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House of Lords

Thursday, 30 October 2008.

The House met at eleven o'clock: the LORD SPEAKER on the Woolsack.

Prayers—Read by the Lord Bishop of Southwell and Nottingham.

Companies: Pay Increases

Lord Wedderburn of Charlton asked Her Majesty’s Government:

Lord Davies of Oldham: My Lords, pay levels in private sector companies are a matter for those companies. The Government have consistently made it clear that there should be effective linkage between pay and performance and that exceptional rewards for mediocre performance are not in the interests of companies, their shareholders or the United Kingdom as a whole.

Lord Wedderburn of Charlton: My Lords, I thank my noble friend for his reply, which showed a mild advance on that given by the noble Lord, Lord Jones, to the same Question in January. Does he not agree that the obscene rises in rewards, bonuses and the like for corporate executives in recent years mean that the voice of fairness must now be heard inside the remuneration committees of companies and similar bodies? Does he not also agree that the Government must consider, urgently and immediately, some control over the membership of remuneration committees of all public companies in the longer run and, in the short run, of those companies in which public money has been invested for shares?

Lord Davies of Oldham: My Lords, of course the Government agree with a great deal of what my noble friend has said. In its letter, the Financial Services Authority has made it clear that for banks, pay—and particularly bonuses—must be related to performance. If it is not, the Financial Services Authority will take into account a bank’s position in relation to where it receives government support.

On the more general issue of companies, from 6 April next year, a new provision will require quoted companies to report in their directors’ remuneration report on how they have taken pay and employment conditions into account when setting directors’ pay. Directors’ pay should be set only by non-executive directors, not by those who benefit from it themselves.

Baroness Gardner of Parkes: My Lords, over the years I have often asked Questions about how unsatisfactory it is that people who perform very

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badly can still get great bonuses, and the answer has always been that that is in the contract. Why can contracts not include penalty clauses as well as bonuses? The public are very dissatisfied that the BBC employee who is suspended—I think that is the word—is going to earn £16,000 a day for doing nothing on a pretty regular basis. There is great public dissatisfaction with rewards for bad performance.

Lord Davies of Oldham: My Lords, I am not sure that the issue surrounding Jonathan Ross is about bad performance; it is about one particular incident which is currently being examined, so I do not think we ought to rush to judgment. It is a matter for the BBC and, as the nation is showing, it expects the BBC to make a response to the errors which have occurred.

On the more general issues, is the noble Baroness asking the Government to have a legal position to interfere with contracts in private industry and set penalty clauses, or is she seeking to show that public opinion expects good performance only to be rewarded? On the latter point, I am with her entirely, but on the former point she will recognise just how difficult it would be for such a concept to work.

Lord Razzall: My Lords, does the Minister not accept that his Answer to the noble Lord, Lord Wedderburn, was exactly the same as the countless answers that have been given over the years by people in his position? Does he not accept that the world has now changed? Does he not also accept that, bearing in mind that the Government are now a major shareholder in many of our financial institutions, we need a much clearer statement than we have had hitherto as to exactly what they mean when they say that they want restraint in executive pay and bonuses in those institutions?

Lord Davies of Oldham: My Lords, that is the burden of the role of the Financial Services Authority in relation to the banks. It has indicated in its letter that it will expect the remuneration of senior bank employees to relate to performance, otherwise the authority will use powers that it has to operate sanctions against banks. Although I take some comfort from the fact that I am in line with what predecessors have said from this Dispatch Box in representing my own Government, I say that we are in a new situation and the Government expect, particularly with regard to banks and the financial sector, an improvement in the relationship between performance and pay.

Lord Peston: My Lords, if one does not get paid for a poor performance, then half the Arsenal football team will not get paid for what it did last night. Is not the problem now how we define the private sector? I do not know whether my noble friend will able to answer the question. With all these banks now receiving all this money, are they now in the private sector or the public sector? I do not know what the National Statistician says, but to those of us who tried to follow what the noble Lord, Lord Wedderburn, said, it looks as if they are in the public sector, in which case they ought to follow precisely public sector pay guidelines.

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Lord Davies of Oldham: My Lords, my noble friend is being a little unfair on Arsenal footballers; they just came up against a superior force in fitness in the last 10 minutes. The Financial Services Authority is of course concerned particularly about those banks in which the Government have made a significant input of resources and about exercising powers with regard to that. However, as I said in response to the noble Lord, Lord Razzall, from the Liberal Benches, the Financial Services Authority is concerned not just about those banks, but the banking and financial sector as a whole. It has made it clear in its letter that, where the companies concerned require government support, that support will be conditional on the Financial Services Authority examining the reports on directors’ pay that the firms have to produce, and that, where they reflect unsatisfactory circumstances, the FSA will act.

Baroness Turner of Camden: My Lords, does my noble friend agree that, in circumstances in which many ordinary workers in financial services are now facing unemployment, if nothing is done about these very high bonuses and rewards for senior people, it will have an adverse effect on the way the public view the present situation?

Lord Davies of Oldham: My Lords, I understand the point that my noble friend makes, but she will recognise that the whole banking system has been shaken by the developments over the past few months. That applies to the highest paid as well as to other workers. She is right that many workers who have no direct responsibility for the catastrophic decisions that were taken will pay the price, but the House will appreciate that some very significant lessons have been learnt by the banking and financial sector—and the Government have indicated that they intend to monitor the situation closely.

Housing: Shared Ownership for the Elderly

11.15 am

Baroness Greengross asked Her Majesty’s Government:

The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Andrews):My Lords, the shared ownership for the elderly scheme is a useful housing option for older people. It forms part of the Housing Corporation’s affordable housing programme for 2008-11 and, along with other low-cost home ownership schemes, is kept under constant review. From 1 December 2008, the new Homes and Communities Agency will be responsible for funding affordable housing schemes.

Baroness Greengross: My Lords, I thank the Minister for that reply. I understand that some housing associations are willing to allow residents to fund care and support, but the associations have to use their own resources to do that. Given the Government’s commitment to personal

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budgets and choice and the huge worry about the costs of care that many people face, will the Government consider changing policy to allow downward staircasing in all shared ownership housing, which would enable residents to fund care and support in this way?

Baroness Andrews: My Lords, the noble Baroness knows that I am very sympathetic to innovation in how we use our housing funding as a link with health and preventive and social care for older people. I know that RSLs use their own money for this, but I am not convinced that buying back shares in shared ownership homes to help older people is the most appropriate role for social housing grants. Essentially, we need to build more homes, as the noble Baroness knows, and more quality homes for older people, not just the traditional residential homes. But I hear what the noble Baroness says and I shall discuss with her the scope for innovation across the field.

Lord Best: My Lords, I declare an interest as chairman of the Hanover Housing Association, which provides several thousand homes for older people, including through the excellent shared ownership scheme. Perhaps I could ask the Minister a question relating to younger shared owners, as they form a particularly vulnerable group at this time of recession. They were marginal home buyers; now mortgage repossessions are running at some 45,000 per annum and nearly 1,000 families a week lose their homes through mortgage repossessions, with all the horrors that go with that. Will the Minister use her considerable influence with the housing associations and the Homes and Communities Agency to try to ensure that there are rescue packages in place for those shared owners who run into mortgage difficulty so that perhaps they can sell back the share that they have purchased from the housing association, become tenants eligible for housing benefit and stay put where they are, so we do not see the horrors of homelessness that follow from repossession?

Baroness Andrews: My Lords, the noble Lord is quite right and makes a powerful case to which we would all want to respond. Young shared owners will be eligible for help with their mortgages if they fulfil the criteria of vulnerability for the new mortgage rescue scheme that is in development now. In addition, he is quite right in saying that RSLs have the option to buy back shares if shared owners cannot keep up the payments because of a change in financial circumstances. They have the discretion to buy back a share or buy out owners so they can reoccupy the property as a tenant. I would be very happy to discuss those measures in more detail with the noble Lord, because our department is looking at all ways in which to free up the housing market and support home owners at the moment.

Earl Cathcart: My Lords, those in this vulnerable group, the elderly, have, like others, huge difficulties selling their homes because of the housing slump, getting loans or mortgages because of the credit crunch, and suffer around double the official inflation rate as a higher proportion of their income goes on food and fuel. Is not that exactly the type of vulnerable group that the Prime Minister said that he wanted to help?

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Baroness Andrews: Yes, my Lords, we are doing a great deal. Interestingly, the affordable homes agency, the Housing Corporation, has relaxed its bidding round so that it is able to respond to registered social landlords who want to specialise in providing homes for older people. Bids are coming forward and the proportion of the funding going on homes for older people is increasing. However, the noble Lord is quite right: because we are concerned that older people do not have sufficient choice and quality in their housing, we last year produced a document, A National Strategy for Housing in an Ageing Society that addresses long-term issues as well as putting forward specific short-term help for older people.

Baroness Hamwee: My Lords, returning to the shared ownership scheme for the elderly—the current scheme—I understand that there have been only 500 completions since 2001. I am sure that the Government would not be so cynical as to introduce a scheme that has low take-up, so can the Minister tell the House what research the Government have undertaken, particularly into the marketing of this and similar schemes?

Baroness Andrews: My Lords, it was always intended as a small and specific scheme for older people with very small incomes. Many of the people who qualified had incomes of less than £10,000, so it was never intended as a massive expansion for older people. I can verify that the scheme is based on research. We need to bear in mind that about 12,000 units are provided for older people from 100 housing associations. As I said, because we are concerned about improving access, the Housing Corporation is freeing up its bidding processes and offering incentives to local authorities to come forward with more allocations. We are looking at an expansion in what we are providing.

Viscount Simon: My Lords, in her initial response to the noble Baroness, Lady Greengross, my noble friend used the words “affordable housing”. Is there a definition of “affordable”?

Baroness Andrews: Yes, my Lords; it was in the homes and communities Act last year. Affordable housing includes homes for social rent—what we traditionally called council housing—and homes that are below market cost when they are sold for people in shared equity schemes or provided with financial support.

Constitution: Monarchy

11.23 am

Lord Taverne asked Her Majesty’s Government:

The Parliamentary Under-Secretary of State, Ministry of Justice (Lord Bach): My Lords, the Government have no plans to review the constitutional role of the monarchy.

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Lord Taverne: My Lords, since there is discussion about restrictions on the religion and gender of potential successors to the throne, would this not be an appropriate moment to look at the role of the constitutional monarchy? For instance, does the Minister not agree that it would be quite incompatible with the principle of constitutional monarchy were a potential successor to the throne to make highly controversial statements about science policy on medicine or agriculture—not that any member of the Royal Family would dream of doing any such thing?

Lord Bach: My Lords, I repeat myself: the Government believe that the national interest and desire are for the country to remain a constitutional monarchy in its present form. Her Majesty the Queen acts as a focus for national identity and unity. Frankly, although political parties change constantly, Her Majesty provides a sense of continuity and stability in times of political and social change.

Lord Howarth of Newport: My Lords—

Lord St John of Fawsley: My Lords—

Baroness Trumpington: My Lords—

The Minister of State, Department of Energy and Climate Change & Department for Environment, Food and Rural Affairs (Lord Hunt of Kings Heath): My Lords, shall we hear from my noble friend first and then the noble Lord?

Lord Howarth of Newport: My Lords, has my noble friend noted the penetrating observation of his distinguished colleague in the Government, Mr Phil Woolas, that, once you introduce elections to the second Chamber, you are inevitably on the way to disestablishment of the Church of England? Is what his ministerial colleague rightly said about the Church of England not equally true of the monarchy? Is it not therefore time for the Front Benches of the three main political parties frankly to acknowledge the secularist and republican implications of their present schemes for reform of the second Chamber?

Lord Bach: My Lords, my noble friend knows as well as the House does that the White Paper included options for both a 100 per cent- and an 80 per cent-elected second Chamber. If there is an appointed element, places for bishops will of course be retained, but if the size of the House is reduced it would be logical for reserved places for bishops to be reduced proportionately. I should add that, as now, the number of bishops would not count towards those appointed by the Appointments Commission.

Lord St John of Fawsley: My Lords, does the Minister agree that these issues about the monarchy are best left for another reign? Would it not be curmudgeonly for this House and, most of all, for the responsible Government to raise questions about the monarchy when we have the most constitutional and Christian monarch in our history?

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Lord Bach: My Lords, the Government are not raising any issue about the constitutional monarchy. My first answer could hardly have been shorter or clearer. I appreciate the great work that the noble Lord has done in this area and his expertise in it.

Lord Maclennan of Rogart: My Lords, is it not a blatant discourtesy to Her Majesty and a disservice to our constitutional monarchy to describe the ministerial power, not least to make war without debate or vote, as the “royal prerogative”? Should not this piece of tattered absolutism now be universally identified as the “Prime Ministerial presumption”?

Lord Bach: My Lords, we debate important matters of national interest in this House, day in and day out. Again, I pay tribute to the noble Lord, who I know is an expert in this field. However, I do not think that this is an immediate issue for the nation.

Lord Pearson of Rannoch: My Lords, do the Government agree that, before we joined the European Union, the monarch acted on the advice of Ministers, which was purely the product of our former system of representative parliamentary democracy, in which Parliament was supreme under the Crown? Do the Government accept, now that a majority of our national law is made in Brussels—to the exclusion of this Parliament—that this is no longer so? Do the Government not agree that this is a huge change on which the British people should be consulted?

Lord Bach: My Lords, I have to tell the noble Lord that I do not agree at all—not in any way. I remember that he was concerned, when we passed the Lisbon treaty Bill, that somehow the constitutional monarch’s role would be altered. He was told then, and I tell him now, that it would not be altered in any way.

Lord Dubs: My Lords, would my noble friend accept the simple proposition that the monarchy should embrace the values of our society? Those values include not discriminating against women and not discriminating against one particular religion. Are those two arguments not sufficient to justify having another look at the issue?

Lord Bach: My Lords, I recall the noble Lord moving the Second Reading of his Private Member’s Bill just before the 2005 general election. Indeed, in preparation for this Question, I read his speech. Of course, these are issues of great importance, but the solving of them is much more complex than it looks at first instance, and, frankly, they are not a priority for us at present.

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