already given some indications of why we might think that.

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9.15 pm

The UN has done some work, and some academics around the world think there is a problem with derivatives based on commodities, and that just as sub-prime markets were an unseen problem for too long, there may be problems now that we cannot see. That is what makes benchmarks and indices so important. We need verifiable, trustworthy numbers that we can investigate to ascertain what is happening in global food markets. As I have said, this is not a techie, dry subject that matters only to economists and those who pore over numbers; the reality is that it matters to every one of our constituents, but most especially to those with the least money to spare.

Sheila Gilmore: Will my hon. Friend reflect on the fact that trading in commodity derivatives can skew investment and whole industries if not properly regulated? For example, I visited the jute museum in Dundee, where one display made the point that the jute lords made more from trading in futures than they made from production. That might have made them less interested in diversifying their manufacturing industry, which has completely died.

Alison McGovern: I thank my hon. Friend for that highly appropriate intervention. When the history of Great Britain is written, it will show that that part of the east coast of Scotland has had a great influence on economics throughout. The example from Dundee is a good one.

All hon. Members look back at global financial trading and markets and wonder how we got to the situation we found ourselves in. When the shadow banking market and complex derivatives and products were created, people became much more interested in them than in the real economy and the fundamentals of our economy. They saw the financial system as a servant to the rest of the economy rather than the other way around. I hope that view is shared broadly on both sides of the House. The Minister is nodding, but I am not entirely sure he agrees with that specific point. I will live in hope and imagine he does.

When the Minister is consulting on whether to broaden the Bill’s reach from the indices that I have mentioned to commodities, will he consider the impact of escalating food and oil prices not only on his constituents and mine, but on those who live closest to the extreme poverty line in the poorest countries? Will he consider the price of maize and wheat in very poor countries, where there is no social support system and no welfare state security net of the sort we have in this country? Will this country take a leading role in properly understanding what is happening in that market?

Geoffrey Clifton-Brown (The Cotswolds) (Con): To use the increase in food commodity prices as an argument for increased control over derivatives trading is a little far-fetched. Surely increased prices have much more to do with the increased world population and the weather than they have to do with commodities trading.

Alison McGovern: As I have said, this morning I listened to a presentation from the UN Secretary-General’s special representative on global food security. We discussed the matters that the hon. Gentleman mentions, but there was strong interest in whether the trading of commodity derivatives has played a role or had an impact in increased

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prices. The hon. Gentleman may suggest that its effect is negligible, and I would be happy to see any evidence he can forward to me. As I try to understand the phenomenon, I am happy to look at numbers and think about the evidence. I am an empiricist if nothing else; we should always consider the evidence. One of the problems to date, however, has been the availability of information, and making it clear and evident for all to see. I have tried to make the point that people looking at the world economy could not, for specific reasons, necessarily see the problems relating to sub-prime mortgages. As my hon. Friend the Member for Nottingham East has suggested, we should try to get ahead of the problem and ensure that there are no longer problems that we simply do not see.

Gordon Birtwistle (Burnley) (LD): The hon. Lady is making a good point, but did the person whom she met this morning give her alternatives to the derivatives and commodities markets? The worldwide food supply is decided by commodities buying. There is a drought in America, so the price of wheat goes up. There is heavy rain in this country, so we have problems ourselves. There are problems in Bangladesh and all around the world that push up the price of food. The same is true for oil; when there is a shortage of oil, the oil price goes up. Did the gentleman whom she spoke to this morning provide an alternative to what we have now? Maybe we could look at it and come up with some suggestions ourselves.

Alison McGovern: I thank the hon. Gentleman for his intervention and his compliment that he thinks my point is not wholly without merit, but it might test your patience, Mr Deputy Speaker, if I tried to shoehorn into the debate on the amendment possible solutions to the global food crisis and productivity in agriculture.

On derivatives, in agriculture production there is a need to hedge. There needs to be some kind of financial security to take account of unforeseen weather events and so on, so of course there is a need to hedge, but that is not what I am talking about. The question is whether some of the recent high-volume, high-speed forms of speculation and trading have had an impact on the global food price. I suspect that they might have, but it would be nice to have more information.

Mark Durkan: When some of us raised these issues in the previous Parliament, the then Government pooh-poohed the whole problem of speculation in relation to derivatives and so on. Does the hon. Lady share the concern that, as banks, hedge funds and all our pension funds try to work their way towards replenishing themselves after the crisis, there is a danger that they will go back to the bad ways of speculating in all sorts of commodities? Does she think the Government should prioritise this issue during their G8 presidency next year, and discuss with other Governments how to circumscribe the capacity of financial institutions to play dangerous games with this sort of speculation?

Alison McGovern: I thank the hon. Gentleman for his intervention, which was characteristically well made. I share his fear, and his point about the G8 is absolutely correct. It will be great to have the G8 summit in Northern Ireland. I am sure that the Minister has heard the hon. Gentleman’s point and will duly feed it back to the Prime Minister, because there is no doubt that it is important.

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In conclusion, underlying what we are trying to achieve is a financial system that has appropriate oversight. Given the importance—we now know this—to our everyday well-being and comfort of what appear to be financial technicalities and bits of information that people do not necessarily connect with the realities of life, I hope that the Government will pay the most careful attention to the results of the consultation on commodities, because we might have a genuine opportunity to set in train rules that will help us to spot the awful crashes and difficult phenomena of the future.

Greg Clark: It is a pleasure to respond to this short but important debate.

The hon. Member for Nottingham East (Chris Leslie) referred to the heated exchanges before the summer. They were necessarily heated because they concerned a major scandal that did great damage to the country’s reputation. The whole House feels strongly about this matter because the industry is vital to the country’s economic future. About 2 million people are employed in the financial services and related industries, most of them in capacities far removed from the ability—and still more the inclination—to engage in the kind of behaviour that came to light in the LIBOR scandal. It is a particular source of outrage that many ordinary working people across the UK with careers in the banking industry have been besmirched by the behaviour of people far from them. As a result, in their ordinary working lives and in conducting their activities, they found themselves bracketed with people who were shaming an industry that they were proud to work in—an industry associated with high standards of sobriety and propriety—and it is particularly important that we act decisively and firmly against the perpetrators of the manipulation that came to light in the summer.

The amendments do precisely that. All Members will recognise the pace with which we have responded, given that the allegations came to light in late June. We immediately asked an independent reviewer, Martin Wheatley, to look into the allegation. He conducted his work over the summer and reported in September. The Government considered all his recommendations and have adopted every one of them. The fact that we are here, in early December, reaching the final stages of legislation to act on those recommendations shows that the Government and the House have taken the allegations very seriously and are acting to restore the reputation not only of the City of London, but of the financial services industry in this country. I hope that the world will see that, when something comes to light that objectively is scandalous, we will not stand by and watch it happen, but will take legislative action immediately.

I shall refer to some of the points made by the hon. Members for Nottingham East and for Wirral South (Alison McGovern). Let me deal first with the independence of benchmark providers. There are, of course, lots of different benchmark providers, not all of which—it is important to say—were associated with the problems that LIBOR and the British Bankers Association had. The Wheatley review recommended that the BBA step aside from setting LIBOR. Future administrators, which may be private, commercial or otherwise—there is no restriction—will be subject to the type of regulation

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powers contained in these amendments. On LIBOR specifically, the tender committee chaired by Baroness Hogg is in its early stages. We will of course update the House on the progress it makes when it considers who will operate the LIBOR benchmark in future.

9.30 pm

The hon. Gentleman asked whether the powers in the amendments will be restricted to the UK or whether they will cover other jurisdictions. The answer is that there needs to be some connection with the UK, as might be expected under legislation passed by this Parliament, but the amendments take a broad approach to the term “connection”. There will be a sufficient connection if, for example, a statement that could have contributed to the manipulation of benchmarks was made in or from the UK, if the person at whom it was aimed was in the UK, or if there was an agreement or conspiracy that such activity would be entered into in the UK. We take a broad view of that. He also asked whether the Bill was wide enough to bring PRAs—price reporting agencies, rather than the Prudential Regulatory Authority—into regulation. The answer is yes, through the secondary legislation that is provided for by the Bill. Where PRAs are used in relation to investments, including derivatives, futures and options, they will be included.

The hon. Gentleman asked whether the powers should explicitly consider commodities. Let me make it absolutely clear that there is no question whatever but that it should be possible to include benchmarks such as those in the gas or energy markets. The consultation provides for that and it is precisely what Martin Wheatley’s report envisaged. Where benchmarks are used for financial investments and financial transactions, it is right that they should be vested in that way, but it would be wrong simply to vest powers for the regulation of every commodity in the Financial Conduct Authority, because commodities can represent many things. The term “commodities” is broad. We would not want the Financial Conduct Authority to regulate benchmarks relating to trading in live cattle or lean hogs, for example, even though they may fit the definition of “commodities”. The current definition means that the regulation of benchmarks by the FCA extends to all the benchmarks that involve financial matters, as is consistent with the Financial Services and Markets Act 2000 and the objectives of the FCA as a financial services regulator.

For that reason—this has been considered in the other place as well as this place—the powers that we are taking have not just LIBOR in mind, but the other benchmarks that could give rise to similar concerns and which in recent days have done so. The criminal offence will pertain to those benchmarks as well as LIBOR. They will ensure that investors, whether in this country or around the world, can have confidence that we have the fullest possible regime of sanctions to prevent and govern any demonstrated misconduct or attempted manipulation of LIBOR.

Let me say a little about the comments that the hon. Member for Wirral South made. She talked about her concerns about the use of derivatives in food commodities in particular. The use of derivatives in food markets can achieve precisely some of the advantages that she talked about—that is, enable farmers, whether in this country or around the world, to get investments into expanding production in anticipation of future demands. The process

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brings forward into the present day the needs of the future; that is what futures markets are about. It is important that farmers in this country, but also around the world, who might not have access to capital can make those connections, so that they can supply in advance what will be required in the future. There is some research, which I would be happy to share, on the contribution that derivatives have made to ensuring adequate food supplies not just in this country but around the world.

I shall conclude by saying that the regime that we are putting in place will provide a swift and robust response to the totally unacceptable set of practices that was unearthed before the summer. We have moved further and faster than any other jurisdiction in the world, and I hope that the House will see fit to approve the provisions tonight so that we can move forward and demonstrate to the world that this is the best jurisdiction in which to trade.

Lords amendment 59 agreed to.

Amendment (a) proposed to Lords amendment 60.—(Chris Leslie.)

Question put, That the amendment be made.

The House divided:

Ayes 200, Noes 266.

Division No. 119]


9.35 pm


Abbott, Ms Diane

Ainsworth, rh Mr Bob

Alexander, rh Mr Douglas

Alexander, Heidi

Anderson, Mr David

Ashworth, Jonathan

Austin, Ian

Bailey, Mr Adrian

Bain, Mr William

Balls, rh Ed

Banks, Gordon

Barron, rh Mr Kevin

Begg, Dame Anne

Benn, rh Hilary

Benton, Mr Joe

Berger, Luciana

Betts, Mr Clive

Blackman-Woods, Roberta

Blears, rh Hazel

Blomfield, Paul

Blunkett, rh Mr David

Bradshaw, rh Mr Ben

Brown, Mr Russell

Bryant, Chris

Buck, Ms Karen

Burden, Richard

Burnham, rh Andy

Byrne, rh Mr Liam

Campbell, Mr Alan

Campbell, Mr Ronnie

Caton, Martin

Champion, Sarah

Chapman, Jenny

Clark, Katy

Clarke, rh Mr Tom

Clwyd, rh Ann

Coaker, Vernon

Coffey, Ann

Connarty, Michael

Cooper, rh Yvette

Corbyn, Jeremy

Creasy, Stella

Cryer, John

Cunningham, Alex

Cunningham, Mr Jim

Cunningham, Sir Tony

Curran, Margaret

Dakin, Nic

Darling, rh Mr Alistair

Davidson, Mr Ian

Davies, Geraint

De Piero, Gloria

Denham, rh Mr John

Dobson, rh Frank

Docherty, Thomas

Donohoe, Mr Brian H.

Doran, Mr Frank

Doughty, Stephen

Dowd, Jim

Doyle, Gemma

Dugher, Michael

Durkan, Mark

Eagle, Ms Angela

Eagle, Maria

Edwards, Jonathan

Efford, Clive

Elliott, Julie

Ellman, Mrs Louise

Engel, Natascha

Esterson, Bill

Evans, Chris

Farrelly, Paul

Field, rh Mr Frank

Fitzpatrick, Jim

Flello, Robert

Flint, rh Caroline

Flynn, Paul

Fovargue, Yvonne

Francis, Dr Hywel

Gapes, Mike

Gardiner, Barry

Gilmore, Sheila

Glindon, Mrs Mary

Godsiff, Mr Roger

Goodman, Helen

Green, Kate

Greenwood, Lilian

Gwynne, Andrew

Hain, rh Mr Peter

Hamilton, Mr David

Hamilton, Fabian

Hanson, rh Mr David

Healey, rh John

Hendrick, Mark

Hepburn, Mr Stephen

Hilling, Julie

Hodge, rh Margaret

Hodgson, Mrs Sharon

Hoey, Kate

Hunt, Tristram

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

Lavery, Ian

Lazarowicz, Mark

Leslie, Chris

Lewis, Mr Ivan

Love, Mr Andrew

Lucas, Ian

Mactaggart, Fiona

Mahmood, Shabana

Malhotra, Seema

Mann, John

Marsden, Mr Gordon

McCann, Mr Michael

McClymont, Gregg

McCrea, Dr William

McDonald, Andy

McDonnell, John

McFadden, rh Mr Pat

McGovern, Alison

McGovern, Jim

McKechin, Ann

McKenzie, Mr Iain

McKinnell, Catherine

Meacher, rh Mr Michael

Mearns, Ian

Miliband, rh David

Miller, Andrew

Morden, Jessica

Morrice, Graeme


Morris, Grahame M.


Murphy, rh Mr Jim

Murphy, rh Paul

Murray, Ian

Nandy, Lisa

Nash, Pamela

O'Donnell, Fiona

Onwurah, Chi

Osborne, Sandra

Owen, Albert

Pearce, Teresa

Perkins, Toby

Phillipson, Bridget

Powell, Lucy

Qureshi, Yasmin

Raynsford, rh Mr Nick

Reed, Steve

Reeves, Rachel

Reynolds, Emma

Reynolds, Jonathan

Riordan, Mrs Linda

Robinson, Mr Geoffrey

Rotheram, Steve

Roy, Mr Frank

Roy, Lindsay

Ruddock, rh Dame Joan

Sarwar, Anas

Sawford, Andy

Seabeck, Alison

Sheridan, Jim

Shuker, Gavin

Skinner, Mr Dennis

Smith, rh Mr Andrew

Smith, Angela

Smith, Nick

Smith, Owen

Spellar, rh Mr John

Stringer, Graham

Stuart, Ms Gisela

Sutcliffe, Mr Gerry

Tami, Mark

Thomas, Mr Gareth

Timms, rh Stephen

Trickett, Jon

Turner, Karl

Twigg, Derek

Twigg, Stephen

Umunna, Mr Chuka

Vaz, Valerie

Walley, Joan

Watts, Mr Dave

Whitehead, Dr Alan

Williams, Hywel

Williamson, Chris

Wilson, Phil

Winnick, Mr David

Winterton, rh Ms Rosie

Woodward, rh Mr Shaun

Wright, David

Wright, Mr Iain

Tellers for the Ayes:

Chris Ruane


Tom Blenkinsop


Adams, Nigel

Afriyie, Adam

Aldous, Peter

Amess, Mr David

Andrew, Stuart

Arbuthnot, rh Mr James

Bacon, Mr Richard

Baker, Norman

Baker, Steve

Baldry, Sir Tony

Baldwin, Harriett

Baron, Mr John

Barwell, Gavin

Bebb, Guto

Beith, rh Sir Alan

Bellingham, Mr Henry

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

Brake, rh Tom

Bray, Angie

Bridgen, Andrew

Brine, Steve

Brokenshire, James

Brooke, Annette

Browne, Mr Jeremy

Bruce, Fiona

Bruce, rh Sir Malcolm

Buckland, Mr Robert

Burley, Mr Aidan

Burns, Conor

Burrowes, Mr David

Burstow, rh Paul

Burt, Lorely

Byles, Dan

Cairns, Alun

Carmichael, Neil

Carswell, Mr Douglas

Chishti, Rehman

Clark, rh Greg

Clifton-Brown, Geoffrey

Coffey, Dr Thérèse

Collins, Damian

Colvile, Oliver

Crabb, Stephen

Crouch, Tracey

Davies, David T. C.


Davies, Glyn

de Bois, Nick

Dinenage, Caroline

Djanogly, Mr Jonathan

Dorrell, rh Mr Stephen

Doyle-Price, Jackie

Drax, Richard

Duddridge, James

Dunne, Mr Philip

Ellis, Michael

Ellison, Jane

Elphicke, Charlie

Eustice, George

Evans, Graham

Evans, Jonathan

Fabricant, Michael

Fallon, rh Michael

Farron, Tim

Featherstone, Lynne

Field, Mark

Foster, rh Mr Don

Freeman, George

Freer, Mike

Fuller, Richard

Gale, Sir Roger

Garnier, Sir Edward

Garnier, Mark

Gauke, Mr David

George, Andrew

Gibb, Mr Nick

Gilbert, Stephen

Gillan, rh Mrs Cheryl

Glen, John

Goldsmith, Zac

Goodwill, Mr Robert

Graham, Richard

Grant, Mrs Helen

Gray, Mr James

Green, rh Damian

Greening, rh Justine

Grieve, rh Mr Dominic

Gummer, Ben

Gyimah, Mr Sam

Halfon, Robert

Hammond, rh Mr Philip

Hammond, Stephen

Hancock, Matthew

Hands, Greg

Harper, Mr Mark

Harris, Rebecca

Hart, Simon

Haselhurst, rh Sir Alan

Hayes, Mr John

Heald, Oliver

Heaton-Harris, Chris

Hemming, John

Henderson, Gordon

Herbert, rh Nick

Hinds, Damian

Hoban, Mr Mark

Hollingbery, George

Hollobone, Mr Philip

Holloway, Mr Adam

Horwood, Martin

Howarth, Sir Gerald

Howell, John

Huhne, rh Chris

Huppert, Dr Julian

Hurd, Mr Nick

Jackson, Mr Stewart

Javid, Sajid

Jenkin, Mr Bernard

Johnson, Gareth

Jones, Andrew

Jones, rh Mr David

Jones, Mr Marcus

Kawczynski, Daniel

Kelly, Chris

Kirby, Simon

Knight, rh Mr Greg

Kwarteng, Kwasi

Lamb, Norman

Lancaster, Mark

Lansley, rh Mr Andrew

Latham, Pauline

Laws, rh Mr David

Leadsom, Andrea

Lee, Jessica

Leech, Mr John

Lefroy, Jeremy

Leigh, Mr Edward

Letwin, rh Mr Oliver

Lewis, Brandon

Lewis, Dr Julian

Liddell-Grainger, Mr Ian

Lloyd, Stephen

Lopresti, Jack

Lord, Jonathan

Loughton, Tim

Lumley, Karen

Macleod, Mary

Maynard, Paul

McCartney, Jason

McCartney, Karl

McIntosh, Miss Anne

McPartland, Stephen

Menzies, Mark

Metcalfe, Stephen

Miller, rh Maria

Mills, Nigel

Milton, Anne

Mordaunt, Penny

Morgan, Nicky

Morris, Anne Marie

Morris, David

Morris, James

Mosley, Stephen

Mowat, David

Mulholland, Greg

Mundell, rh David

Munt, Tessa

Murray, Sheryll

Murrison, Dr Andrew

Newmark, Mr Brooks

Newton, Sarah

Nokes, Caroline

Nuttall, Mr David

Offord, Dr Matthew

Ollerenshaw, Eric

Opperman, Guy

Paice, rh Sir James

Parish, Neil

Patel, Priti

Paterson, rh Mr Owen

Pawsey, Mark

Penrose, John

Percy, Andrew

Perry, Claire

Phillips, Stephen

Pincher, Christopher

Poulter, Dr Daniel

Pugh, John

Randall, rh Mr John

Reckless, Mark

Redwood, rh Mr John

Rees-Mogg, Jacob

Reid, Mr Alan

Robathan, rh Mr Andrew

Rogerson, Dan

Rudd, Amber

Ruffley, Mr David

Russell, Sir Bob

Rutley, David

Sanders, Mr Adrian

Scott, Mr Lee

Selous, Andrew

Sharma, Alok

Shelbrooke, Alec

Simmonds, Mark

Simpson, Mr Keith

Skidmore, Chris

Smith, Miss Chloe

Smith, Sir Robert

Soames, rh Nicholas

Soubry, Anna

Spelman, rh Mrs Caroline

Spencer, Mr Mark

Stanley, rh Sir John

Stevenson, John

Stewart, Bob

Stewart, Iain

Stewart, Rory

Streeter, Mr Gary

Stride, Mel

Stuart, Mr Graham

Sturdy, Julian

Swales, Ian

Swayne, rh Mr Desmond

Syms, Mr Robert

Thurso, John

Timpson, Mr Edward

Tomlinson, Justin

Tredinnick, David

Turner, Mr Andrew

Tyrie, Mr Andrew

Uppal, Paul

Vaizey, Mr Edward

Vara, Mr Shailesh

Vickers, Martin

Villiers, rh Mrs Theresa

Walker, Mr Charles

Walker, Mr Robin

Wallace, Mr Ben

Walter, Mr Robert

Watkinson, Angela

Webb, Steve

Wharton, James

White, Chris

Whittaker, Craig

Whittingdale, Mr John

Wiggin, Bill

Williams, Stephen

Williamson, Gavin

Willott, Jenny

Wilson, Mr Rob

Wollaston, Dr Sarah

Wright, Simon

Young, rh Sir George

Zahawi, Nadhim

Tellers for the Noes:

Mr David Evennett


Mark Hunter

Question accordingly negatived.

10 Dec 2012 : Column 118

10 Dec 2012 : Column 119

10 Dec 2012 : Column 120

Lords amendment 60 agreed to.

Lords amendments 61 to 97 agreed to.

Mr Speaker: With the leave of the House, I propose to put Lords amendments 98 to 290 together.

Chris Leslie: Amendment 98 is in a separate group relating to clearing houses, and I would like to make some remarks.

Mr Speaker: The Minister will need to move amendment 98, and can do so.

10 Dec 2012 : Column 121

Clause 27

Powers in relation to recognised investment exchanges and clearing Houses of Parliament

Motion made, and Question proposed,

That this House agrees with Lords amendment 98.—(Greg Clark)

Mr Speaker: With this it will be convenient to consider Lords amendments 99, 122 to 127, 224 and 225.

Chris Leslie: I would have thought the Minister wanted to speak, as Lords amendment 98 is the lead amendment of a group relating to the extension of resolution schemes from banks and building societies to investment firms and in particular UK clearing houses. There is a wider set of issues, therefore.

UK clearing houses stand between two parties in a trade, ensuring that a deal goes through in the event of one party defaulting. Once a deal is agreed, the transaction is honoured even if one party goes bust.

The Government’s decision to extend a set of resolution arrangements to clearing houses is incredibly important, as the debates in the other place set out. Clearing houses are highly significant entities nowadays. After the 2009 G20 summit, it was clear that several hundred trillion dollars of market transactions, especially in over-the-counter derivative arrangements, were part of the clearing house ambit. Therefore, a failure in a clearing house could clearly mean a big problem—a series of problems—for the financial services sector more broadly.

I have a series of questions for the Minister, as I would be grateful for his help in respect of the provisions of this amendment and others in this group. First, I want to ask him about today’s Financial Times, the front page of which talks interestingly about the extension of resolution plan arrangements from covering just companies within the UK to an agreement between the United States and the UK that the Bank of England seems to have struck which will mean, for the first time, that there is a template for larger, serious, significant international financial institutions to have resolution arrangements that span borders. Clearly that is relevant to these amendments on clearing houses. [Interruption.] I can tell that hon. Members are very familiar with these arrangements. Clearing houses have a great deal of cross-border interoperability, they cut across jurisdictions and there is a need to co-ordinate their work. Will the Minister assure the House that steps will be taken to ensure that international efforts are made to promulgate resolution arrangements that also cut across borders for clearing houses?

Central counterparty clearing arrangements these days contain a requirement also to hold Government bonds as collateral. As we know, Government bonds are not what they once were; there have been some questions about their safety. The Minister needs to explain: are we guarding against the deterioration of standards in central counterparty collateral arrangements? If we are increasingly reliant on gilt-edged securities of an international variety, are we actually ensuring that there is sufficient strength behind our central counterparty clearing arrangements?

Finally, may I ask the Minister a further question? Basel III arrangements will be ensuring that banks that are members of clearing houses need to capitalise their exposure to central counterparty contingent liabilities. Can he just give us a sense of the impact on the UK

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banking system, particularly on its capital adequacy, of processes that will see a rapid change on central counterparty arrangements from an over-the-counter arrangement to an exchange-based arrangement? If the regulators are insisting more and more on exchange-traded arrangements in those clearing houses, there will be an imperative for those clearing houses to become more and more price sensitive and they will be more desirable for the market more generally. That is why we are seeing so many mergers and acquisitions of clearing houses. Are these costs eventually going to be finding their way on to customers and our constituents? I would be grateful if the Minister replied.

Greg Clark: Let me give a bit of context to amendments 98 and 225. Taken together, they make provision with regard to the Bank of England’s role in insolvency proceedings relating to a UK clearing house. The amendments will ensure that the Bank of England is put on notice of any application for administration in respect of a UK clearing house, of any petition for a winding-up order in respect of a UK clearing house, of any resolution for the voluntary winding up of a UK clearing house and of the proposed appointment of an administrator of a UK clearing house. That will give the Bank the opportunity to consider whether to exercise a stabilisation power provided for in part 1 of the Banking Act 2009 in order to minimise the impact of the clearing house’s failure on financial stability. Amendment 225 gives the Bank of England the power to direct insolvency practitioners appointed in relation to a company that is or has been a UK clearing house. The direction would operate without prejudice to the existing statutory requirements relating to company insolvency.

The financial crisis of 2008-09 highlighted many deficiencies in the regulation of the global financial system. Most importantly, we found that the disorderly failure of systemically important banks could have catastrophic effects on the stability of the UK and international financial markets.

The hon. Member for Nottingham East (Chris Leslie) mentioned the piece that featured in the Financial Times today, which was a joint paper, in effect, between the Bank of England and the Federal Deposit Insurance Corporation on plans for resolving global systemically important financial institutions. The Bank of England and FDIC paper is a perfectly proper collaboration between brother regulators across the world and is exactly the sort of approach we would expect regulators to take to make the financial system safer. It should be seen as part of the wider international and European work to deliver a credible resolution regime for the biggest banks and for—

10 pm

Debate interrupted (Programme Order, this day).

The Speaker put forthwith the Question already proposed from the Chair (Standing Order No. 83F), That this House agrees with Lords amendment 98.

Question agreed to.

Lords amendment 98 accordingly agreed to.

The Speaker then put forthwith the Questions necessary for the disposal of the business to be concluded at that time (Standing Order No. 83F).

Lords amendments 99 to 290 agreed to, with Commons financial privileges waived in respect of Lords amendments 122, 125 to 128, 138 to 140, 146, 182 and 203.

10 Dec 2012 : Column 123

Business without Debate

Delegated Legislation

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

Representation of the People

That the draft Electoral Registration Data Schemes (No. 2) Order 2012, which was laid before this House on 30 October, be approved.—(Greg Hands.)

Question agreed to.

European Union Documents

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

Single Market Act II

That this House takes note of European Document No. 14536/12, a Communication from the Commission: Single Market Act II - Together for new growth; and supports the Government’s aim of prioritising growth enhancing measures.—(Greg Hands.)

Question agreed to.

Business of the house (12 December)


That at the sitting on 12 December, notwithstanding sub-paragraph (2)(c) of Standing Order No. 14—

(1) opposition business may be proceeded with for three hours, and shall then lapse if not previously disposed of, and

(2) the backbench business set down for consideration may be entered upon at any hour, may be proceeded with, though opposed, for three hours, and shall then lapse if not previously disposed of.—(Greg Hands.)

Environmental Audit


That Ian Murray be discharged from the Environmental Audit Committee and Chris Evans be added.—(Geoffrey Clifton-Brown, on behalf of the Committee of Selection.)


Mr Speaker: With the leave of the House, we will take motions 9 to 11 together.



That Chris Evans be discharged from the Justice Committee and Andy McDonald be added.

Public Administration

That Michael Dugher be discharged from the Select Committee on Public Administration and Mr Steve Reed be added.


That Julie Hilling be discharged from the Transport Committee and Sarah Champion be added.—(Geoffrey Clifton-Brown, on behalf of the Committee of Selection.)

10 Dec 2012 : Column 124

Schizophrenia Care

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

10.2 pm

Mr Charles Walker (Broxbourne) (Con): Let me start by saying that I am a great enthusiast and a great optimist. I enthusiastically believe that in the area of schizophrenia we need to do more of what we do well and less of what we do badly—more of the good stuff and less of the bad stuff. I pay tribute to the fantastic men and women who work in the NHS in mental health; they are the unsung heroes. It is not the glamorous end of the NHS but it is, perhaps, the most important.

I want this to be an upbeat speech—I really do—but I think that at the beginning we must focus on what we do badly. First, I am very concerned at the fact that the life expectancy of someone who has a diagnosis of schizophrenia or psychosis is up to 20 years less than that of someone who does not have that illness or disease. I do not believe that that is acceptable in a first-world civilised society; we cannot tolerate it any longer. I am concerned that young and middle-aged men and women around the country who have a diagnosis of psychosis and who live with schizophrenia might well end up smoking 60 or 70 cigarettes a day, gaining huge amounts of weight and living pretty desperate lives. Their drug therapies cause them to feel pretty miserable and disconnected, and that is why we end up in this terrible and desperate situation of such a lowered life expectancy.

Secondly, we need a system in which people are not frightened. Being ill is not a pleasant experience. People are naturally fearful, but too many people suffering from psychosis or schizophrenia are very scared and very frightened far too much of the time. That is very upsetting for many people. It is upsetting for them and for their friends and families, and I am afraid it is upsetting for those of us who observe this going on and want to change things. Again I say, we are a first-world society and we cannot have people feeling frightened and separate.

Thirdly, we lock up far too many people who are ill. There are 7,000 people in secure units, many of whom should not be there, but we do not know how to get them out. We do not know how to take them out of a secure unit and reintegrate them into society. Those processes are not in place, so we remove people’s liberty, sometimes for their own good to stop them harming themselves, and in the most extreme cases to stop them harming others. But we must ensure that when they are in these places they feel safe and secure and that the systems are in place to enable them to return, as far as possible, to mainstream society.

Finally on the bad things that we must stop doing, only one in 10 people who are diagnosed with psychosis or schizophrenia are in work. We have an unemployment rate of 92% and we all know in this place that employment is the route to fulfilment: being in a career with friends and colleagues, having a sense of purpose, being able to get up in the morning to go to a place that is welcoming and to which we want to go.

Let us now be upbeat. What we need is a manifesto of good things. We need more and earlier interventions, because the quicker we can deal with a problem the

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more chance there is that it will remain manageable and the less likely it is to escalate to something far more serious. That is why we need early interventions.

Mr Brooks Newmark (Braintree) (Con): I appreciate that I did not speak to my hon. Friend about his debate, but I have been listening to him and I congratulate him on holding the debate. Does he agree that another bad thing that happens with schizophrenia is that people are left to roam the streets and end up homeless, and that a huge number of people are afflicted by schizophrenia and other mental illnesses with whom we need to deal?

Mr Walker: My hon. Friend makes a very good point. I have had an extremely good paper from St Mungo’s dealing with that very issue.

We also need to do more listening. We must stop talking over people who suffer with psychosis or schizophrenia. They are warm, live human beings. They exist. We tend too often to talk over them and about them, not to them. Certainly there will be times when they are in crisis, but when they are we need a crisis plan so that they can tell us how they want to be treated, looked after and cared for—how we can help to secure their dignity. Then we need to ensure that they have advocates who can sit alongside them and be their voice—someone they trust at a time of crisis, illness and distress.

We need more support for carers—the people who love them, the people who stand by them day in and day out, trying to do the right thing, trying to get them the care that they deserve and require—their champions. Let us not forget in this place the important role that carers play in being the champions. We need much more talking and listening to carers, involving them in the process. They will know so much more about the individual being cared for than probably anyone else.

Then we need to provide more training for people working in the mental health arena. It is a demanding environment. In the acute settings people tend to be admitted who are very ill. The threshold for admittance is so much higher now. The staff need to be trained to deal with and to care for these people. It is no reflection on the staff that I am asking for this. I want to stand shoulder to shoulder with the staff. We want to stand alongside them and help them to deliver the care that they want to deliver, and that their professional pride demands that they deliver.

Robert Halfon (Harlow) (Con): I congratulate my hon. Friend on securing the debate and on his knowledge of the subject. He talks about early intervention. I recently visited the North Essex Partnership NHS Trust, which works on mental health. It puts people into schools to identify children and young people who are developing such problems, which has a huge impact and manages to stop more serious problems developing later.

Mr Walker: My hon. Friend makes an excellent point on early intervention. It is about getting there before the crisis occurs and making sure that people who are at risk have the support they need to manage their illness so that they end up in a good place, not a frightening place.

We need more peer support. When someone goes through a mental health crisis, many people tell them that it will get better, but they might not be believed, as things can look pretty dark and desperate at the time.

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There are many professionals around, but perhaps that person wants to talk with someone who has been there, travelled through the fire they are going through and come out the other side, someone who can sit with them and say, “We’re going to work through this together. I’m not just saying this; I’ve actually done it. I’ve been where you are and I’ve come out the other side. I’m going to take you by the hand and we’re going to walk through this together.” That is peer support, and we need to encourage it and see more of it.

We need more intermediate services, because many people are terrified of going into acute care and too often the experience is not a good one. Being hospitalised is frightening. They do not want to go into acute care because they are terrified by that prospect. Let us think more about intermediate care. When things are getting on top of someone and they are feeling stressed out, that perhaps the ground is going from underneath them and that things are getting out of control, there should be a place they can go in the community, a crisis house, where they can say, “I need help, because I feel that I’m going to have some troubled times ahead.” There they can be told, “Come on in. We’re going to work together for the next couple of weeks. We’re not going to be a crutch and you aren’t going to be here indefinitely, but we will work together for the next five or 10 days or two weeks to get you back on your feet and out there again.”

We also need uniform reporting. I want diversity of provision, because out of diversity comes innovation, but I also want to know what is going on. I want to know when we are successfully meeting the needs of those with psychosis and schizophrenia, but I also want to know when we are not, because that is when we can start doing something about it. With heart disease, cancer or stroke, we can check the league tables and know exactly what is going on, but it is much more difficult with mental health problems, particularly psychosis and schizophrenia, so we need uniform reporting. I am concerned that the Care Quality Commission is stopping its in-patient surveys in mental health wards, which I think is a mistake. I think that it is regressive and that it needs to be revisited. I hope that I can bring the focus of the House to bear on that issue.

Patients need a voice. They need to be able to tell us what is and is not working. Most of all, we need to ensure that people have a chance of living fulfilled and complete lives and that a diagnosis of psychosis or schizophrenia is not the end of the road. They should not hear, “That’s it. Society will now turn its back on you. You’re in real trouble and you’re going to be removed.” We must have absolutely no more of that. We have an obligation to work together on mental health problems in this place and with the NHS and to say to people, “We’re going to work together to get you through this. You have a right to have a chance for a fulfilled, happy and productive life. What has gone before is not good enough, but what will come will be better.”

I have said that I am an enthusiast and an optimist, and I am optimistic. We have the bit between our teeth, we are moving ahead and mental health is being talked about, but schizophrenia and psychosis is a difficult area for politicians and for the public, because so much misinformation and nonsense has been talked about it for so many years. It is going to be the hardest mountain to climb, but climb it we must, because we have an obligation and a duty in this country to take everyone

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with us. We must not leave people behind because they are ill but take them with us on a journey together—a journey towards wellness.

I have spoken for far too long and I am now much more interested to hear what the Minister has to say. I conclude by saying this: I speak a lot about mental health, but I am fully aware that an army of people out there, professionals and charities, do mental health and do it extremely well. Mind and Rethink are fantastic organisations that campaign daily, hourly, by the minute to ensure that people with mental illness get a voice. As a result of their hard work, those people are getting a voice in here, and that is a good and positive thing.

10.15 pm

The Minister of State, Department of Health (Norman Lamb): I sincerely congratulate my hon. Friend the Member for Broxbourne (Mr Walker) on securing this debate on an incredibly important subject. It is good that in this House today we have debated people with learning disabilities and how they get treated by the system, and now we are debating people with schizophrenia. In the past, those two very important groups of people have often been rather neglected, and it is good that Parliament is focusing on them and how the system treats them. I pay tribute to my hon. Friend’s work as an advocate in mental health. It is very important that people speak up for those with mental health problems, and he and one or two other MPs have done us a good service by being prepared to talk about it openly. I pay great tribute to his work in this field.

This is a timely debate. The premature mortality that my hon. Friend mentioned, the stigma, the human cost and the statistics are as well known as they are shocking. Together they add up to a compelling call for action, and that makes the recent report, “The Abandoned Illness”, very important. It sets out how things must change, how services have to be more accessible, how staff have to be fully supported, how integration of services can change lives, and, of course, how people’s mental and physical health must be treated equally. Too often in the past, mental health has been seen as the poor relation. The Government have established the principle of parity of esteem, and we now have to make it a reality. This debate is an important moment at which to consider that.

The Government have published a mandate for the NHS Commissioning Board which sets out our key priorities for the service. The mandate goes further than ever before in setting out the priority that the Government give to mental health, and it makes it very clear that mental and physical health problems should be treated in a co-ordinated way with equal priority. We expect the NHS to demonstrate real progress on this by March 2015. We have also tasked the NHS with making progress in specific areas. Accessing care and treatment should be as easy for people with mental health conditions as for those with physical conditions, so we have asked the NHS Commissioning Board to consider new access standards, including waiting times, for mental health services. It is remarkable that in the past decade we have introduced waiting time standards for physical health—the 18-week wait—and yet in mental health there is no comparable standard. That has to change.