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Lord Davies of Oldham: My Lords, we are concerned, as the right reverend Prelate has suggested, about dairy farmers in Britain. Of course last week I was commenting on the collapse of a significant dairy and its consequences. Last week, I wanted to emphasise, and this week I wish to reiterate, that the medium-term perspective for the dairy industry, far from being depressing, is encouraging. The right reverend Prelate is absolutely right to say that we have a difficult 18 months to two years to go through. That is why we are taking what measures we can to give support during this interim period. We were pleased, and the House will have rejoiced in the fact, that all farmers affected by the collapse of the dairy to which we referred last week had been offered new contracts and, therefore,
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Lord Burnett: My Lords, I should declare that I own and am landlord of farmland. The right reverend Prelate, who is a friend of mine, is quite right in what he says about farming, particularly dairy farming. We should be self-sufficient in liquid milk, but UK dairy farmers and co-operatives have to compete within the UK with overseas suppliers with a huge home market share, sometimes as high as 90 per cent. Competition is very important. Nevertheless, will the Government ask the Competition Commission to investigate the market share allowed to UK suppliers? They should be able to achieve greater economies of scale and be enabled to compete more fairly with their overseas competitors.
Lord Davies of Oldham: My Lords, of course it is right that the Competition Commission should ensure that British farmers compete on a fair basis but, as I indicated last week, we export considerable amounts of milk. That is not to say that we do not import considerable amounts too, but we are exporters of milk and find a market for it. The noble Lord is suggesting that there is unfair competition. I shall certainly draw that to the attention of the competition authorities, but I imagine that the House will appreciate that the issues are somewhat more fundamental than the aspect of unfair competition.
Parole: Ronald Biggs
Question
11.30 am
To ask Her Majesty's Government what considerations they took into account in refusing parole to Ronald Biggs.
The Parliamentary Under-Secretary of State, Ministry of Justice (Lord Bach): My Lords, the Justice Secretary considered all the material that was before the Parole Board panel. This included details of Mr Biggs's index offence; his previous offending history; his escape from Her Majesty's Prison Wandsworth in 1965; the many years which he subsequently spent evading extradition and recapture; his progress in custody after he returned to the United Kingdom in 2001; the reports prepared by staff in NOMS; the written representations of his legal representative; and the Parole Board's recommendation. After careful consideration, the Justice Secretary determined that the risk of harm presented by Mr Biggs was such that it might not be safely managed in the community.
Lord Dubs: My Lords, while not for a moment condoning the crime that Mr Biggs originally committed, would my noble friend confirm that Mr Biggs is old, very ill, most unlikely to do any harm to anybody and
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Lord Bach: My Lords, of course I can confirm that Mr Biggs is elderly and not in good health. However, I should remind my noble friend that the Parole Board said:
"What has quite plainly reduced enormously is his capacity to reoffend; the medical evidence indicates overwhelmingly that his own ability to commit further acts of violence has reduced to an extremely low level. The Panel is not persuaded that risk arising from association with criminal peers and consequent indirect involvement in offending is necessarily equally low".
Forgive the pun, my Lords. More seriously, the significance the Parole Board made of that risk is a matter of judgment. It decided to make its recommendation. My right honourable friend the Justice Secretary considered the significance of the last part of the passage I read out to be of considerable importance when coming to his decision.
Lord Thomas of Gresford: My Lords, I am sure that the Minister will recall that the European Court of Human Rights in the case of Stafford said that the Parole Board should have the power to direct release if continued detention was not necessary. The Government carried the effect of that decision in the Criminal Justice Act 2003. Is it not extremely unfortunate that the Justice Secretary should now bring back into the political arena a decision that should have been made by the Parole Board, and would have been made by the Parole Board, to release Mr Biggs, regardless of what he has done? Is it not simply a populist move that we should deplore?
Lord Bach: My Lords, it is not a populist move. I reject that utterly. As I think the noble Lord will know, the law as far as this is concerned is in rather a particular position at the moment. Under existing legislation, it is for the Secretary of State for Justice to determine whether an offender sentenced to 15 years or more and whose release is subject to the provisions of the Criminal Justice Act 1991 might be released early on parole. For all other types of prisoners-for example, those with indeterminate sentences-it is a matter for the Parole Board. I am glad to be able to say that the noble Lord will able to support the Government when we come to Clause 129 of the Coroners and Justice Bill, which will change the law in this regard.
Lord Elystan-Morgan: My Lords, the Minister has very properly listed a number of aggravating features of Biggs's case, but is it not also perfectly correct to say that he did, after all, return voluntarily to the jurisdiction?
Lord Bach: My Lords, it is right to say that he returned voluntarily-some 36 years after he committed the offence of escaping from Her Majesty's Prison Wandsworth. Why he returned voluntarily has been a matter of some comment in the media, and I will not repeat it. The noble Lord is strictly right that Mr Biggs
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Lord Elton: My Lords, how many prisoners are over the age of 75, and what consideration is given to the overcrowding in our prisons when reviewing their cases for parole?
Lord Bach: My Lords, I do not know the number of prisoners over 75, but I will find out and write to the noble Lord. Of course it is important that the right people are in prison at the right time; prisoners can be released if their health is in such a state and they can apply to the Justice Secretary for release on those grounds. We are talking about a decision which my right honourable friend took in a quasi-judicial role, having considered all the evidence before him.
Arrangement of Business
Announcement
11.36 am
Lord Bassam of Brighton: My Lords, my right honourable friend the Chancellor of the Exchequer made a Statement in the other place yesterday on reforming financial markets. The usual channels agreed to the Statement being repeated immediately after Oral Questions today. My noble friend Lord Myners will now repeat this Statement.
With the leave of the House, at a convenient point around 6.30 pm, my noble friend Lord West of Spithead will repeat as a Statement an urgent Question, which was allowed in the other place, asking the Secretary of State for the Home Department to make a Statement on the steps that he is taking to look into the actions of the police, the prosecutors and the Information Commissioner in respect of the use by newspapers of illegal surveillance methods.
Reforming Financial Markets
Statement
11.37 am
The Financial Services Secretary to the Treasury (Lord Myners): My Lords, with the leave of the House, I will now repeat a Statement made in another place yesterday by my right honourable friend the Chancellor of the Exchequer on government proposals for reforming financial markets. The Statement is as follows:
"With permission, I shall make a Statement on the Government's proposals for reforming financial markets. Copies of our proposals are contained in a document that is available in the Vote Office.
The world economy has been hit by a severe financial crisis which has resulted in the worst economic downturn for well over 60 years. Its origins lie in failures in the banking system around the world. Financial institutions in many countries simply took on too much risk. They became over-reliant on wholesale funding and too exposed to particular products, and irresponsible pay practices made banks take unnecessary risks.
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It is also clear that some financial institutions appeared to have little appreciation of what was going on inside their own businesses. However, regulators and Governments, too, must learn from the events of the past two years and understand better the risks that come from rapid globalisation in the financial system.
Our economy has a clear need for well managed, well functioning banks and financial institutions to perform a vital set of functions: channelling investment and helping people to save and plan for the future.
The financial services industry is also a major employer in this country of more than 1 million people, and it will continue to generate wealth for our country in the future.
Our central objective must be to ensure that, as we come through the downturn, we reform and strengthen our financial system and rebuild it for the future with consumers who are better informed, financial institutions that are better managed, and markets that are better regulated. The proposals I will set out today build on our previous reforms to provide a new settlement that is open, competitive and effective, is able to meet the needs of business and families, inspires trust and confidence on the part of businesses and consumers, ensures robust regulation that reduces the likelihood of failures without preventing innovation, and provides effective mechanisms for dealing with the failure of financial institutions should they occur.
I want to take steps to help consumers make better informed choices and to ensure that they are given access to free and impartial financial advice. We will legislate to introduce a national money guidance service and impose a levy on the financial sector to help fund it. We will also legislate to consolidate existing FSA resources to provide separate independent consumer education, setting up a lead provider of consumer information and personal finance education. Consumers will get more protection, along with a greater right of redress and access to compensation if things go wrong. We will also improve arrangements for depositor protection, including legislation to pre-fund and expand the role of the Financial Services Compensation Scheme.
Because of the events of the past two years, there are fewer firms in the market providing financial services. It is essential that we retain competitive markets as they play a key role in providing consumers with value and choice. We want to see greater competition and greater choice for consumers as well as a bigger role for mutuals and building societies. So the OFT and the FSA will ensure that we maintain competition in the market for financial services. As we come out of this downturn we need to promote a competitive market than enables new entrants, which may include non-banking institutions, and innovation to benefit consumers and businesses. In that way, we will see better informed consumers who have greater choices in a more competitive market.
We also need banks and financial institutions that are better managed. We need a change of culture in the banks and their boardrooms, with pay practices that are focused on long-term stability and not short-term profit. The FSA now has powers to penalise banks if their pay policies create unnecessary risk and are not
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Bank boards and institutional investors must also become better equipped to do the job and understand their businesses, with more effective risk management and greater independence of non-executives who must not be afraid to ask searching questions. Next week, Sir David Walker will report on measures that will deliver improved corporate governance at financial institutions ahead of his final report in the autumn.
Building on reforms already made, my proposals today will strengthen regulation of the financial system. They will cover three areas: first, new regulatory powers to allow tougher regulation of individual firms; secondly, measures to deal with the potential failure of institutions that could have a significant impact on the economy; and thirdly, a strengthened framework for financial stability to deal with system-wide risks in today's more complex and global markets. We will continue to work with other countries to deal with what is, at heart, a global problem.
I asked Lord Turner to make recommendations, which the FSA is now implementing, to strengthen the regulatory regime and increase the intensity of supervision. They will strengthen the rules to ensure that banks hold enough capital as a buffer against losses, introduce a backstop power ensuring that banks do not overextend themselves by lending too much when they do not have the strength to do so, and increase the focus on bank liquidity so that they are able to carry out their business at all times. These measures will help ensure that financial firms are stronger, more resilient, and better able to serve the needs of our economy.
I will also introduce legislation in the autumn to give the FSA a new statutory objective for financial stability, and extend its powers to ensure that it has the appropriate rules to deal with different risks in individual banks and tougher powers and penalties against misconduct, and that it can take account of new developments in the financial sector, including expanding regulation where necessary-for example, for systemically important hedge funds.
We need to ensure that our resolution regime can deal with financial institutions of all sizes, including banks that are very large or complex. As these banks are often global, we also need an international mechanism for resolving large multinational banks, and we will bring forward proposals to the G20 Finance Ministers when they meet in London in the autumn.
At home, we can better deal with risk by ensuring that safeguards are in place-for example, by making banks hold capital at a higher level that reflects not only the possibility of failure, but its cost. By introducing higher standards and transparency, the FSA can also improve the functioning of key markets, such as the derivatives markets, so that problems in one institution are less likely to spread through the entire system. The FSA and the Bank of England will make institutions put in place practical resolution plans that can be deployed in the event that they get into difficulties.
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There is, of course, a debate to be had about whether Governments should restrict the size of banks or separate different types of banking, as happened in the United States in the 1930s. I believe that this is a simplistic solution which fails to take account of the complexity of today's financial system. Small banks as well as large banks can threaten financial stability, as in the case of Northern Rock. Equally, both retail and investment banks in different parts of the world have failed in the past year. And it is not only banks that can affect stability, as we saw in the example of the American insurance company AIG.
In addition, the approach of one regulator for one category of institution deemed to be systemically important and another regulator for the rest seems to me to miss the point, because what is systemically important can change rapidly, as we have seen in the past two years. Instead, the new regulatory system has to recognise and respond to the complexities of individual institutions, and that is what we are doing.
We also need to strengthen the framework for financial stability. That is a question not only of institutional powers and responsibilities but of better understanding what is happening in the markets. No simple fixes, no institutional reform, could have prevented these problems occurring. There are different institutional frameworks in countries across the world, but no one model has been successful in insulating a country from the current crisis. Although regulatory arrangements were not the cause of the current problems, we need the right institutions to maintain financial stability, and we must ensure that they have the right tools to do the job.
The move in this country to a single regulator 12 years ago addressed problems with the previous regime of multiple self-regulators which did not reflect the changing nature of financial markets, and our approach has been adopted by many other countries. However, 10 years on, the world has moved on again. Some of the global problems of the past two years went beyond the scope of existing regulation, while others were simply not given sufficient attention by regulators and central banks. In this country, the authorities have been able over the past year to deal quickly and effectively with a number of financial stability issues, such as those relating to the Dunfermline Building Society and Bradford & Bingley. But further reform is now needed. We will therefore legislate to set up a council for financial stability which will bring together the Bank of England, the FSA and the Treasury. It will not only deal with immediate issues but will monitor system-wide financial stability and respond to long-term risks as they emerge. That needs to be done on a formal statutory basis.
The council will draw on the expertise of the FSA and the Bank, which are and will remain independent of government, by looking at their regular reports-the financial stability report and the financial risk outlook-and formally responding to their recommendations. In that way, when risks or threats to stability are identified they will be addressed. This body will do that in a way that is transparent and accountable so that people can see how and why decisions are made, with the regular publication of minutes. The council's responsibilities
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We have already taken significant steps to improve the way in which we monitor and manage risks to the financial system as a whole-through more systemic use of stress testing of financial institutions, for example. The proposals that I am making today will further strengthen our ability to identify and deal with systemic risks and will ensure that the authorities can be held accountable for their actions.
We also need to consider what further countercyclical measures are needed in order to allow us to lean against the credit cycle and prevent the build-up of risks that could threaten the stability of the financial system. The principle of leaning against the cycle is easy to agree, but deciding what action to take and when to take it is far more complex. At the moment there is no clear consensus here or abroad, but I believe that central banks will have an important role to play in this area.
Today's global markets for finance mean that new measures can be effective only if they are implemented on a broad international basis. So, under our presidency of the G20, we will continue to press for measures to strengthen the international regulatory architecture, building on the proposals agreed in April. In Europe, too, we will argue for enhanced monitoring of system-wide risks, while retaining the crucial link between national regulators and Governments. By working internationally, our efforts can help us deliver more effective supervision of global banks, stronger international standards and a more responsible global financial services sector.
We intervened to stabilise the banking system while retaining a clear view that banks are best managed and owned commercially and not by the Government. We intend to return our stakes in the banks to the private sector in a way that brings best value to the taxpayer, promotes competition and maintains stability, and we will use the proceeds to cut government debt.
We are empowering consumers, supporting better corporate governance and strengthening regulation so that our financial sector can continue to be an engine of prosperity. I commend this Statement to the House".
That concludes my right honourable friend's Statement.
11.52 am
Baroness Noakes: My Lords, I thank the Minister for repeating the Statement made yesterday in another place. We have had the overnight benefit of reading the reviews of those outside Parliament. I do not suppose that the Chancellor will be thrilled with the reception that his proposals have received, but he should not be surprised; the Statement is yet another sign of a Government who are running out of steam.
The Statement does not come close to acknowledging one central fact about the banking crisis: namely, that the regulatory arrangements that the Government set up failed. The Government put banking supervision into the vast experiment of the FSA. The Government believed that a memorandum of understanding would create effective tripartite working. All this failed.
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