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The figures from the Office for National Statistics and the Labour Force Survey have shown that opportunities for older workers have been increasing, as employment figures for those up to age 65 and beyond have been rising consistently. The employment rate of men aged 65 and over has risen from 7 per cent in quarter 3 of 1998 to over 10 per cent in quarter 3 of 2008. For women aged 60 and over, it has increased from 7.8 per cent in 1998 to nearly 12.5 per cent in the third quarter of last year. These increases are larger than those seen during the same period in the overall employment rate of men and women of working age, so there are early signs of change in that process. On the point which I think was also raised by the noble Lord, Lord Selsdon, on the tax on earnings beyond the state retirement age, people who work past the state pension age do not pay national insurance and those who work past age 65 have a higher income tax allowance, as I am sure he is aware, so they keep more of what they earn.

Most of the rise in employment rates of older workers has been due to retention in the workplace. As we all know and as was restated tonight, since the default retirement age was introduced, the economic landscape has changed dramatically. That point was made by a number of speakers tonight and was passionately made by the noble Baroness, Lady Afshar. People may want or need to work longer to boost savings or to enhance pensions or their own individual financial position, and we are more than committed to working with employers to promote the retention of skilled workers, both younger and older. As has recently been highlighted, these are the workers that will help businesses pull through and out of the economic downturn as markets improve. Conversely, they may be those who are often worst hit.

We are monitoring the legislation, as we said we would in our impact assessment, in preparation for the review that we have committed to publicly. The legislation needs some time to bed in so that we can properly judge its effectiveness. To change that at this stage would be a level of change too much. We need to make a judgment on whether the age regulations have created the sort of culture change that this evening’s debate has argued for. Our long-term aim has always been to achieve a culture in which compulsory retirement ages are no longer required. We will continue to closely monitor the trends in employment rates by age and, in our coming research on employer policies and practices on that specific question, we will explore the issues and up-to-date evidence concerning the use of fixed retirement ages.

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As has been pointed out tonight, we also need to hear what the ECJ says, if anything, in the Age Concern judicial review about the directive in relation to retirement, and what the High Court says in turn, once the case returns to our own courts for a decision. We will take due account of that and of all the up-to-date information available in ensuring that we arrive at an appropriate outcome in our review, which is currently planned for 2011.

The noble Baroness tabled today’s debate to ask about the Government’s plan to reform the default retirement age. Our plans are to review it. We provided for the default retirement age because we examined the evidence and concluded that we needed it. We will reform it when the evidence shows that it is the right thing to do. I am afraid that I am not going to pre-empt the review, which is rightly to be firmly evidence-based. Skilled older and younger workers can be the key to maintaining business productivity, recovery and renewed growth, and the review will take full account of the position that businesses and older workers face in the prevailing markets.

On the question asked by my noble friend Lord Giddens, age is, in truth, common to us all, even if it is not evenly distributed at any particular point in time. Perversely perhaps because of that, we need to work even harder on this point of discrimination.

I am grateful to all noble Lords who have taken part in today’s debate on the default retirement age. I am sure that my right honourable friends in Cabinet will look with interest at the points raised in the debate. It is a key element of our strategy to make work pay and help older people remain in employment. As I have said, we will reform it when evidence shows that it is the right thing to do, ensuring that businesses can continue to operate effectively and that we balance the need for the culture change that we all wish for with the ability for it to be adopted in a willing and constructive manner.

8.23 pm

Sitting suspended.

Banking Bill

Bill Main Page
Copy of the Bill
Expanatory Notes
DPCommittee: 1st Report

Committee (1st Day) (Continued)

8.33 pm

Clause 6: Code of practice: procedure

Amendment 22

Moved by Baroness Noakes

22: Clause 6, page 4, line 15, at end insert “, and

( ) the Banking Liaison Panel referred to in section 10.”

Baroness Noakes: I shall speak also to Amendment 23 in this group. Both amendments concern consultation on the code of practice required by Clause 6 before that code is issued.

Amendment 22 requires the Treasury to consult the Banking Liaison Panel, which is constituted by Clause 10. The Minister will be aware that the panel has been welcomed by the financial community. Early feedback from the meetings of the panel’s forerunner,

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the expert liaison group, indicates that it is fulfilling a useful function. However, Clause 10 confines the role of the panel to advising on matters contained in secondary legislation.

Although we shall debate the issue in the next amendment, no parliamentary approval is attached to the code of practice and, hence, there is no involvement of the panel. The Banking Liaison Panel was not in the Bill when it was introduced in another place. The Government introduced the panel by way of an amendment moved on the last day of Committee in another place. I suggest to the Minister that the exclusion of the panel from the Clause 6 consultation process was an oversight, and I invite him to agree to the panel’s inclusion by way of the amendment.

While the involvement of the panel would be a wise addition to the development of the code of practice, it is incumbent on the Treasury to consult more widely than its inner circle—whether or not that circle includes the panel. Hence, Amendment 23 requires the Treasury to consult persons who have relevant knowledge of the matters contained in the code of practice.

The Minister may well say that of course the Treasury will consult, as all good government departments do this in accordance with Cabinet Office guidance. However, we do not believe that it is wise to rely on informal and non-binding guidance where something is involved that is as important as the code will be for the banking industry. I freely acknowledge that the availability of the draft code during Committee in another place has meant that it has had wide exposure but good practice today cannot frank all future issues or revisions of the code, and those, not the current draft code in circulation, are the main focus of my amendment. I hope that the Minister will agree. I beg to move.

Lord Davies of Oldham: I reassure the noble Baroness that this part of the Bill and the areas that relate to the stabilisation powers and secondary legislation on safeguards are the subject of ongoing consultations. We are interested in developing the Bill in a way that interested parties should continue to welcome. The noble Baroness has already indicated that the expert panel, which has been subject to consultation, has done good work. It is a precursor of the Banking Liaison Panel and we are sure that it will continue that excellent process.

The process of consultation has not been set out in the Bill and nor, as a general rule, do we think that it should be because it is already covered by the relevant Cabinet Office and better regulation guidelines on the development of secondary legislation. The process of consultation, which all government departments observe, follows well established guidelines which largely meet the noble Baroness’s objectives, which we share—namely, that on certain aspects of the Bill, particularly with regard to secondary legislation, adequate consultation should be a precursor to the instruments being refined and then laid.

Throughout the process of producing the Bill and its supporting documents, we have engaged very fully with interested parties. We intend to continue to follow Cabinet Office guidelines in producing and consulting on the new secondary legislation and other documentation supporting the special resolution regime.

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I recognise that there is interest in the code, as testified to during our earlier debates. That is why we published a draft for consultation and sent a prior version to the expert liaison group. As I said, I am pleased that the noble Baroness felt able to express approval for the panel’s work. I assure her that the consultation will continue in future on the code’s development. Therefore, in terms of the way in which we have handled this process—not only in relation to the Bill but also through the guidelines on the development of secondary legislation that now obtain—we do not think her amendment necessary. However, we entirely agree with her objective of ensuring that appropriate consultation takes place before such instruments are presented to the Houses.

Baroness Noakes: As I anticipated, the Government are relying on the Cabinet Office and, indeed, better regulation guidelines that there should be consultation. That may well deal with the second of the two amendments that I have tabled. Amendment 22, which refers specifically to the Banking Liaison Panel, is an important issue. We have hard-wired that body into the Bill, which is an unusual but welcome process, but have given it rather narrow terms of reference. The issue is not about the current drafts but the future.

It is unfortunate if the Government are seeking to narrow the ongoing scope of the Banking Liaison Panel because the expert liaison group has been used in a much broader way. That is why the comment has been made to us that wider powers are required for the Banking Liaison Panel. A later amendment deals with that specific aspect, so I shall not pursue the issue today. I am not sure that we have entirely given the right role to the Banking Liaison Panel, and it would be a comfort to those involved in the financial services industry to see it with a better role, and a good thing for the Treasury to have people involved who are outside the magic circle of the tripartite authorities in the future development of codes. As I said, I shall not pursue that today but I do not preclude returning to it later. I beg leave to withdraw the amendment.

Amendment 22 withdrawn.

Amendment 23 not moved.

Amendment 24

Moved by Baroness Noakes

24: Clause 6, page 4, line 19, at end insert—

“( ) The code shall not come into force unless an order containing a draft of the code has been laid before, and approved by a resolution of, each House of Parliament.”

Baroness Noakes: This amendment concerns the parliamentary process for the code of practice. As Clauses 5 and 6 are currently drafted the Treasury issues the code of practice after the minimal consultation set out in Clause 6. There is no requirement for more general consultation because the Government rejected the amendments in the previous group, nor is there any role for Parliament. That is what Amendment 24 focuses on; it requires a draft code to be approved by each House before it comes into force.

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It is perfectly normal for statutory codes to be approved by Parliament; this is not an innovative procedure. When the amendment was debated in another place, the Minister said that the FSA’s handbook was not approved by Parliament so it was not necessary for the code to be approved. I believe that the Government have chosen not to understand the difference between the FSA’s handbook and the related powers in the Financial Services and Markets Act and this Bill and its code. The FSMA inter alia sets out the basis on which regulated activities can be undertaken and gives the FSA the related powers, and the handbook sets out how the FSA will use those powers. On the other hand this Bill gives relevant authorities some sweeping and intrusive powers that go way beyond anything that we found in the FSMA. It is one thing to say how a regulatory body will apply its regulatory constraints but quite another to say how public bodies will use powers to grab property that belongs to other people. That is why we believe that it is important that Parliament is involved in all stages of the implementation of this Bill, including the extremely important code of practice, which will be the main route of communication between the relevant authorities and the businesses that could be subject to the powers in the Bill.

In addition, as a purely practical matter, the FSA’s handbook was reputed at one stage to have reached nine feet had it been printed out in total. That did not reflect particularly well on the FSA but for present purposes tends to indicate a level of detail with which Parliament ought not to get involved. The code of practice, a draft of which we have seen, is commendably short and very amenable to parliamentary scrutiny.

8.45 pm

The Government have produced their helpful draft code, but it is already clear from the November consultation that significant new elements will be added to it before it is finalised. It is important that the whole code is subject to proper scrutiny, and it is difficult to see how that can be achieved without proper parliamentary process. Furthermore, it is important to remember that the code can be revised and reissued whenever the Treasury chooses by virtue of Clause 6(3)—I have no problem with that power—so, over time, a very different code might emerge. It cannot be right for Parliament to play no part in that.

Lord Higgins: On the previous amendment, the Minister referred to the code of practice of the Cabinet Office in relation to statutory instruments. I do not see why we should be bound by that when it is important that it should be obligatory for the Government to carry out widespread consultation in regard to these matters. In any case, we are not considering the code as a statutory instrument. My noble friend’s amendment makes it a statutory instrument. Clause 6 makes no provision for Parliament to have a role in or to comment on the code of practice. It will be laid before Parliament but—the Minister will correct me if I am wrong—there is no provision for Parliament to debate it. Still less is there provision for it to be compulsory for Parliament to have a chance to debate it. That being so, there is a great deal to be said for the amendment.

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Lord Stewartby: This code of practice is very important and is subject to substantial, or even complete, rewriting without any obvious input from consultation or Parliament. I hope that the Government will look again at this. Amendment 24 suggests that a positive resolution of each House of Parliament should be built into the Bill. If that is not done, the code, which governs in large measure how the Bill is going to be put into practice, will not get the scrutiny that it needs and deserves.

Viscount Eccles: One of the problems with the code is that it raises a lot of controversial issues and does not have any clear direction. For example, paragraph 92 was cited earlier. It applies to banks in temporary public ownership and states:

“Immediately following the transfer of securities”—

that means that the bank is 100 per cent in public ownership—

We could probably have an exciting two-hour debate on what that paragraph means in certain circumstances. My noble friend’s proposal that this code of practice should be subject to parliamentary scrutiny and debate has got to be right.

Lord Davies of Oldham: I would be the last person to deny the opportunity for the noble Viscount, Lord Eccles, to participate in an exciting debate and I assure him that he will get that opportunity. The code will be laid before Parliament and those who are excited by it and want to organise a debate on it either in the other place or here will be more than entitled to do so. The issue is whether it should be mandatory that it be laid before the House.

First, let us be grateful for the progress represented by the code under the Bill. I look around me and see enough noble Lords present who have sat through the passage of Bills during which they have bemoaned the fact that a code of practice or conduct will be involved when they have not seen sight nor sound of the code because it has not been drafted until after the legislation has been produced—sometimes a considerable time after. Constant have been the complaints about the process that that situation has created.

Here we have the noble Baroness freely congratulating the Government on the fact that considerable progress has been made on the draft code in both the consultation that led up to it and the draft code itself. We have had the benefit of that in informing debate on the Bill. We also intend the code to be published very soon after the Bill becomes an Act and for it to be laid before Parliament in order to provide opportunities of which Parliament may want to take advantage. That seems to indicate that the Government have taken the issue of consultation on the code and its importance in an exemplary way. I was rather hoping for plaudits from the opposition Benches, rather than criticism of the process.

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I understand the enormous advantages of secondary legislation by affirmative resolution. We all know that if every call on every piece of legislation was incorporated in Bills, Parliament would be submerged by those instruments which often—even when they are affirmative and therefore have extra status and significance attached to them because the Government are obliged to lay them—give rise to limited debates with limited participants, even on the most significant issues.

Baroness Noakes: I will make the Minister an offer. How about the negative procedure?

Lord Davies of Oldham: I will not hear any offer proffered from the opposition Front Benches without saying that I will consider it very seriously, because no doubt it is presented in that constructive pose that we all welcome. That is not what the amendment states. It states: approved by a resolution of the House. The noble Baroness is such a stickler for the precise terms of legislation that she will know that I will be a stickler for the precise terms of the amendment, and I therefore hope that she will withdraw it.

Baroness Noakes: The Minister's response surprised me not at all. I was grateful for the support from my noble friends for the need for parliamentary process. He wanted more praise for the draft being available. I have already given him as much praise as I am ever likely to give him on that subject. It is asking a lot to ask for even more praise. The most important thing is that the Bill says only that it will be laid before Parliament, which initiates no process of any recognisable substance whatever. The only thing that would lead to any recognisable process would be the requirement for either the affirmative or the negative procedure. The Minister may tempt me to return at the next stage with at least the negative procedure, which it would be churlish of the Government to refuse because it is churlish of them to disregard the need for parliamentary involvement. However, I will think about that further, and I beg leave to withdraw the amendment.

Amendment 24 withdrawn.

Clause 6 agreed.

Clause 7 : General conditions

Amendment 25

Moved by Baroness Noakes

25: Clause 7, page 4, line 28, leave out “not reasonably likely” and insert “highly unlikely”

Baroness Noakes: Amendment 25 would amend Clause 7(3), which contains the second condition that must be met before the FSA can fire the starting gun that will allow the stabilisation powers to be exercised. This is one of the more important amendments that we shall consider today and one about which the banking industry feels strongly.

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Condition 1, which is set out in subsection (2), is that the bank is failing or likely to fail the threshold conditions—we alluded to that in earlier amendments—but condition 2, which, as I said, is set out in subsection (3), is as follows:

“Condition 2 is that having regard to timing and other relevant circumstances it is not reasonably likely that (ignoring the stabilisation powers) action will be taken by or in respect of the bank that will enable the bank to satisfy the threshold conditions”.

Amendment 25, to which I am glad to see the noble Lords, Lord Newby and Lord Oakeshott, have added their names, would change “not reasonably likely” to “highly unlikely”. It would thus make the FSA’s judgment based on positively rejecting whatever plans a bank has in place to meet its threshold conditions rather than simply saying that it is not convinced by them. There is a world of difference between these two tests and the evidence that will need to be amassed to deal with them.

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