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House of Lords

Wednesday, 10 October 2007.

The House met at three o’clock: the LORD SPEAKER on the Woolsack.

Prayers—Read by the Lord Bishop of Chelmsford.

Banks: Sub-prime Lending

Lord Barnett asked Her Majesty’s Government:

Lord Davies of Oldham: My Lords, the Governor of the Bank of England meets Treasury Ministers regularly and often discusses topical market issues. In recent months, there have been more frequent discussions between the Governor and Ministers, which have covered sub-prime lending issues and the disruption of the global financial market that was triggered by problems in the US sub-prime mortgage market. The Chancellor of the Exchequer provided a Written Statement to Parliament on 8 October.

Lord Barnett: My Lords, I thank my noble friend for his Answer. The Governor of the Bank of England said recently that it was not his job to rescue banks from difficulties caused by their risky behaviour. Does my noble friend agree? If so, does he also agree with the Governor’s statement that the Bank of England is the lender of last resort? Can he reconcile the two statements for us?

Lord Davies of Oldham: My Lords, I do not think that the two statements are difficult to reconcile. The Bank of England is not there to underwrite all activities by any bank, however unwise they might prove to be. What is clear is that the Governor is the governor of the bank of last resort and we have in place components for the proper regulation of the market, to respond to vicissitudes. As will be recognised, there have been exceptional features in the market in recent months and lessons have been derived from that.

Lord Jenkin of Roding: My Lords, is the Minister aware of a speech made in Newcastle last month by Richard Lambert, Director-General of the CBI, which had the headline, “Three-way system failed the big test”? He was referring to the system that the present Prime Minister set up when he was Chancellor of the Exchequer, dividing the responsibility for supervision between the bank, the FSA and the Treasury. Do the Government agree that the system failed the test? Whose responsibility is that?

Lord Davies of Oldham: My Lords, it is clear that there were difficulties attendant on Northern Rock and it is equally clear that more careful analysis of that bank’s operations would perhaps have led to

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earlier action. That the system failed against a background in which, despite the difficulties in global financial markets, the United Kingdom is remarkably stable—and a great deal of these anxieties are distant from our shores—is surely testimony to the fact that basically the structure is sound.

Lord Newby: My Lords, the Minister said earlier that it was not the job of the Bank of England to underwrite all the business of any bank. Will he accept that the Bank of England is underwriting all the business of Northern Rock? Does he, like me, find it strange that this very week Northern Rock is still making new loans on the basis of very high multiples of income and very high proportions—over 100 per cent—of the value of the property, backed by the Bank of England?

Lord Davies of Oldham: My Lords, the noble Lord will recognise from his deep knowledge of these issues that operations of Northern Rock are being monitored very carefully by the FSA. He will appreciate that a guarantee was given to depositors to the bank, underwritten by the Government and the Bank of England, to give security, and that it is anticipated that Northern Rock will carry on its operations with that degree of successful development to lead towards eventually a wider rescue.

Lord Howarth of Newport: My Lords, have Ministers and the Governor discussed the problems of conflict of interest for the credit rating agencies, which, being paid by the financial institutions whose products they rate, have duly colluded in the alchemy of transmuting sub-prime mortgages into triple-A-rated bonds? If the game is to be worth playing, don’t you need to be able to trust the umpires?

Lord Davies of Oldham: My Lords, I am not sure that I follow the simile accurately, but I follow the sense of my noble friend’s question. It is important that we recognise that undue risks have been taken by a well regarded institution of considerable significance both to the banking sector and to the many people who put their trust in it. It behoves us to look at the whole question of credit rating and how credit is provided to ensure that we do not have this catastrophe again.

Baroness Noakes: My Lords, will the Government discuss with the Governor his assertion that the market abuse directive prevented a covert support operation? What representations do they intend to make to Brussels about that?

Lord Davies of Oldham: My Lords, we are looking at that factor. This is a developing situation that we need to analyse with the greatest care. All these institutions are subject to close scrutiny, not just by the Government; there is also public and open scrutiny. The noble Baroness will appreciate the work that is being done by the Treasury Select Committee in interviewing both the FSA and the Bank of England on these matters. Of course, the issue must

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be analysed properly, but there is no easy, flip answer to this significant development, which has certainly shaken the financial community and to which the Government need to respond properly in due course.

Lord Bridges: My Lords, may I make the following practical suggestion; namely, that the SFA should be requested to inform the firms that it supervises that they should not include in their accounts assets that have not been formally approved by accountants in this country under the procedures established by existing United Kingdom legislation? Thus, funds such as the US non-prime mortgage loans could not be used in balance sheets here without the approval of the SFA. I should explain that I have no current interest in the City of London, although on retirement from the public service I was for some years a member of the board of the Securities and Futures Association before the establishment of the existing authority and I served as a member of its disciplinary committee. The Minister may feel inclined to reply that this would bolt the stable door after the horse has gone but the purpose is to—

Noble Lords: Reading!

The Lord President of the Council (Baroness Ashton of Upholland): My Lords, it is Question Time.

Lord Davies of Oldham: My Lords, I am grateful to the noble Lord for his great expertise in this area and for his constructive suggestion on how this issue should be tackled. The whole House will recognise that in certain areas it is easier to be wise after the event, but his proposal needs to be looked at carefully and taken into account in future arrangements.

Parliament: Broadcasting

3.14 pm

Lord Vinson asked Her Majesty’s Government:

Lord Davies of Oldham: My Lords, the answer is no. Under our current broadcasting arrangements, responsibility for what is broadcast on television and radio rests with the broadcasters and the organisations which regulate broadcasting. Ofcom, the BBC Trust and the Welsh Fourth Channel Authority. They are independent of the Government and are responsible for safeguarding the public interest in broadcasting.

Lord Vinson: My Lords, I thank the Minister for that gracious reply. The object of this proposal is to try to raise the whole profile of Parliament, which many of us believe has slipped. There is the continuing disengagement between Parliament and the people, indicated not least by the ever-falling voting figures. This simple and relatively costless suggestion could be

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implemented by saying that a condition of a broadcasting licence would be that the main news bulletins should carry a brief summary of the work of Parliament on those days. At the moment—

Noble Lords: Question!

The Lord President of the Council (Baroness Ashton of Upholland): My Lords, could the noble Lord move to his question?

Lord Vinson: My Lords, I am leading to the question, if I may.

Baroness Ashton of Upholland: My Lords, I think the noble Lord needs to move rather swiftly.

Lord Vinson: My Lords, could the noble Lord give some consideration to that simple idea, which would strengthen the profile of Parliament and strengthen our democracy?

Lord Davies of Oldham: My Lords, the House will share the concern of the noble Lord. We would all like to see the broadcasting authorities guarantee that parliamentary proceedings are reported adequately. He will recognise that under the BBC charter the BBC is under an obligation with regard to the reporting of parliamentary proceedings.

On the more general issue, the noble Lord, in his initial Question, was requesting direct instruction from the Government, which would be entirely inappropriate. It is also up to Parliament to make sure that its work is better received elsewhere. That depends rather more on the activities in the other place and its relationship to the wider public. Of course, it will be recognised that this House and its authorities make strenuous efforts to broadcast to schools and to the wider public the contribution made by this House and the other place.

Baroness Bonham-Carter of Yarnbury: My Lords, I declare an interest as an associate of a television production company. Is not part of the solution to the point made by the noble Lord, Lord Vinson, to give broadcasters, and through them the viewing and listening public, easier and greater access to all the different activities that are conducted in this building and that those in charge of such matters need to be a bit more flexible?

Lord Davies of Oldham: My Lords, I have no doubt that improvements can be effected. The noble Baroness will recognise the very considerable improvement in the opportunities for broadcasters to have access to the House. The work of the Select Committees and the fact that the BBC has a Parliament channel guarantees publicity of that kind. She is right that this is a two-way process. The broadcasters have got to want to achieve access, and we, for our part, have got to facilitate that access where we can see that it is to the benefit of the public to whom, at the end of the day, Parliament is answerable.



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Lord Davies of Coity: My Lords, while having some sympathy with the terms of the Question, the issue of compulsion strikes me as rather strange. If the Government are now being requested to compel the broadcasting authorities to take a certain action, where do we stop? Is it not true that if we went along this line we would end up with the broadcasting system that the Soviet Union once had?

Lord Davies of Oldham: My Lords, my noble friend has made the point, somewhat more dramatically, that I made earlier at rather greater length and rather less graphically.

Lord Haskel: My Lords, is my noble friend aware that the House of Lords has a much-improved website? On the website, all the Questions, debates and other House of Lords matters are fully covered. Does my noble friend agree that is a big step towards involving the public more in our work?

Lord Davies of Oldham: It is, my Lords, and we should not underestimate the constructive work done in recent years by those with responsibility for publicising our operations and widening understanding of the role of the House. The work of the House is much more appreciated than it probably was a decade ago. Of course, we can always improve.

Baroness Carnegy of Lour: My Lords, the public do not necessarily turn to the website. Does the Minister agree that the idea that there should be a requirement in the charter is sound and simple? It is basic to the public’s relationship with Parliament. Has not my noble friend made a rather good suggestion which the Government should not simply push away?

Lord Davies of Oldham: My Lords, the noble Baroness will recognise, as the House does, that the BBC has a specific responsibility in its charter regarding Parliament and its proceedings. All broadcasters are expected to provide news channels that are concerned with accuracy and relevance. The bodies which exist to oversee broadcasters would take action if they thought that there was conspicuous neglect of the salient work of Parliament which was making news that did not appear on the broadcasts.

Zimbabwe: Company Assets

3.21 pm

Lord Blaker asked Her Majesty’s Government:

The Minister of State, Foreign and Commonwealth Office (Lord Malloch-Brown): My Lords, we understand that, regrettably, the Indigenisation and Economic Empowerment Bill, which requires the transfer of at least 51 per cent of foreign-owned companies to

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indigenous Zimbabweans, will become law shortly. We are certainly in favour of an environment in which Zimbabwe business and business people can prosper, and it is important that all Zimbabweans can benefit from the natural mineral and other resources available in Zimbabwe; but the indigenisation Bill will discourage foreign investment from investing and remaining in Zimbabwe. It will not ease the country’s economic crisis. I can assure the noble Lord that we are keeping in touch with British companies in Zimbabwe and discussing their concerns.

Lord Blaker: My Lords, is it not clear that Mugabe’s purpose is not to help the economy of his country, but to enhance his power of patronage by giving him the ability to bribe his cronies with businesses as well as farms? Does the noble Lord recall that President Mbeki not long ago said that African problems should be dealt with by Africans? Is not SADC positively aggravating the problems of southern Africa, because every time Mugabe attends a SADC ministerial conference he is greeted as a hero? That cannot be doing any good to the investment which southern Africa needs.

Lord Malloch-Brown: My Lords, I agree with every word. My one qualification is that the SADC negotiations, led by President Mbeki, are in their final stages in trying to agree conditions for free and fair elections. We should wait to see those results before arriving at a judgment, but, so far, SADC has disappointed us with the treatment it has accorded President Mugabe.

Lord Morris of Handsworth: My Lords, in light of the Prime Minister’s statement that he will not attend the Lisbon summit if President Mugabe is there, what advice is being given to our sportsmen and women who are required to be on the same field of play as representatives of the Zimbabwe Government? Does the Minister agree that the Prime Minister of Australia has given a clear lead in saying that Zimbabwe will not be able to tour Australia? Have the British Government any plans to give similar advice?

Lord Malloch-Brown: My Lords, we are reluctant to involve ourselves too directly in matters of sport. We hope that sporting bodies can arrive at this decision on their own, but we agree that we must look at the Australian example. My ministerial colleague in the other House said yesterday that we were reviewing this matter in light of the Australian decision.

Lord Avebury: My Lords, the Minister agreed yesterday, in the context of Burma, that banking sanctions have been effective in the case of Sudan and should be applied again with Burma. Would that not also extend to Zimbabwe? Can the noble Lord seek to mobilise international support—particularly in South Africa, where companies are also affected, as ours are—for an international ban on the use of the banking system by companies that have been taken over under Mugabe’s seizure?



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Lord Malloch-Brown: My Lords, we already apply banking sanctions and have seized the assets of Zimbabwean individuals named as being responsible for the crimes of this regime. I am afraid that here in the UK we have not found much in that regard, as I think that those responsible prudently moved their assets out of the UK before we did that. However, if there is action against British or South African companies in Zimbabwe, we will certainly want to look at the matter that the noble Lord has raised.

Baroness D'Souza: My Lords, what steps are being taken to ensure that human rights and democracy in Zimbabwe are brought up and discussed in the agenda of the EU-Africa meeting?

Lord Malloch-Brown: My Lords, first, we are pressing hard—and the Foreign Secretary will press directly for this at a meeting of European Foreign Ministers next week—for the appointment of an EU envoy to visit Zimbabwe before that summit and report back to the EU and the summit on the human rights situation in the country. Secondly, Britain, along with others, continues to support human rights activists inside Zimbabwe so that they can try in a neutral, objective way to bring attention to human rights abuses there.

Lord Tebbit: My Lords—

Baroness Park of Monmouth: My Lords—

Lord Acton: My Lords—

The Lord President of the Council (Baroness Ashton of Upholland): My Lords, each side has spoken but, if we were going in rotation, I think that it would be the turn of the Conservatives.

Lord Tebbit: My Lords, does the Minister recollect that the Question asked what steps the Government are taking to protect British interests in Zimbabwe? What has he said today that will cause Mr Mugabe to shiver in his shoes and draw back from what he is doing?

Lord Malloch-Brown: My Lords, as always, the noble Lord is forensically correct in his question. The answer is: probably very little. The British Government have taken a number of steps and have pressed the rest of the international community to take more steps against President Mugabe. However, there is no doubt that he seeks to turn this on us by arguing that we are merely perpetrating a continuation of some colonial action against him. It is vital that we persuade his African neighbours and the rest of the international community to share our outrage and combine together on taking other steps against this Government.


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