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House of Lords

Tuesday, 10 February 2009.

2.30 pm

Prayers—read by the Lord Bishop of Manchester.



2.36 pm

Asked By Lord Barnett

The Financial Services Secretary to the Treasury (Lord Myners): My Lords, on 19 January the Government announced a comprehensive package designed to reinforce the stability of the financial system, to increase confidence and capacity to lend, and in turn to support the recovery of the economy. The Government are now focused on implementing these measures.

Lord Barnett: My Lords, I think I thank my noble friend for that Answer, but is he aware that whatever he seeks to do on the central issue is being driven off the news headlines by the bonus issue? Does he accept that without the billions of pounds that the taxpayer has put into the banks, they would have gone bust and the employees would have been looking for jobs, not bonuses? Does he not agree that the only way to get back to the central issue is to stop all bonuses now and ask the committee that the Government propose to set up to look into the banks to produce an interim report quickly to consider the legal part of the contracts that any of them may have and any other relevant matters? Then the final decision could be taken by a government proposal approved by Parliament.

Lord Myners: My Lords, the Chancellor of the Exchequer has invited Sir David Walker to look at a wide range of issues relating to the governance of banks, including the approach that boards took to evaluating risk and the establishment of compensation and incentive arrangements. He is also looking at the engagement between shareholders, who owned the banks, and the banks. The issue of bonuses is very much in the public eye at the moment. I endorse the view that bonuses should not be paid unless they are fully justified by the contribution of the individual. That contribution must reflect the individual’s contribution to the success of the bank, taking into account risk and the provision of bank capital, which has often been overlooked in the design of those schemes. It is quite clear that the schemes have had unintended consequences. The responsibility for making decisions on bonuses rests with the boards and with their shareholders. In respect of those banks in which we have a large shareholding through UKFI, UKFI is engaging with those boards of directors. In particular,

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we will seek to ensure that where it is asserted that there is a legal and contractual obligation to pay bonuses, that that really is a legal and contractual obligation that cannot be challenged.

Lord Lawson of Blaby: My Lords, in the light of this whole sorry experience, is it not clear that the time has come to put in place a modern equivalent of the 1930s Glass-Steagall Act, which separated investment banking from commercial banking? Talking of the 1930s, does the Minister agree with his ministerial colleague, Mr Ed Balls, that the current boom and bust—to coin a phrase—is said to be even worse than the slump of the 1930s?

Lord Myners: My Lords, I am not an economist, and therefore I am not going to comment on Mr Balls’s observations. As for the Glass-Steagall Act, the noble Lord, Lord Lawson, will be aware that, in our consideration of the Banking Bill, we have had much discussion on this subject: a discussion that has been led in particular by two colleagues, my noble friends Lord Eatwell and Lord Williams. The genie is out of the bottle, and it is very difficult in a global situation to separate retail from investment banking, but what we can do—the FSA is doing this—is to look at the allocation of capital against activities. It is quite clear that too little capital was required in support of trading activities, and probably too much capital was required against rather more conventional banking, as we understand it. We can achieve some of the consequences and benefits of separation through a much more rigorous capital, supervisory and regulatory regime than previously prevailed.

Lord Newby: My Lords, does the Minister accept that many people find his earlier Answer extremely frustrating? Allegedly, the Prime Minister and the Chancellor want to end the bonus culture. Taxpayers currently have majority or very significant stakes in two banks. Why, at the very least, cannot ridiculously high bonuses be ended in those banks, rather than kicking the whole thing into the long grass of yet another wretched review?

Lord Myners: My Lords, I absolutely assure noble Lords that this is not being kicked into the long grass. There is a need for a considered and contemplative review of governance, practice and engagement between shareholders, companies and boards of directors. That is what Sir David Walker will lead on. The more pressing issues about bonuses will require decisions to be taken in the fairly near future. Those issues are in no way being ducked. They will need to be confronted, and UKFI is now actively engaged in discussions with the Royal Bank of Scotland and the Lloyds Banking Group in connection with this. We will endorse the payment of bonuses only where there is a legal requirement to do so or where there is evidence of an extraordinary and exceptional contribution by individuals or teams. We will not reward failure.

Baroness Noakes: My Lords, can the Minister explain that last statement? He has said that the Government will not endorse the payment of bonuses, but they

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have been standing by, since they first started to take control of the banks, and have done absolutely nothing. Can he say precisely what the Government are going to do about the bank bonuses?

Lord Myners: My Lords, clearly the phrase “doing nothing” has finally caught on on the other side of the House. We are not the Government who do nothing. We made it clear in October, when we recapitalised the banks and in so doing ensured that the banking system continued to be available to support the economy, that reward issues were pertinent to that recapitalisation, and we secured the commitment from boards of directors that they would not take cash bonuses for 2008. We have now said in our more recent statement that participation in the schemes that have been detailed, including asset protection and the extended credit guarantee scheme, will be conditional on bonus payment issues. I repeat that we are not opposed to paying for contributions and adding value; we are opposed to rewarding failure.

Lord Peston: My Lords, did my noble friend see the bankers appearing before the excellent Treasury Select Committee this morning? Is he not as worried as many of us are that they seem to have learnt absolutely nothing from the events of the past few months? Is there not something that the Government could do at least to give them a lesson in humility?

Lord Myners: My Lords, I caught only snippets of the Treasury Select Committee hearings this morning between meetings. I understand that there were some expressions of sorrow, but the work that David Walker is going to do will be much more constructive in setting a new framework for accountable banks, taking into consideration their importance to the economy and their dependence on public support for the immediate future.

House of Lords: Reform


2.44 pm

Asked By Lord Tyler

The Minister of State, Department of Energy and Climate Change & Department for Environment, Food and Rural Affairs (Lord Hunt of Kings Heath): My Lords, we have received over 150 written responses to the White Paper, including those from parliamentarians, professional bodies, interest groups and members of the public.

Lord Tyler: My Lords, I am grateful to the Minister, but that does not go very far. Can I take it that the Government are disposed not to make timid and

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temporary tinkering but to take action on a longer term for a more strategic approach? Perhaps I may remind the Minister that the House is now likely to be here for another 15 or 16 months before an election and that all three parties and their leaderships in both Houses have supported the White Paper and the thrust of its proposals. Surely now we should make real progress. Does the Minister accept that any delay in this House would be interpreted by the public as complacency and special interest? On four occasions, he has said to me that he would be prepared to look at four or five draft clauses for pre-legislative scrutiny. Finally—

Noble Lords: Too long.

Lord Tyler: My Lords, finally, does the Minister recall the recommendation of the Joint Committee on Parliamentary Privilege, on which I served? It said:

“The House of Commons has power to suspend its Members, and it would be anomalous and undesirable if this were not the position in the House of Lords”.

Lord Hunt of Kings Heath: My Lords, the Government’s White Paper was informed by the work of the cross-party group. We are committed to fundamental reform of your Lordships’ House and the manifesto at the next general election will indicate that. From then on, it will be very much open to legislation. As far as immediate legislation is concerned, as my right honourable friend the Lord Chancellor has said, the Government are actively looking at what legislation we might be able to introduce to support the House in disciplining its Members.

Baroness Boothroyd: My Lords, the document under question has been in circulation for some time. When might we expect a debate in this House on what is a most interesting White Paper?

Lord Hunt of Kings Heath: My Lords, this is a matter for the usual channels and I am sure that they will take account of what the noble Baroness has said. On 27 February, we have the Second Reading of the Private Member’s Bill sponsored by the noble Lord, Lord Steel, in which I am sure many noble Lords will wish to take part.

Lord Howarth of Newport: My Lords, have the Government received representations that the time is now ripe, without further prevarication, to enact the reforms specified in the Bills of the noble Lords, Lord Steel and Lord Oakeshott, given the widespread agreement that those reforms are necessary? However, given the strongly conflicting views on elections to the second Chamber, not least between the Front Benches and the Back Benches, the time is not ripe to resolve that issue. Finally, questions of the discipline applicable to Members of your Lordships’ House ought to be determined by your Lordships and not in a new law or by some outside body.

Lord Hunt of Kings Heath: My Lords, we have various inquiries and reviews going on in relation to allegations made in respect of Members of your Lordships’ House and it is best to await the outcome

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of those before we discuss that matter any further. The White Paper was the result of cross-party work. As for the Private Members’ Bills of the noble Lords, Lord Steel and Lord Oakeshott, we will have a very interesting debate on 27 February. However, the Bill introduced by the noble Lord, Lord Steel, covers a large number of areas and I have to say that the Government’s commitment to comprehensive reform is not diminished by a need for any swift legislation in some specific areas.

Lord McNally: My Lords, is not one of the tragedies that, as the Minister knows well, if he, the noble Lord, Lord Strathclyde, and I got together we could probably get an agreement on Lords reform within an hour or so? If we are not going to use the slack of the least busy parliamentary year since 1945, would the Minister take the initiative so that at the next election the three major parties have identical commitments on Lords reform, which may put into perspective any prevarication in this House?

Lord Hunt of Kings Heath: My Lords, it does not feel like a slack legislative Session to me. Of course it will be up to each of the political parties to decide what they put in their manifestos, but it is clear that the cross-party group has worked well. The White Paper makes some excellent proposals and highlights issues for consultation on fundamental reform. There is no reason at all why legislation following the next general election could not take place.

Lord Strathclyde: My Lords, is the Minister aware that there can be no possibility of agreement on a future elected House of Lords while the noble Lord, Lord McNally, sticks to his position of a House elected by proportional representation? Can the Minister also confirm that at the last general election all three parties made in their manifestos a commitment to a referendum on the Lisbon treaty but none has so far taken place?

Lord Hunt of Kings Heath: My Lords, I do not recall the party opposite proposing a referendum on the Maastricht treaty. As far as the noble Lord, Lord McNally, is concerned, the White Paper puts forward a number of options on electoral systems. The working party could not reach agreement on this matter, so we will see what the manifestos say and then discussions will have to take place. What is clear, however, is that there is agreement that the electoral system in general for your Lordships’ House should not be a mirror image of that for the House of Commons.



2.51 pm

Asked By Baroness Gardner of Parkes

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Baroness Gardner of Parkes: My Lords, I beg leave to ask the Question standing in my name on the Order Paper, which according to the Evening Standard is my second question in the last year, and according to the parliamentary records is my 19th.

Lord Brett: My Lords, before I give the Answer I have before me I have to say that, from my experience as well, if the journalist suggested a lack of diligence on the part of the noble Baroness, it actually reveals a lack of diligence on the journalist’s part.

Noble Lords: Hear, hear!

Lord Brett: My Lords, I have checked, and I see that the noble Baroness has taken part in 72 debates over the past year. I have to say that her questions to us are always pertinent and quite often a discomfort, but I hope that the answers I can give her today will at least be of some comfort.

The Government’s planning policy statement 3 sets out the national planning policy framework for delivering the Government’s housing objectives, including for sustainable, inclusive mixed communities in all areas. We want housing associations to work closely with local planning authorities, which are responsible for ensuring that residential developments meet the needs of their communities through their planning policies, subject to viability testing.

Baroness Gardner of Parkes: My Lords, I thank the noble Lord both for the first part of his response and for his reply on housing. Does he agree that the evidence shows that mixed housing settlements are much better for poorer groups because they raise employment, cut crime and are more successful than the old style mono-tenure estates? At present, housing associations have an estimated 10,000 properties that they are unable to sell, and they are being forced to turn them into rented homes. In order to retain mixed housing, would the Government consider encouraging the introduction by housing associations of rent-to-buy schemes to enable people to build up a deposit through their rent payments? When economic conditions improve, they could become the owners of their own homes, thus retaining the mixed estate.

Lord Brett: My Lords, when the noble Baroness started her question, my heart sank as I thought that it would get me into a situation where I could not provide comfort, but her latter point provides the comfort for me that I shall be able to. Yes, we agree entirely that mixed housing developments boost the prospects for poorer groups, and yes, there are some 10,000 houses. However, that is of course a churn. A house purchase takes about three months, and over that period those houses are turning over. But she is right to identify the need to put new policies in place to assist in this difficult time, and the Government are doing that. I am pleased to report that they have a rent-to-buy scheme which allows tenants to rent a newly built property at a below-market rent—80 per cent—for up to five years, which allows them to save

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for the deposit, with them having the first option to buy the property either during or at the end of that five-year term.

Baroness Hamwee: My Lords, in a Question on housing last week I asked about the Government ensuring that finance was available to housing associations. The noble Baroness, Lady Andrews, answered that question in terms of public grant. What are the Government doing to ensure that private finance is available to housing associations and to individuals who wish to buy or part-buy from housing associations? I understand that the banks at the moment are taking every opportunity to renegotiate loans to housing associations on difficult terms, if at all.

Lord Brett: My Lords, the Government have a number of policies in hand to meet the difficulties of the social housing market. We have brought forward £550 million of funding to ensure that new social rented housing comes on stream sooner rather than later. It is to be hoped that that will provide 7,500 houses. We have also made £400 million available for Homebuy Direct schemes, thus supporting the construction industry, which, it is to be hoped, will provide 18,000 people with first-time-buyers’ opportunities. We are, of course, monitoring closely the banking situation, about which we have heard in other circumstances, and talking with the banks to ensure that the policies for lending to housing associations continue to allow them to do the job that they have very effectively done so far.

Baroness Howarth of Breckland: My Lords, what are the Government doing to ensure that special needs housing, especially disability housing and wheelchair accessible housing, is protected in these difficult times? As the Minister knows, a number of housing associations are finding it difficult with the present housing corporation model, and these are the units most at risk.

Lord Brett: My Lords, there is nothing that I can add to that question. I will take notice of it. It is the Government’s intention that housing for the groups of people named by the noble Baroness should be in no way diminished in these difficult times. I shall happily supply her with a written, detailed answer.

Lord Vinson: My Lords, is the noble Lord aware that the root cause of homelessness is the cost of housing and that over the past 50 years the land value of a house has gone up from 25 per cent of the value of the plot to more than 50 per cent of it, caused by excessive land rationing? Will the Government continue to ease planning restrictions so that more land is released and supply and demand can come into a more natural balance?

Lord Brett: My Lords, the housing needs of this country will outlive the current financial crisis that the world is seeing. Therefore we have to not allow what is happening currently to divert us from our intended plans in the long term. The noble Lord is right: when we move out of the current problems of housing, we

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need to ensure that land is available and that planning permissions are sufficiently flexible to ensure that we do not find ourselves with a dearth of land on which to build the housing we so desperately need.

Lord Skelmersdale: My Lords, can the Minister confirm that if you are a new resident of a housing association property and are eligible for help with your housing costs from the local authority, you would be on housing benefit rather than on local housing allowance?

Lord Brett: My Lords, my expertise in this area is more limited than that of the noble Lord. I do not know the answer, but I will find out.

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