Lord Davies of Oldham: My Lords, it is not the Governments policy that commercial banks should not be allowed to fail. As the Treasury, the Bank of England and the Financial Services Authority set out in their recent consultation document, Financial Stability and Depositor Protection: Further Consultation, reducing both the likelihood and the impact of bank failures is a government objective, as the disruption for consumers and the effects on the economy of failure may be large. As also explained in the consultation document, however, a no-failure regime is neither desirable nor possible.
Lord Barnett: My Lords, I think that my noble friend is saying that it is not the Governments policy to bail out banks. I am delighted to hear that the Government have no intention of bailing out incompetent bankers, but we do not need doom-mongers to tell us that many banks are having great difficulties. Has my noble friend been around city centres recently? In Manchester, for example, large numbers of new blocks of flats are empty, presumably financed by banks, which are clearly having some trouble. He said that the situation will be regulated by the Bank of England and the FSA. It is important that he tells us precisely which is the regulator concerned. Is it the FSA under the new chairmanship of the noble Lord, Lord Adair Turner, or is it the stability commission chaired by the former Governor of the Bank of England and the present governor?
Lord Davies of Oldham: My Lords, my noble friend will have to show a little patience. We intend to produce a Bill to change and strengthen the regulation of banks and to define quite clearly the responsibility of the authorities. We will proceed with that Bill in the autumn, but we also intend to produce crucial draft clauses before the Recess to outline government proposals.
Lord Peston: My Lords, I am relieved at my noble friends Answer about government policy, but is he aware that it has been widely believedit certainly was in my time as an economist for more than 40 yearsthat Treasury policy is that under no circumstances should a joint stock bank ever be allowed to go bankrupt? While I am pleased by what he said today, is he aware above all, given that commitment from the Government, that there is a serious moral hazard here,
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Lord Davies of Oldham: My Lords, the banks do not need government predictions on that matter; they can look at the example of Northern Rock and the costs sustained thus far by the shareholders. However, it will be clear that we intend to strengthen the supervisory regime for banks to ensure that they take the necessary measures before reaching the crisis level to which Northern Rock descended.
Baroness Noakes: My Lords, the noble Lord, Lord Peston, referred to loss of shareholder value, but there are also the concerns of individual depositors for deposits over £35,000. The recent refinancings have raised levels of concern in that regard. What will the Government do to reassure those depositors?
Lord Davies of Oldham: My Lords, that is an important consideration. As the House will recognise, guarantees were given to depositors with regard to Northern Rock and to all depositors with regard to the banks. The Financial Services Authority, which takes responsibility for this level of protection, has proposed in its consultation document that the level be raised to £50,000. The debate on this matter will of course continue and will be a part of discussions on the Bill, which we will introduce later this summer, as I indicated.
Lord Howe of Aberavon: My Lords, does not the fact that the Minister was unable to give anything like a precise answer to the very precise question posed by his noble friend Lord Barnett indicate that we are starting a period of highly undesirable uncertainty in a very important area of the economy?
Lord Davies of Oldham: My Lords, it will be appreciated that the Government stabilised the position during the crisis over Northern Rock. The guarantee to depositors was of the greatest significance and put an end to the threat or possibility of a run on another bank. However, the noble and learned Lord is right that we need security with regard to these issues. It is clear that the supervisory regime for banks needs to be tightened and improved. That is the burden of the legislation that we will put before the House later this year. Of course, that will be to guarantee as far as we are able that the banking system is on a secure footing, while at the same time not giving the absolute guarantee that banks can never fail.
Lord Newby: My Lords, I am sure that the Minister will be aware that at the time of Northern Rocks nationalisation it was envisaged that the Banking Reform Bill would come before your Lordships House before the summer. He will accept that there have been considerable delays in bringing it forward at a time of increased and increasing concern, among the banks and individual depositors, about the scale of the banking crisis. Can he give us an absolutely clear assurance that the Bill will come before Parliament well before the end of the spillover session when we get back in October?
Lord Davies of Oldham: My Lords, I have learnt in my short time at this Box not to give absolute guarantees about future action. However, I assure the noble Lord that what he seeks is the Governments intention.
Earl Ferrers: My Lords, on banks failing, the Minister said earlier that all banks had to do was to see what happened to Northern Rock. Does that mean that the Government will nationalise any bank or building society that appears to be in difficulty, provided that they fall into difficulty within the next 12 months, which is the time that the Government have allowed themselves for nationalising what banks they like?
Lord Davies of Oldham: My Lords, the lesson to be derived from Northern Rock is that the Government will seek to guarantee depositors against the loss of their resources up to a sum in excess of that which obtained during Northern Rock. Secondly, if mistakes are made at a catastrophic level, the costs will be borne by shareholders. Also learnt from Northern Rock is the necessity of improved supervision of the banking sector to guarantee as far as we are able that nothing like Northern Rock occurs again.
The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Andrews): My Lords, the report was commissioned to inform the Church of Englands internal discussion about welfare provision. It would be premature for the Government to anticipate the churchs considered views on the report by making a formal response at this stage. We have discussed the report with the church and have agreed to facilitate cross-departmental discussions on the issues raised.
Baroness Cox: My Lords, although I am grateful for that indication that there is an intention to establish a working group on the issues raised, it is a little harder to thank the Minister for her inability to reply to the Question, especially as the report was endorsed by the Archbishops of York and Canterbury and commented on by her right honourable friend in another place, Hazel Blears. Therefore, will the Minister take this opportunity to put on record the Government's deep appreciation of the many ways in which the Christian churches and other faith-based traditions make contributions to our national life in so many sectors such as the National Health Service, the voluntary sector and international development?
Baroness Andrews: My Lords, as I explained, we are waiting for the church's own response to the report, which is merely courteous. We will certainly take up the archbishops joint challenge to consider the report very carefully. I am happy to endorse what the noble Baroness says. We have a unique and instinctive partnership with the church. We want to encourage
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The Lord Bishop of Leicester: My Lords, I am grateful to the Minister for her generous remarks about the Church of England and its work in partnership with others. Is she aware that clergy and congregations throughout the country are to be found running post offices, cafes, doctors surgeries, asylum rights centres, homeless, outreach and bereavement counselling, job creation and economic regeneration programmes, eco-initiatives, youth clubs, peace networks and campaigns for the worlds poor? Will she acknowledge that that establishes the Church of England in a lead position in relation to reaching the most disadvantaged sections of our society? Will she therefore commit to pursuing the dialogue with the Church of England about how these recommendations can be taken forward?
Baroness Andrews: My Lords, what an extraordinary list. I think in this context of the Archdeacon of Leicester, Richard Atkinson, and his work with the New Deal for Communities in a very deprived part of Leicester, Braunstone. He has enabled that community to put itself back on its feet after many years of neglect. That work is replicated in many parts of the country. I am delighted to say that, alongside the interfaith framework, we will also be publishing the work that we have done with the Church Urban Fund, which encourages local action and celebrates the excellent case studies that are going on in terms of local partnership.
Lord Clarke of Hampstead: My Lords, does my noble friend agree that parts of the report give cause for concern for our society? In particular, I refer to the widely held perception of respondents that the Government are positively excluding the church in matters of faith? I would appreciate it if my noble friend could disabuse me and others of that view. In particular, will she confirm that churches, as we have just heard from the right reverend Prelate, are a great comfort to our society?
Baroness Andrews: My Lords, I am very happy indeed to confirm that. We were rather disappointed with the report because we believe that the instinctive partnership that we have may be hard to evidence in detail because much of the churchs work is hard to evidence in detail. However, it goes back a long way and has a great future. One problem was that none of the authors of the report came to talk to my officials in the department who work in the cohesion and faiths division about the work that we are doing. I have a great deal of evidence of how we are working with the third sector and faith-based charities throughout the country to reach those parts of our communities that no other organisation can reach.
Lord Newby: My Lords, I first declare an interest as the spouse of a member of the clergy. Is the Minister aware that one of the main reasons why churches do not offer more youth and other community provision is that they face high hurdles in terms of the application process and criteria that they have to meet in order to bid successfully for government funding? Will she urge her colleagues to review that bidding process in order to make it easier for churches and other secular groups based in the community to bid successfully for government programmes?
Baroness Andrews: Yes, my Lords. The noble Lord has identified a real problem: the commissioning processes are elaborate and small organisations and church organisations sometimes have difficulty in accessing funding. We are looking at a whole programme of better commissioning, of which I hope the Church will be able to take advantage, as well as better training for local authorities and councillors, who need more skill in commissioning the right people to deliver the right services.
Lord Dixon-Smith: My Lords, I am not a historian but, looking at our history, the Christian ethic is a great driver of development in modern society. Do the Government still accept that that ethic is the skeleton on which the whole of modern UK society hangs?
Lord Anderson of Swansea: My Lords, the Charity Commissions data and system of classification were found to be very weak, with a conscious focus on minority communities to the relative exclusion of the Christian faith. Will my noble friend examine this finding and say whether the Government will consider giving the Charity Commission additional resources to reorganise its measurement criteria?
Baroness Andrews: My Lords, the best way to answer that is to quote from the chair of the Charity Commissions letter of 14 June to the Times. The Charity Commission found that the evidence base was slightly dodgy in some ways and states:
The report claims we underestimate and thereby selectively disadvantage other Christian charities. It bases this claim in part on a complete misconception about how we categorise registered charities, and in part on the fact that many Christian charities are currently exempted from registration.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord McKenzie of Luton): My Lords, we are continuing to make progress, and it remains our aim to ratify the convention by the end of the year.
Lord Morris of Manchester: My Lords, as before, I am grateful to my noble friend. Can he say where we stand now in relation to the optional protocol and whether, in ratifying the convention, the Government will make any substantive reservations? How will Ministers involve disabled peoples organisations in the work of the Convention Monitoring Committee, in keeping with the requirements of Article 34? And finally, since the convention must lead to an increasingly central role for disabled people in planning their own rehabilitation and programmes for independent living, will the Government be empowering their organisations with the resources necessary to help them to do so?
Lord McKenzie of Luton: My Lords, I am pleased that my noble friend continues to press us on the signing of this convention given the central role that he played in ensuring that it came into being. He asked me about the optional protocol. The answer that I can give at the moment is the one that I always givethat we will consider it in the context of our overall ratification work and in light of the review that the Ministry of Justice is conducting into the accession to the similar protocol to the Convention on the Elimination of All Forms of Discrimination Against Women. But let us remain optimistic about that.
My noble friend will be aware of my colleague Anne McGuires Statement on 6 May setting out the reservations identified by the MoD, the DCSF and the Home Office. Other departments have identified areas where the position is not yet clear but progress continues to be made. Engagement on the monitoring of the convention is hugely important. The UN monitoring committee has now been set up under Article 34, but we will consult disabled peoples organisations when we nominate experts for membership after ratification. Finally, it is crucial that we engage with disabled people as we take forward our adherence to the convention and our whole range of disability discrimination policies.
Lord Skelmersdale: My Lords, surely the point of an optional protocol is that it is optional. Therefore, the convention can be ratified without any reference whatever to it. Is the real reason that we have this hang-up, and therefore delay, Article 24, on education, or Article 19, on independent living and being included in the community?
Lord McKenzie of Luton: My Lords, the noble Lord is right: the protocol does not have to be signed to enable us to ratify the treaty. As we have discussed before, ratification can take place only after we have fully scrutinised our laws and processes to make sure that when we do sign up and ratify we can fully carry out our responsibilities. My honourable friend Anne McGuire set out the areas where reservations were being considered. Since the Statement on 6 May, issues around accommodation and choice of place of residence
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Lord Lester of Herne Hill: My Lords, we on these Benches greatly welcome the Governments intention to ratify this important convention. Before they can do so, as the Minister said, they must be satisfied that our domestic law is compatible. I have given notice to the Ministers office of what I am about to say, so that he can answer in an informed way.
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