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Lord Davies of Oldham: My Lords, of course, we expect the fact-finding mission to carry out a full investigation of the position. Inevitably, it is bound to reflect on the level of casualties that have occurred and the circumstances in which those casualties were

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caused. My noble friend should have no doubt at all about the thoroughness with which the fact-finding mission will go about its job on behalf of the council.

Baroness Tonge: My Lords, does the Minister agree that this Government should do all in their power to uphold international law throughout the world, applied equally to all countries of the world? What guarantee can our Government give that the United Nations Human Rights Council will be allowed access to the Gaza Strip to investigate?

Lord Davies of Oldham: My Lords, it is clear that the council starts off with an international mandate and it will expect and demand the necessary co-operation. But if the noble Baroness is referring to the broader picture, the role which the United Kingdom Government envisage for themselves is to be constructive towards establishing a permanent ceasefire leading to a permanent, two-nation peace agreement between Palestine and Israel.

Pensions: Public Sector


3 pm

Asked By Baroness O'Cathain

Baroness O'Cathain: My Lords, I beg leave to ask the Question standing in my name on the Order Paper. In so doing, I declare an interest as a recipient of a small public sector pension from the City of London Corporation.

The Financial Services Secretary to the Treasury (Lord Myners): My Lords, the Government have introduced a wide range of reforms to modernise schemes and meet the rising costs associated with longevity. Recent reforms such as cost-sharing, cost-capping and changes to pensionable age are designed to help with financial sustainability and are currently being implemented. The Government will continue to monitor public service pensions and the benefits they provide to overall remuneration packages.

Baroness O'Cathain: My Lords, I thank the Minister for that reply but I suggest that it will be received with a slightly jaundiced view by those who have been in final salary schemes who are now threatened with having those schemes curtailed mid-service. Have the Labour Party and the trade unions come to any formal or informal agreement, such as Warwick 2, about the postponement of public sector pension reform?

Lord Myners: My Lords, there is no agreement of which I am aware about the postponement of public sector pension reform. Indeed, this continues to move ahead. The savings that have already been introduced have an estimated value of £1.25 billion to £1.5 billion per annum. That is arising as a result of negotiations relating to pensions paid to the National Health Service, teachers and the Civil Service. With others, which fall under the general heading of public sector pensions, negotiations continue. The introduction of capping,

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cost-sharing and revised rules around early retirement due to ill health are leading to significant savings. However, I share the concerns of the noble Baroness, Lady O’Cathain, about the termination of pension fund benefits and I am sure those working in the public sector would have been alarmed by the comments attributed to Mr David Cameron when he spoke to the Manchester Chamber of Commerce in November and said he proposed to phase out public sector defined benefit pension plans.

Lord Oakeshott of Seagrove Bay: My Lords, I declare an interest as a pension fund investment manager. Why is an independent review of public sector pension costs the only one of the recommendations of the noble Lord, Lord Turner, that the Government are not prepared to accept?

Lord Myners: My Lords, I am not familiar with all of the recommendations made by the noble Lord, Lord Turner, in his review, but the key ones are being implemented—in particular, those relating to personal accounts which will, importantly, bring pension fund benefits to those in the private sector on moderate and low incomes who have previously been denied access to final service pension schemes. This is a very significant step forward in terms of pension provision for a wide sector of the population who have previously been neglected.

Lord Blackwell: My Lords, has the Minister seen the recent estimates published by the Institute of Economic Affairs that suggest that public sector pension liabilities are now close to £1,000 billion and increasing at a rate of over £100 billion a year? Does the Minister accept that if that were applied across the whole of the economy, it would mean that something like 30 per cent of our GDP was being spent on pension contributions? Is that affordable and are the measures he has suggested going to substantially reduce that?

Lord Myners: My Lords, as the noble Lord will fully appreciate from his service on the board of a major pension fund management and insurance company, estimates of pensions liabilities depend critically on assumptions, small changes in which can lead to very large numbers. The most important factor to recognise is that the total cost of public sector pension provision is currently of the order of 1.5 per cent of public expenditure per annum and is not projected to rise above 2 per cent in the next 50 years.

Baroness Hollis of Heigham: My Lords, I think that we all agree that we want to protect and maintain final salary pensions while seeking to contain some of their cost. When my noble friend talks about cost-sharing, could he tell the House whether he has in mind the option of career-average pension contributions, which would fully protect the pensions of the lower paid but ensure that those who have very sharp increases in pay at the end of their working life do not then receive a pension that is disproportionate to the contributions they have made and put in?

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Lord Myners: My Lords, I thank my noble friend for her question. She again evidences her great understanding of issues relating to pensions. Career-averaging or averaging of final years of service are among the approaches which can be adopted to smooth or share the cost of pension fund contribution. This would be a matter for individual negotiation between the unions and representatives of employers. I am sure that it is on the menu of factors to be considered.

Baroness Noakes: My Lords, the public sector workforce is around 20 per cent of the total, yet there are more than 5 million public sector employees with defined benefit pension arrangements, but fewer than 1 million private schemes are still open to new entrants. Does the Minister seriously believe that taxpayers bearing this burden will be sustainable in the long run?

Lord Myners: My Lords, I have already explained that the so-called burden, when expressed as a percentage of total public expenditure, is much lower than most people believe. I believe that the core issue in the question of the noble Baroness, Lady Noakes, should be seen from other perspective: it is the deplorably small number of people in the private sector, particularly those on low and moderate incomes, who have any pension provision at all. That is the figure on which we should focus and why we hope that the Conservatives will continue to support our proposals in the Pensions Act 2008, including the proposals for personal pensions and personal accounts.

Postponement of Local Elections (Northern Ireland) Order 2009

Northern Ireland Assembly (Elections) (Amendment) Order 2009

Motions to Approve

3.07 pm

Moved By Baroness Royall of Blaisdon

Motions agreed.

Welsh Ministers (Transfer of Functions) (No. 2) Order 2009

Motion to Approve

Moved By Lord Davies of Oldham

Motion agreed.

9 Feb 2009 : Column 947

Health Bill [HL]

Order of Consideration Motion

Moved By Lord Darzi of Denham

Motion agreed.

Banking Bill

Bill Main Page
Bill as Amended in Committee
Explantory Notes
Amendment Paper
3rd Report from Constitution Committee

Third Reading

3.08 pm

Clause 4: Special resolution objectives

Amendment 1

Moved by Baroness Noakes

1: Clause 4, page 3, line 22, at end insert “which includes ensuring that they have access to their deposits as rapidly as possible and that depositors and other customers have continuity of banking services”

Baroness Noakes: My Lords, on Report, the Government agreed to take a number of issues away for Third Reading. This was in part a consequence of the very limited time between the completion of Committee and Report, which did not allow the issues outstanding at the completion of Committee fully to be resolved. We were grateful for the Government agreeing to take issues away and to the usual channels for allowing these issues to be debated again today.

Report concluded on the evening of Tuesday last week, and we had to table our amendments for the outstanding issues ahead of final discussions with the Government and before sight of their own amendments. This means some inevitable duplication between our own amendments and the Government’s, but I hope that it does not inconvenience the House.

Amendment 1 is one such amendment. The Government have tabled Amendment 2 in this group. An issue that I have raised throughout our consideration of this Bill is that the need to achieve continuity of banking services is absent from the objectives of the special resolution regime. This concern has been expressed largely by the British Bankers’ Association, but it is supported by consumer groups. Modern life is dependent on continuity of banking services; it is as simple as that.

My Amendment 1 is to objective 3 of the special resolution regime, which is set out in Clause 4(6). Objective 3 is about the protection of depositors, which clearly overlaps with the issue of banking services. There is a link here to the separate proposals being pursued by the Financial Services Authority, which are aimed at speeding up payments to depositors via the Financial Services Compensation Scheme in the event of bank failure. However, the BBA believes that unnecessary costs may be imposed by the FSA if

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insufficient attention is paid to the alternative, and more satisfactory, outcome of continuity of banking services.

To this extent, therefore, I am pleased that the Government have, with their Amendment 2, accepted the principle of placing the continuity of banking services in the Bill. I will, of course, let the Minister speak to his own amendment in a moment. While we understand the link between the Government’s amendment and objective 1, namely the stability of financial systems, we remain concerned that the FSA will take insufficient account of the continuity of banking services when it pursues changes to the FSCS aimed at depositors alone. I hope that the Minister will be able to reassure the House that the FSA will be mindful of the banking continuity requirement, which, as a result of the Government’s amendment, will now be an explicit part of the special resolution regime. I look forward to hearing the Minister’s comments. In the mean time, I beg to move.

The Financial Services Secretary to the Treasury (Lord Myners): My Lords, I thank the noble Baroness, Lady Noakes, for her amendment. Noble Lords will be aware that the Government have tabled an amendment of their own on this subject and that there is now little, if any, difference between us. I am grateful to the noble Baroness for the strength with which she has urged the case for continuity, and I am pleased that we have been able to accept the validity of her arguments and incorporate them into our amendment.

As the noble Baroness said, the issue here relates to continuity of banking services. I spoke at length on this matter both in Committee and on Report. Noble Lords will be relieved to hear that I do not wish to return to these arguments in full, but I will summarise the Government’s opinion on these points. The Bill already includes, at its heart, provisions aimed at ensuring continuity of services. The very purpose of the stabilisation tools of the special resolution regime is to ensure that banks do not fail completely, thereby maintaining full continuity of banking services. This is reflected both in the objectives set out in Clause 4 and the draft code of practice, which explains them.

That said, the Government are, as always, prepared to listen to the views of the House and to respond as constructively as possible. We have therefore tabled an amendment that meets the concerns expressed on Report. This amendment makes it expressly clear that the special resolution objective includes the concept of continuity of banking services. Noble Lords will note that this is included as part of objective 1, to protect and enhance the stability of the financial systems in the UK. As I have said, the continuity of banking systems is implied in different ways in each of the first three objectives. Therefore, in making explicit provision for the continuity of banking services, we have done so under the broadest of them. To be absolutely clear, this drafting is entirely consistent with the fact that this concept also relates to the objectives of protecting and enhancing confidence in the banking systems, and of protecting depositors.

I also make it clear that continuity of banking services is not the only element to be considered under objective 1. The amendment does not, therefore, limit

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the scope of that objective in any way. However, the amendment now makes it explicit in the Bill that this concept is at least one of the elements that needs to be considered. I hope this demonstrates, once again, the Government’s commitment to listening to the views of the House and responding constructively. I will therefore, most respectfully and—to take the names of two horses in the 5 o’clock at Kempton this afternoon—in a way that is both Faintly Hopeful and with a Straight Face, ask the noble Baroness to withdraw her amendment. If she will do so, I will move the government amendment which I have just described.

The noble Baroness asked me one question relating to the FSA. The authorities must have regard to all the objectives. This includes objective 1, which now references continuity of service and objective 3 on protection of depositors. I believe that the introduction of the continuity of service is something that the FSA will need to take into careful consideration in framing all its policy responses to the Bill. Therefore, I hope that my answer provides the comfort that the noble Baroness sought in her question.

3.15 pm

Lord Higgins: My Lords, as the Minister has been very sympathetic to the views expressed in the House throughout the passage of the Bill, could I just clarify one point? There is a clear difference between Amendment 1 and Amendment 2. Does the Minister regard the ability of depositors to get their deposits back as part of banking services? I should have thought that that was something rather different. It is not a service, as such. The Minister’s amendment does not seem to refer to the position of depositors getting their money back.

Lord Myners: My Lords, I am pleased to see the noble Lord, Lord Higgins, back with us again in debate on this Bill. We shared our pleasure at the acknowledgement of the noble Lord’s wife’s contribution to the International Court of Justice in a previous debate. As far as I am concerned, provision of banking services includes the return of balances, and I am happy for that to be read into Hansard as being part of the meaning of that term for the purpose of the clause.

Baroness Noakes: My Lords, what the Minister said is entirely satisfactory. I am grateful for his response on this. I am not quite so sure about his horserace tipping ability, but he is doing extremely well in bringing amendments back at Third Reading. I beg leave to withdraw the amendment.

Amendment 1 withdrawn.

Amendment 2

Moved by Lord Myners

2: Clause 4, page 3, line 25, at end insert—

“(8A) In subsection (4), the reference to the stability of the financial systems of the United Kingdom includes, in particular, a reference to the continuity of banking services.”

Amendment 2 agreed.

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Clause 10: Banking Liaison Panel

Amendment 3

Moved by Lord Davies of Oldham

3: Clause 10, page 6, line 17, leave out “75(2)(c)” and insert “75(2)(b) and (c)”

Lord Davies of Oldham: My Lords, the amendment standing in the name of my noble friend relates to Clause 10, which provides for the Banking Liaison Panel and has proven to be one of the more appreciated clauses in this Bill. With this amendment, we return to matters relating to Clause 75, which it is fair to say has occasioned some degree of controversy and which has been rather less well received by the House thus far.

We have come a long way with this debate. I believe that the Government have made the case for the power to change the law and for the particular aspect of the retrospective dimension contained in the clause, which I know causes anxiety in the House. I appreciate that concerns remain, but I hope and believe that we are reaching a point of consensus on this important clause.

I do not intend at this point to delve into the substance of Clause 75. I think that arises from the important amendments in the name of the noble Lord, Lord Goodlad, and the other noble Lords who support him. The reason why I am speaking first in this important debate, which largely revolves around the amendments in the noble Lord’s name, is simply because we have a technical government amendment at the start of the group.

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