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In that context, I echo some of the concerns about the banking merger. Given the turmoil in the financial markets and the international situation about which we are all deeply concerned, it is inevitable that we should go down this road. However, once things have settled down, longer term issues in relation to individual consumers and, in particular, small businesses will arise. As the noble Lord, Lord Razzall, said, there are many flaws in the retail banking system and the banking system as a whole, but the combination of some degree of intervention by regulators, the Government’s commendable activity on financial inclusion and competition within the banking sector has extended banking and credit facilities to a swathe of the population and vastly increased their quality of life as a result.
The fact that we are now merging, with government funding support, into an organisation which will control about 30 per cent of the retail banking system and about 30 per cent of mortgages must give us cause for some degree of concern. I have written to my noble friend on this issue and suggested that, from a consumer point of view, a number of concerns need to be addressed. I echo the words of my noble friends Lord Borrie and Lady Kingsmill that when things have settled down the OFT needs to have a longer-term look at the operation of competition within the banking sector. Within the mortgage sector, particularly given the equivalent turmoil in the housing sector, it is important that the OFT is specifically committed to looking at the mortgage sector in its next annual plan and at how it extends mortgages to both individual consumers and small businesses.
Also in this context is a hotchpotch of different regulatory activities for what most people regard as normal banking. If you go for a loan, it is one sector; if you go for a mortgage, it is another; and if you go
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The noble Lord, Lord Razzall, also referred to the local situation. Clearly consumers, by and large, both business and individual, operate in their locality. If there is a restriction of competition as a result of this merger in certain localities, particularly in the more remote localities, that will be an issue which the Government and the competition authorities will have to address. I hope the OFT will also at some point, whatever the timescale, look at that dimension as well.
Finally, and somewhat cheekily, I suggest that consumer institutions ought to be represented in the newly-merged bank. It would behove the management of the new bank to establish internally a proper and authoritative consumer panel representing both individual and business interests. That would give a lot of reassurance to consumers and to all parts of this House.
Lord Cotter: My Lords, I welcome the Secretary of State to his new role and thank him for his excellent speech. I shall be brief—I wish to raise only one issue—but I hope I will not put my foot in it as I characteristically do sometimes. As the Secretary of State may recollect, shortly after his departure from his second role in government he entered a lift in which I was going upwards, as it were. I said to him, “Are you going up?” He said, “I wish I was”, and his characteristic humour came through. I thought that was very good and I shall try not to put my foot in it again.
The Secretary of State knows of my long-term interest in small businesses and I am in touch with his department on a number of issues. I hope that under the present circumstances of the merger and the influence that the Government have through the banking sector we will see small businesses being treated fairly and helpfully. The small business sector provides an awful lot of work and that is why it is extremely important. Small business could suffer and big business is suffering. I welcome the Secretary of State in his role as a champion for business—which I know he will be—and I hope he will also be the champion for small business.
On that note, I hope I will hear back from his department shortly on a number of points that I have raised.
2.15 pm
Viscount Eccles: My Lords, in joining the welcome to the Secretary of State, I should like to go back 50 years—he went back 50 years—and describe to him my experiences in the Grand Hotel, Hartlepool, where I frequently found myself negotiating the annual wage round with the local unions. I remember that one of their strongest arguments was the need for wellington boots for their many children.
I follow the noble Lord, Lord Borrie, in his argument. He, quite significantly, used the word “takeover”, and it is important for the House to remember that there is
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I declare an interest. I have been for a number of years a small shareholder in Lloyds TSB; of course, now I am a very small shareholder in Lloyds TSB. I am a member of the Merits Committee and it might be useful if I describe the experience of that committee in considering this order.
The order was laid on 7 October. At that time the solution to the banking crisis was being taken along institution by institution. On 8 and 13 October, we received the overall plan, which covered the eight leading banks to start with and then was to be spread to the whole sector. In the regulatory impact assessment before the Merits Committee, only two solutions were proposed. This was written on 3 October and came to us, unsigned, via the Minister, although, of course, I assume the original copy in the records will have a signature on it. It proposed two options: one was to do nothing and the other was to lift competition law restrictions. But, by the time we came to consider the order on Tuesday of this week, there was a third option—that the two banks should remain independent as they are both eligible to be recapitalised under the new scheme. Indeed, there are agreements in the Library, signed by the Treasury but not signed yet by either Lloyds TSB or by HBOS, which provide for £6 billion of preference and open offer ordinary shares to Lloyds TSB and about twice that to HBOS. Around £17.5 billion has been committed. But these agreements stand up independently, as they have been written; they are not dependent the one upon the other. So the Statement made to this House which said that the acceptance of these agreements by the banks and the confirming of them by the Treasury was dependent on the merger has not been followed in the structure of the arrangements that have been made.
The most important point that we are asking the Secretary of State to consider is not whether we should pass this order but whether he will ever use the powers that he will be granted under it. That is the crucial question. The noble Lords, Lord Razzall and Lord Borrie, asked him to think again about whether he should exercise the powers which no doubt Parliament will grant him.
The Secretary of State said that he would take very careful note of what the Treasury, the Bank of England and the FSA had to say. I should like formally to add the OFT to that list. It is due to make a report to him at the end of next week—on 24 October, I think—and this order cannot come into effect until 24 October. I should like the noble Lord to confirm to the House that he will wait until he has studied not only the advice from the present players but the report from a new player about this proposed takeover of HBOS by Lloyds TSB.
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In the mean time, I offer a little thought. It is said by the Secretary of State’s department that both banks want to continue with the talks. I would think that Lloyds TSB is a lot keener than HBOS—certainly the reports indicate that. Did the HBOS leadership put up a white flag and just depart or was it pushed? It is not very clever for the leadership of HBOS to have departed. It is rather like the captain leaving the bridge when the boat is sinking.
The fundamental question then becomes: is it wise to continue with what is being proposed? If we take short-term considerations into account, Lloyds TSB is among the stronger of the banks at this troubled time. It has some problems of its own. HBOS has, under the Halifax title, what I believe to be a very sound mortgage book. Under the Bank of Scotland, it has a lousy commercial loan book. I may be wrong about that or I may be right; I am going on analysts’ reports. Past experience of takeovers is that the majority do not deliver what is promised at the time that they are proposed. In fact, the great majority deliver significantly less, and quite a large number are failures. In my view, Lloyds TSB’s ambition should give way to common sense. It should not risk its own position, and it is very much against the public interest that it should do so. We need it, and we do not need it to be tied up with a highly complicated task which may indeed prove to be insurmountable in the problems that it brings.
If we look at the matter in the longer term, I should like to think that the rescue plan for the banks—their recapitalisation—will work. I think we are all optimistic, and it is a good sign that out of the eight to which the proposals were first made, only three have taken up the opportunity. If this recapitalisation is a success, in the longer term I do not think that anybody would support a fully investigated takeover of HBOS by Lloyds TSB. We should not just be focused on the short term. Let us hope that the solution to that is well in progress. We should still think about the longer term.
Lord Mandelson: My Lords, I thank the noble Viscount, Lord Eccles, for his kindly reference to the Grand Hotel in Hartlepool. He will be interested to know that it has undergone a tasteful refurbishment since he last visited, and I am sure that there will be a welcome there for him.
Let me say to the noble Lord, Lord Razzall, that I am only too well aware that my reputation precedes me. Should I ever forget it, I know that my friends in the press will be there to remind me. And to the noble Lord, Lord Hunt, I say that I am very well aware that I am here to toil, not to spin. In that context, I will take very seriously the accountability that I have to Parliament through this House. I will extend that accountability in ways to the other place, but at this Dispatch Box, I know where my duty lies.
I commend to the noble Lord, Lord Bilimoria, the article I presciently wrote for the Guardian, before I realised that I was going to be standing at this Dispatch Box, on the need for a new Bretton Woods. I stand by every word of that article which, I am glad to say, coincides with the views of the Prime Minister.
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I say to my noble friend Lord Whitty that it is true that the relationship between a director of campaigns and communications and a general secretary in a fraught general election campaign can be a little fraught. The campaign to which he was referring was the famous “Red Rose” campaign of 1987, which was subsequently described by Private Eye magazine as “Labour’s brilliant election defeat”. Funnily enough, I turned up a note that my noble friend left me at the end of that campaign in which he wrote, if I recall it correctly, that, “If at times it might have appeared otherwise, I would like to place on record my appreciation of your role and contribution to the result of this election”. It could have been interpreted as a little double-edged, given that the result was a Tory majority of well over 100. I think we gained a princely 28 per cent of the poll on that occasion. But, as history records, we lived to fight again.
I thank noble Lords for their consideration of this very urgent and necessary measure and for today’s frank and useful debate. I should like to offer one wider observation arising from something that the noble Lord, Lord Hunt, said, and also offer an important caveat. The wider observation is about the general economic situation that we face. I believe very strongly that we should neither exaggerate nor downplay the wider economic consequences of what has happened internationally in the banking system. It will be a struggle for us, there is no doubt at all about that, and there are no overnight quick fixes to the challenges that we face. Equally, the UK economy has some innate strengths, many very strong companies—as I know, because in my previous job I was championing them as well as those across the European Union—and we have among those companies some excellent positions in overseas markets. I hope that no one, whatever their political affiliation, will be tempted to play politics with the banking crisis in order to make out that things are worse than they are, because that will help no one. So I welcome the noble Lord’s remarks in that context.
2.30 pm
The caveat is this: the order that we considering is brought forward to allow for the careful consideration of financial stability as part of our assessment of the proposed merger between Lloyds TSB Group and HBOS. This debate, therefore, is not about the assessment, which I have yet to undertake. I will do so following receipt by me of the OFT’s recommendations on the competition and public interest issues which are due by 24 October. I have an open mind to both the competition and the public interest considerations.
The noble Lord, Lord Hunt, asked two specific questions. The first concerned the regulatory cost of the order. There are no direct costs on business as a result of the amendment, because it simply introduces a fresh public interest consideration. Secondly, the European Commission has approved the Santander takeover of Alliance & Leicester. That arises because two-thirds of its turnover is outside the UK and the competition issue is dealt with by the Commission, which is not the case with Lloyds/HBOS.
The failure of a bank or building society could leave individuals and businesses unable to access savings, raise finance or meet their day-to-day financial obligations.
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Financial services account for all but 9.5 per cent of UK GDP, while HBOS plc alone manages around one-fifth of residential mortgages in this country, holds one-fifth of all UK current accounts and employs tens of thousands of people. In such circumstances, the Government have a responsibility to act. This Government are committed to do all they can to ensure that our banking system functions effectively for the stability of our economy and good of our society.
A dynamic economy needs open, flexible markets. This Government remain absolutely committed to ensuring a regulatory framework that promotes competition, improves productivity, drives innovation and protects the vital interests of businesses but also, I say to my noble friend Lord Whitty, of consumers as well.
It is critical now that Governments work together across the international system to assure stability and responsible risk-taking in their own economies and the global financial system as a whole. Therefore, the actions that the Government have taken and measures that we have put forward are the end of the beginning; they are not yet the beginning of the end. There is plenty more that Governments have to do, but plenty more in particular that Governments have to do together to put in place the international regulatory systems that we have learnt from this crisis are essential to be created.
In addition to the measures currently being implemented at an international and national level, the powers set out in this order will enable quick and comprehensive action to be taken in the assessment of proposed mergers that could bolster financial stability in the UK economy. The order will allow the Secretary of State for Business to base final decisions on the vital public interest of financial stability, alongside competition issues. There is no question of putting aside or disregarding competition issues. They will continue to be monitored, and any abuse carefully assessed and acted upon. I emphasise, and do so in particular to my noble friends Lady Kingsmill and Lord Borrie, that all normal powers remain available to the competition authorities to protect consumers now and in the future. I understand the concerns that have been expressed and we will be vigilant. I do not, however, want to anticipate any time limit on that vigilance. Therefore, I do not envisage a one, two or a three-year review following whatever decision I take on the merger in due course. I will not be drawn on conditionality in advance of my decision, but I assure your Lordships that, should a decision be taken for the merger to go ahead, we will not relax our vigilance at any time when it comes to the proper protection of consumers. I am sure that the prospective management of this potentially merged bank will have heard the
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The powers contained in this statutory instrument will be reserved for these exceptional circumstances where vital public interest issues are at stake. Now is such a time and we must take the action that we are proposing. I commend the order.
On Question, Motion agreed to.
Planning Bill
2.37 pm
House again in Committee on Clause 36, Amendment No. 176.
Lord Greaves: We resume debate on this long and varied group of amendments on applications for development consent and consultation on them. The lead amendment in the group was moved some hours ago by the noble Lord, Lord Dixon-Smith. We have a number of Liberal Democrat amendments, 10 in total, in the group, to which I shall speak in a minute. In addition, my noble friend Lady Hamwee and I have added our names to the three amendments from the noble Lord, Lord Jenkin, to which he has already spoken. I am not sure that the digression into building a highway tunnel under the Lake District was entirely appropriate in this debate, and I do not think that the Minister would want us to go that way. The idea of a road tunnel being built under Great Gable and Bow Fell would not immediately gain our support—we wonder where it would come out at each end. As somebody who has been peripherally linked to a campaign against building a similar road under the Vignemale in the Pyrenees, I would not support it. However, we support everything else said by the noble Lord, Lord Jenkin, with great enthusiasm.
I also added my name to the two amendments tabled by the noble Lord, Lord Judd, about national parks. I will briefly return to the issues that we talked about on Tuesday relating to national parks, parishes and consultation. As the noble Lord, Lord Cameron, said, this is part of the Bill where it is most important that a statutory right to consultation exists, because it is about development control. They will be called applications for development consent, but in practice they are applications for planning permission for big nationally important projects.
At the moment, if someone comes along and wants to build a new road, power station, railway or whatever in a parish, the parish council has a statutory right to be consulted on that planning application. Unless it is written into the Bill, that is an existing right of parish councils that would be taken away. That is the fundamental point. Surely the Government do not want that. When we were talking about the Local Government Bill on Tuesday, the Government said that they did not have a national database of parish councils. I have been thinking about that since then. Parish councils must be the only organisation or group of people in the entire country that the Government do not want to have on their new super database. However, if that is the case, as I pointed out previously, local planning authorities would do the job for the applicants if that was a way round it, but it has to be in the Bill.
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The argument about national parks, of course, is that they are the local planning authorities in terms of planning implications. They are the local development control authority within each national park. It would be extraordinary if the body which, at the moment, is initially the body to which application is made, should be cut out of the process altogether and should not even have the right as a consultee. These are important matters and I hope the Government will reassure the Committee, or I have a feeling that we will have to return to them.
The issue raised by the noble Lord, Lord Dixon-Smith, is very important. He asked about the relationship between these new national planning applications—applications for development consent—in relation to existing local development frameworks, which are a part of the existing planning policy system. But the issue is wider than that because the existing planning policy system, which is fairly complex as we all know—some would say inscrutable—essentially consists of three layers. There are the national policy statements or planning policy statements, the regional planning policy statements or regional spatial strategies and then there are the local development frameworks which will all develop within the regional spatial strategy. If you are considering a planning application as a local planning authority, those are all important material considerations. You look at the local development framework, you look at the regional spatial strategy and you look at the planning policy statement.
Sometimes, they conflict. Together with all the other material considerations, you decide whether to pass the planning application. However, I am not clear about the new system. One thing that is clear is that the new national policy statement will be up-front and will be the first thing that the Infrastructure Planning Commission will look at. It is the number one material consideration, although others are listed in the Bill.
However, if you have a planning application for a new power station or railway line, for example, it is most unlikely that all the considerations to be taken into account to deal with that application will be in the national policy statement. By its very nature, the national policy statement is a more strategic document. Even if it is pushing people towards specific sites, it is still an overall policy statement. Everything else connected with it is probably not in the national policy statement, such as the materials in which a building will be built, for example. Some of these other issues may be found in planning policy statements, regional spatial strategies and local development frameworks. I cannot find in the Bill the role and relationship between the Infrastructure Planning Commission and the existing policy structure set out within the planning system. That is the fundamental issue in the narrower amendment of the noble Lord, Lord Dixon-Smith, which talked specifically about local development frameworks. It would be helpful if the Minister could send round one of her famous circulars explaining how the provision will work, because we need to understand it. If it is not clear at the moment, the Bill should be amended so that it is clear.
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2.45 pm
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