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House of Lords

Wednesday, 25 March 2009.

3 pm

Prayers—read earlier at the Judicial Sitting by the Lord Bishop of Chester.

Building Societies


Asked By The Lord Bishop of Chester

The Financial Services Secretary to the Treasury (Lord Myners): My Lords, the Government are committed to developing the mutuals sector. They supported a Private Member’s Bill, which will, among other things, facilitate transfers between one type of mutual and another. This has recently been implemented for building societies.

In addition, building societies are eligible for assistance under the Government’s recapitalisation and credit guarantee schemes, and the Banking Act 2009 contains provisions which will help building societies to access liquidity support and ease legislative restrictions on their business.

The Lord Bishop of Chester: My Lords, I am grateful to the Minister for his Answer, but may I press him on one point? Is it fair that the mutual societies, which on the whole have conducted themselves in a fairly cautious and risk-free way, should be required to pay such large contributions to the Financial Services Compensation Scheme to make up for the failures of Icelandic banks and similar institutions? Is this consistent with the Government’s support for the mutual societies?

Lord Myners: My Lords, the right reverend Prelate is not the first to make that point to the Treasury. The allocation of constituencies through the Financial Services Compensation Scheme was the subject of consultation and the current arrangement was welcomed by the building society movement. However, it is based on retail deposits and it is recognised that this means that a heavy burden is falling on building societies. The Financial Services Authority is consulting on the proposals for allocation although I do not think that an announcement is imminent.

Lord Tomlinson: My Lords, does my noble friend agree that the demutualisation of building societies was a major contributory cause of the crisis in the banking sector, that in most cases where greed motivated demutualisation the relevant demutualised societies collapsed, and that we now need to see the Government’s promise put into practice so that we can re-establish a wide range of mutual societies to strengthen the regional base of our financial services?

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Lord Myners: My Lords, there is a great deal in my noble friend’s comments with which I agree. The demutualisation of building societies, approved, supported and encouraged by the members of those societies, has had regrettable conclusions. I, for one, regret that mutuals are less significant in the financial services sector, both in insurance and in banking, than they were originally. Mutual building societies exhibited a sense of community responsibility, attachment to their geography and, above all else, prudence and responsibility which is so different from the greed and self-serving motivation of those who have led some of our banks which have got into so much difficulty. I deeply regret the fact that the prudence of building societies did not remain in the ascendancy and instead became subservient to those who led our banks so monstrously badly.

Lord Newby: My Lords, given the noble Lord’s support for the concept of mutuality, will he consider remutualising all or part of Northern Rock?

Lord Myners: My Lords, it is too soon to consider that issue but I very much welcome anything that can be done to encourage the co-operative movement, the credit union movement and mutuality. If, out of this disastrous affair, which has afflicted a small number of our major banks, some opportunity for promoting mutuality can be identified, I would be the first to endorse it.

Lord Trimble: My Lords, I welcome very much what the Minister has said about the mutual sector, particularly his desire to support it, but is it not rather unfortunate that in recent months a mutual society has collapsed because of the current financial problems and has not had any significant help from the Government? I am referring of course to the Presbyterian Mutual Society which, alone among all the financial institutions in trouble in the United Kingdom in recent months, has received no help at all from the Government. I wonder what it is that the Government do not like about it; is it perhaps because it is in Northern Ireland?

Noble Lords: Oh!

Lord Myners: My Lords, I think that the reaction from noble Lords would affirm the fact that this has nothing to do with the location of the society. Discussions are continuing with the Presbyterian Mutual Society and I am very aware of the concerns that have afflicted that particular society. The Financial Services Authority and the Treasury are in continuing discussions in respect of the Presbyterian. I do not think that it would be appropriate for me to say anything further at this stage.

Lord Forsyth of Drumlean: My Lords, when the Minister answered the right reverend Prelate, he said that he was not the first to make the point about the unfairness of the depositors’ protection scheme. Why can the Government not come forward with a new proposal? As I understand it, the Government have lent the money. This money is going to be paid back. It will be paid through higher mortgage payments by people who have mortgages with building societies and lower interest payments for people who are depositors

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with building societies. Why do the Minister and the Government not come forward with an alternative proposal that is fairer? Why do they keep hiding behind consultations and the FSA and not actually come forward with a policy that is fair?

Lord Myners: My Lords, we as a Government think that consultation is the right way to proceed. It is entirely consistent with mutuality, which is members expressing views having appraised themselves of the situation. The Financial Services Authority is consulting, and we shall await the outcome of that consultation. The Financial Services Compensation Scheme is administered by the FSA and it is a structure that was endorsed when the Financial Services and Markets Act was passed by Parliament.

Lord Dubs: My Lords—

Baroness Sharples: My Lords—

Lord Elystan-Morgan: My Lords, may I ask a question that is slightly wider than the original Question? It relates to credit unions. Does the noble Lord agree that the time is now very ripe indeed for the fullest consideration to be given to government assistance to credit unions, bearing in mind that there is ample evidence that more and more people are all the time falling into the clutches of loan sharks?

Lord Myners: My Lords, the Government are already giving considerable support to credit unions, and I believe that I evidenced that in my answer to an earlier question.

Lord Dubs: My Lords, will my noble friend give further thought to credit unions, particularly in Northern Ireland, where there have been some serious difficulties? I do not expect him to have the answer now, but will he agree to look at the position there? They are certainly working under serious constraints and are not able to work as competitively as credit unions either in Britain or in the Republic.

Lord Myners: My Lords, I shall definitely look more closely at the situation.

Supreme Court: Retirement Age


3.08 pm

Asked By Lord Pannick

The Parliamentary Under-Secretary of State, Ministry of Justice (Lord Bach): My Lords, the Government have no immediate plans to raise the retirement age of Supreme Court justices but are keeping this issue under review.

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Lord Pannick: My Lords, I thank the Minister for that slightly encouraging response. When he looks at this matter again, will he agree that special consideration should apply to judges of the Supreme Court, in that they are the cream of the judiciary and inevitably take time to rise to the top, normally after serving for several years in the High Court and then in the Court of Appeal? Is it not therefore a terrible waste of our most valuable judicial resources to dispose of them after a short stay in the Supreme Court?

Lord Bach: My Lords, as the House would expect, the noble Lord puts a powerful argument. However, there are arguments on the other side. We have to try to strike a balance between retaining experience and ensuring the flow of high quality applicants to the highest judicial office. When we consider this—we consider it all the time—it will be only in relation to Supreme Court justices.

Baroness Butler-Sloss: My Lords, is the Minister aware that a large number of High Court judges are not appointed until the age of 55? Consequently, if they have to retire at 70, they will serve only 15 years on the Bench and it becomes difficult to get through to the Supreme Court in time to do more than 18 months or two years. Is he also aware that the noble and learned Lord, Lord Carswell, the former Lord Chief Justice of Northern Ireland, was 70 when appointed—he is about to retire—but that the noble and learned Lord, Lord Scott, was 67? The noble and learned Lord, Lord Bingham, was also 67, I think; if we had lost him as the senior Law Lord, we would have lost a huge amount of jurisprudence.

Lord Bach: My Lords, I am grateful to the noble and learned Baroness for that information, some of which I knew already. She puts forward powerful arguments, which will have to be balanced with other considerations that, I dare say, will be put in the next few minutes.

Lord Mackay of Clashfern: My Lords, I had responsibility for introducing to Parliament the Act on which this difficulty arises. Of course, there have been many changes to the judicial system since then—many more than I had ever envisaged. This difficulty has shown up particularly in relation to the Supreme Court. The age limit of 70 came in when the Pensions Act became law and, therefore, it applies only to judges who were appointed after that time. In this situation, the quicker one arrives at the Supreme Court, the more likely one is to be cut down by this provision. That is a serious loss of talent. It is difficult to generalise, but those who reach the Supreme Court the quickest will, on the whole, be among the best of the talent available. I hope that this review will happen quickly and will have the outcome for which the noble Lord, Lord Pannick, has asked.

Lord Bach: My Lords, I am grateful to the noble and learned Lord. We have to balance the arguments for and against. I acknowledge him as the author not of our difficulties but of what we consider to be the sensible rule that judges should retire at 70.

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Lord Borrie: My Lords—

Lord Lester of Herne Hill: 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, there is time both for my noble friend and for the noble Lord, Lord Lester.

Lord Borrie: My Lords, the retirement age for senior judges was introduced for the first time in 1959, when it was established at 75. Later, in the early 1990s, under I believe the Lord Chancellorship of the noble and learned Lord, Lord Mackay, it was reduced to 70. Is it not rather odd that the retirement age is being reduced at a time when the physical and mental abilities of people in their 70s have never been higher?

Lord Bach: My Lords, I shall have to answer my noble friend with some care if I want to get out of this Chamber alive. Of course, it is right to acknowledge those in their 70s, but it is also right to acknowledge that we want to allow those who are coming through the system to get to the top jobs at a younger age.

Lord Lester of Herne Hill: My Lords, I declare an interest—no one else has done so—in that I am 72. Of course, this is a totally unbiased House of elders whose average age is about the age that we are talking about. In considering the 1992 scheme of the noble and learned Lord, Lord Mackay, will the Minister and his colleagues bear in mind the fact that the supreme courts of Australia, South Africa and New Zealand in the Commonwealth, the supreme court of Ireland outside the Commonwealth and the European Court of Human Rights all have retirement ages of 70, the only exception being Canada, as a result of the imperial Constitution Act 1867? Will he also bear in mind the fact that the scheme established by the noble and learned Lord, Lord Mackay, very sensibly provides for a supplementary panel so that one can go beyond 70 and sit until 75? Will he consider whether that is proportionate and fair if one wants to enliven and enrich the Bench and have diversity, rather than simply being ruled by rather old people?

Lord Bach: My Lords, interestingly, the average age of this House is below 70, but only just, I think. We will consider the points that the noble Lord makes. As I said, there are points to be made on all sides of this argument. It is a serious matter, and we want to consider it seriously.

Israel: Arms Embargo


3.16 pm

Asked By Lord Hylton

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The Minister of State, Foreign and Commonwealth Office (Lord Malloch-Brown): My Lords, imposing sanctions would advance neither Britain's influence nor the prospects for peace in the Middle East and in our view is not the best way to engage or to influence Israel. We have been very clear that, in accordance with EU arms export criteria, no arms exports are granted where there is a clear risk that those arms could be used for internal repression or external aggression, and that is surveyed very closely. We continue to monitor this very carefully.

Lord Hylton: My Lords, this is not a negligible matter. Can the Minister confirm that in the first nine months of 2008, military equipment worth more than £27 million was exported to Israel? Will the Government tell the incoming Government of Israel that disproportionate killing and destruction as in south Lebanon and Gaza are unacceptable? Will they redirect our arms export effort to supporting peace-building and to trying to ensure as far as possible that there is parity between those negotiating for peace?

Lord Malloch-Brown: My Lords, on the noble Lord’s second point, we will continue to say to this Government and the incoming Government that disproportionate deaths of civilians are never acceptable. As to his first point, of the £27 million of sales to which he referred, £4 million were dual-use goods that were not being used for military purposes. Of the remaining £23 million, a single approval in January last year of a large contract for naval communications equipment accounted for over 75 per cent of the remainder. I assure the noble Lord and the House that in normal years we are a very small supplier of arms to Israel.

Lord Turnberg: My Lords, does my noble friend agree that if Israel was rendered unable to defend itself, it would rapidly be destroyed by those neighbours who vowed to remove it from the face of the earth? In the light of yesterday’s Statement on anti-terrorism, is it in the UK’s best interests to impair the ability of a pro-western ally that is right at the forefront in the fight against terrorism?

Lord Malloch-Brown: My Lords, in this House and elsewhere, we have always confirmed Israel’s right to self-defence. Whatever one’s view of the conflict in the region, it is clear that Israel needs a significant capacity for that self-defence.

Lord Wallace of Saltaire: My Lords, a new Government are coming in in Israel who appear to be stone deaf to all forms of outside criticism, with a Prime Minister who has made it clear that he rejects the two-state solution and is not willing to withdraw from the Golan Heights as part of a negotiated principle. What are Her Majesty's Government going to do to provide the outside pressure needed on this new right-wing Government in Israel to make them think rather more constructively about common security and peace for the Palestinians?

Lord Malloch-Brown: My Lords, I very much hope that the new Government in Israel will be given pause for thought by the fact that not just this Government but the Administration in Washington are, like nearly

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all of Israel's allies, firmly committed to a two-state solution and will use every opportunity to make that point unequivocally clear to the new Prime Minister.

Lord Astor of Hever: My Lords, the Minister in the other place said that there is no evidence that any British defence exports were used in the recent Israeli operations in Gaza. When will the Foreign Office’s assessment of that matter be completed?

Lord Malloch-Brown: My Lords, the noble Lord is correct to ask. There have been a number of reports on which we are drawing heavily as sources. There was the Amnesty report on 23 February. Our defence attaché in Tel Aviv has carried out an assessment. Once we have arrived at a clear picture of what materiel and equipment was used by the IDF, we will assess again whether any UK-exported parts or equipment were likely to have been involved. If so, we will adjust our export licensing policies accordingly.

Lord Wright of Richmond: My Lords, is the Minister aware—I am sure he is—that the previous Conservative Government imposed an arms embargo on Israel following the Israeli invasion of Lebanon in 1982? Two years later, they raised that embargo, in the words of the then Foreign Secretary,

Given the appalling devastation of Gaza by the Israeli defence forces and disturbing reports of instructions given to them that contravene international humanitarian law, is there not a strong case for Her Majesty's Government and the European Union—and the United States—to reimpose an arms embargo on Israel? Does the Minister agree that there is little reason to reject the case for an embargo on the grounds given 1964:

Lord Malloch-Brown: My Lords, as an underlying policy objective, the UK believes that engaging with Israel, drawing it into the international community and making it meet its obligations to its Palestinian neighbours is the right way forward. Let me add that we do not consider European arms sales to Israel to be the big stick implied. Ninety-five per cent of Israel's defence imports come from the United States. If you add in the gifted element, it comes to 99 per cent. The other 1 per cent indeed comes from the European Union, and the three big providers are Germany, France and Romania. I say that to give us a sense of proportion here. UK arms sales are not a big factor.

Lord Anderson of Swansea: My Lords, would it not be just a little absurd to deny arms sales to Israel—to have an embargo on Israel—a democratic ally which supplies us, for example, with drones used to protect our forces in Iraq and Afghanistan while, at the same time, Iran supplies Hamas with sophisticated rocketry that rains upon Israel?

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