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4 Nov 2009 : Column 254

Banking: Mutualisation


3.30 pm

Asked By Lord Borrie

Lord Davies of Oldham: My Lords, the Government do not believe that it is in the public interest for the Government to operate banking services in the longer term. We therefore intend to return government stakes in banks to the private sector at the earliest and most prudent opportunity. Any decision will consider value for money to taxpayers, financial stability and protecting depositors' money. Mutualisation would be considered with other options on this basis.

Lord Borrie: My Lords, I thank my noble friend the Minister for his sound Answer, so far as it went. Does he recognise that this is a unique if not historic opportunity for remutualising or mutualising a number of the failed financial institutions that the Government now own? Does he agree with the Oxford Centre for Mutual and Employee-owned Business, which reported at length in September? It recommended that the creation of a number of mutuals would enhance competition in the high street and encourage diversity, at little net loss to the taxpayer, and that such mutuals would be less risk-based than those institutions that were there before.

Lord Davies of Oldham: My Lords, I am of course grateful to my noble friend for his constructive suggestions. He will have appreciated from my reply that we are considering all these matters, but in due course. There is no question of decisions being taken in the very immediate future, because they are very important decisions to take. As I indicated in my original Answer, we take on board the arguments that he presents to the House.

Baroness Noakes: My Lords, does the Minister agree that mutual status is no magic bullet, as we have seen from the disastrous financial failures that occurred in, for example, the Dunfermline Building Society, Equitable Life and the Presbyterian Mutual?

Lord Davies of Oldham: I agree largely with what the noble Baroness has said, although I prefer magic wands to bullets, which I always regard as being the silver kind when they are dangerous. However, I accept her point. Among the calamities that we had during that dreadful period a year to 18 months ago was, in fact, a mutualised society, the Dunfermline, which showed that the sector is not entirely proofed against difficulties. Nevertheless, I think that the House will recognise that a number of the casualties involved institutions that had been demutualised in recent times.

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Lord Shutt of Greetland: My Lords, I have been reflecting on the words of the noble Lord, Lord Myners, yesterday afternoon, when he said:

"There is nothing that I would like more than for a new mutual to be created".-[Official Report, 03/11/09; col. 147.]

He said that he would like noble Lords to come up with constructive ways to do that. I suggest to the noble Lord-

Noble Lords: Oh!

Lord Shutt of Greetland: Then I shall ask the noble Lord: would he like to look at the proposition that a mutuals' mutual should be created? The existing mutuals-the 50 building societies and the very many mutual insurance companies-would be asked to put up some money for that mutuals' mutual, which would also be backed by a government loan. That would then mean that the new mutual would, because of its size, be able to give services that the smaller mutuals cannot at present. Would the Government encourage that to happen?

Lord Davies of Oldham: My Lords, I am glad that my noble friend Lord Myners not only demolished the Opposition yesterday but encouraged constructive thoughts in other parts of House. He said that he wanted to see such thoughts and I am glad to receive them on his behalf today.

Lord Lawson of Blaby: My Lords, would the Minister reflect on the fact that it was the Prime Minister's decision to override competition policy and allow the purchase of HBOS by Lloyds-it is now having to be partially broken up-that contributed greatly to the mess that we are now in?

Lord Davies of Oldham: My Lords, the noble Lord underestimates the mess that we were in 18 months to two years ago, when there was a direct threat to Northern Rock's depositors and a run on the banks of proportions that we had not seen for more than half a century. Of course dramatic measures were taken at that time, most of them opposed by the Opposition, either directly or through their showing scant regard for the constructive approach of the Government. I hope that the noble Lord would appreciate that we are in slightly better times today.

Lord Naseby: My Lords, the mutuals have a long tradition of success. The odd one has gone wrong, but on nowhere near the scale of the commercial banks that have gone wrong. Would it not help in seeking the future of mutuals to look closely at what happened in Holland, where the mutuals have done extremely well, and Canada, where they also play a major role?

Lord Davies of Oldham: My Lords, I am greatly encouraged to know that I have support from not only my Back Benches and the Liberal party but now, indeed, the Conservative Back Benches. Such constructive ideas will form part of the Government's agenda.

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Lord Newby: My Lords, the noble Lord, Lord Myners, yesterday made it clear that, although he had looked at the possibility of remutualising parts of the currently largely nationalised banks, he could not find a way to do it. Would the Government therefore institute a formal broad-ranging review of other options that they could take-for example, the option promoted by my noble friend Lord Shutt-so that we and they could look across the piece at what could be done to promote mutualism in the financial services sector?

Lord Davies of Oldham: My Lords, the House will recognise that we have time on our side. We have no intention of selling, for example, Northern Rock in the immediate future, so we can begin to look at other constructive proposals. As my noble friend indicated yesterday, he looks forward to examining these matters.

Electoral Law Act (Northern Ireland) 1962 (Amendment) Order 2009

Electoral Law Act (Northern Ireland) 1962 (Amendment) Order 2009
21st Report Joint Committee Statutory Instruments

District Electoral Areas Commissioner (Northern Ireland) (Amendment) Order 2009

District Electoral Areas Commissioner (Northern Ireland) (Amendment) Order 2009
21st Report Joint Committee Statutory Instruments

Private Security Industry Act 2001 (Amendment) (Northern Ireland) Order 2009

Private Security Industry Act 2001 (Amendment) (Northern Ireland) Order 2009
22st Report Joint Committee Statutory Instruments

Private Security Industry Act 2001 (Amendments to Schedule 2) Order 2009

Private Security Industry Act 2001 (Amendments to Schedule 2) Order 2009
22st Report Joint Committee Statutory Instruments

Motions to Approve

3.37 pm

Moved By Baroness Crawley

Motions agreed.

Apprenticeships, Skills, Children and Learning Bill

Bill Main Page
Copy of the Bill
Explanatory Notes

Report (2nd Day)

3.38 pm

Clause 109 : Research, information and advice

Amendment 130

Moved by Lord Young of Norwood Green

130: Clause 109, page 70, line 2, leave out "are" and insert "is"

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The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Lord Young of Norwood Green): My Lords, Amendment 130 is a drafting correction to ensure consistency between Parts 3 and 4. In moving it, I will speak also to Amendments 131, 132 and 133. The latter amendments raise concerns about the timing and proposals around the new role for regional development agencies. I recognise these concerns and will explain the background.

At the point that we created the Department for Business, Innovation and Skills, which sponsors both regional development agencies and the LSC, there was opportunity to reflect on the landscape in which the Skills Funding Agency will sit. In particular, we wanted to address significant concerns from business and other sectors about the overlap in roles between RDAs and the Learning and Skills Council. This analysis identified a compelling case for simplifying the landscape by embedding skills within the single integrated regional strategies agreed by the joint local authority and RDA partnership boards. Not only would this remove any potential duplication, it would also place skills firmly within economic development strategies. I understand the possible issues that this proposal may have raised in the context of this Bill and I believe that it may be helpful for me to provide reassurance to the House on a number of points about which I know noble Lords are concerned.

First, why did we not announce this in the House? The main reason is that we wanted, before coming to a decision, to discuss the proposal with local authorities, regional development agencies, business sector organisations and other interested parties. That was the purpose of the letter from my noble friend Lord Mandelson to Jim Braithwaite in July. We are currently considering the responses we have received, most of which recognise the strong case for this change.

Secondly, why does this change not require any amendment to the Bill currently before the House? The Bill is intended to establish the chief executive for the Skills Funding Agency as a statutory post-holder with specific funding responsibilities. It does not try to set out in detail every single function of the chief executive. So in the case of strategy setting, these functions are not described in this Bill, and because my department sponsors the regional development agencies, we can require them to take on this new role in respect of skills through administrative means. However, the Local Democracy, Economic Development and Construction Bill is putting in place the legislative framework for the single integrated regional strategies, which will now include skills. The Department for Business, Innovation and Skills will sign off these strategies and will ask the Skills Funding Agency to contract accordingly, ensuring that the agreed sectoral, regional and sub-regional priorities are met.

I recognise that this is important context to the work of the Skills Funding Agency and, therefore, I welcome the opportunity for a full debate about it now. I know some have argued for a more sectoral approach. I would like to reassure the House that we are committed to ensuring that sectoral priorities are met under these arrangements. Our proposals will ensure that regional, local and sectoral needs are

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catered for. As I said earlier, we have written to a range of organisations about the proposals, including sectoral organisations such as the Alliance of Sector Skills Councils. Through the formal signing-off arrangements with the Secretary of State, we will make sure that the regional strategies include the sectoral priorities relevant to each region. We will be holding an event with the sector skills councils and other relevant organisations to make sure there is an effective system in place which meets the needs of the sector skills councils and others.

On Monday, the noble Baroness, Lady Sharp, raised the issue of the importance of a bottom-up approach to strategy setting, with the involvement of all key partners. I would like to assure her that partnership is essential to the new system and I recognise the importance of involving local authorities. Partnership working is already happening in practice on the ground. The RDA and the local authority leader board in the West Midlands have recently written to Ministers emphasising how they are already working closely together to develop the single integrated strategy for their region and the importance they place on this as they build skills into those strategies. I am sure this good practice will be reflected across the rest of the country.

I understand that the intention behind Amendment 132 is to probe how these arrangements will work with city regions, such as London. Let me first give reassurance that these changes will not affect the powers which currently exist for Greater London. The mayor will have the same relationship with the Skills Funding Agency as he does with the Learning and Skills Council. Similarly, Manchester is currently undergoing an assessment of its employment and skills board proposal, and we expect it to be awarded equivalent powers to London in relation to the Skills Funding Agency in due course. Leeds has not yet established its employment and skills board, but we have committed to help it do that and to consider it for the award of the same powers, probably in spring 2010.

Leeds and Manchester are, of course, more complex than London because they sit within broader regions. In these cases it will be vital for the city and regional strategies to be fully aligned, so that the Skills Funding Agency has a clear and unambiguous statement of the skills needs on which to base its funding and contracting decisions. Manchester and Leeds city regions are putting protocols and agreements in place with their RDAs to make sure that their strategies align, and neither sees any difficulty in making this work. The Government will look at these arrangements and offer guidance to other areas which might in the fullness of time have similar issues.

I hope this provides reassurance to the noble Baronesses and that they will not press their amendments.

3.45 pm

Baroness Sharp of Guildford: I shall speak to my three amendments in this group, Amendments 131, 132 and 133. As the noble Lord indicated, they relate to the role of regional development agencies in the development of skills strategy and were stimulated by the letter of 31 July from the noble Lord, Lord Mandelson, to Jim Braithwaite of SEEDA, which I quoted extensively in Committee.

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The noble Lord, Lord Young, has to some extent pre-empted some of the questions that I had intended to ask. We are particularly concerned about two issues. One is, as he rightly indicated, that when the Bill was conceived, the role of regional development agencies was not written into it. The briefings that we received about the role of the Young People's Learning Agency and the Skills Funding Agency stated that each was to play a part in developing a skills strategy. The YPLA in particular was to work with local authorities and sub-regional authorities and look at the skills gaps at a local level. A lot of work has gone into creating these sub-regional authorities and the shadow administrations that have been set up. Having talked to local authority members who have been working on this, they are, on the whole, happy with the sub-regional authorities. Suddenly, out of the blue, comes the notion that all of this will not only be part of a regional skills strategy but that the lead will be taken by the RDA, that the skills strategy will be formulated at a regional level, and be binding-certainly on the Skills Funding Agency. Whether it will be binding on the YPLA is left obscure.

As the noble Lord indicated, that eviscerates the notion of a bottom-up development of skills strategies. That depends a little on the size of a region. I was talking to my noble friend Lady Maddock, who comes from Northumbria. She said that her sub-region was, in truth, the same as the region, which was very small and the plan would work well. However, as the Minister knows, I come from the south-east which is a huge region of 11 million people. There are huge differences between Thanet and Milton Keynes. To suggest that you can formulate a regional skills strategy for the whole of that area is an absolutely absurd, top-down notion.

I do not know how many Members have had a chance to look at the publication by the United Kingdom Commission for Employment and Skills, Towards Ambition 2020: Skills, Jobs, Growth-expert advice to the Government from one of the many organisations that litter this area of responsibility of the Department for Business, Innovation and Skills. It was about a simplification agenda. It is quite interesting. I shall read a paragraph concerned with all the areas that we have been looking at, in which the commission recommends:

"Reviewing and clarifying the future roles (if any) of, and relationships between, Regional Development Agencies, Regional Skills Partnerships, Multi-Area Agreements, Employment and Skills Boards, Neighbourhood Renewal Programmes arrangements and Local Authorities, in relation to skills provision and funding-simplifying the range of organisations involved in shaping skills provision, removing duplication in the system, eliminating unnecessary structures, and unifying funding and contractual requirements".

One of the recommendations is for a review and a clarification of their roles. It is very carefully phrased. It refers to "future roles (if any)" of all these organisations, including the regional development agencies, so we remain extremely sceptical about their role.

We also think, as do other Members of the House, that these issues have been brought into the game late. They are not mentioned in the Bill, and the House feels that it has been slightly ignored with this new proposal just being brought in and swept through. The Minister said that we do not need legislation for this

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and that they can do it by diktat, in a sense. Fine, it can be done by diktat, but my Amendments 131 and 132 are designed to try to stop that. There is something to be said for limiting that.

My other amendment relates rather more specifically to a question that I raised in Committee about the overlap between this Bill and the Local Democracy, Economic Development and Construction Bill, which envisages the development of integrated regional strategies with statutory economic prosperity boards-not one economic prosperity board has been mentioned by UKCES-allowing local authorities to come together to form multiple area agreements. In addition, the Budget 2009 announced that Greater Manchester and Leeds would become core cities. The questions that I was going to pose to the Minister, but which he has answered, are: will Greater London and the Mayor of London retain the powers of direction over adult skills and will the Local Democracy, Economic Development and Construction legislation be used to enable Greater Manchester and Leeds to create economic prosperity boards linked to their multiple area agreement, following London in creating statutory employment and skills boards, and giving them powers to direct the Skills Funding Agency?

This does pose questions. Can the Government reconcile regional skill strategies agreed between the Northwest Regional Development Agency of West Yorkshire and Humber and the relevant leaders boards if they are to be binding on the SFA, and any powers of direction over SFA funding which might be granted to Greater London and Leeds? The RDAs' skills strategy decisions will be binding on the SFA, yet what will be the relationship between the SFA and core cities? To some extent the Minister has answered that with a straightforward yes, and that they will be just as in London. My question comes back to the central issue of the role of the RDAs. How far is it a top-down, labour-planning role? I wonder whether it is appropriate that the RDAs have that role or whether the original conception, as in the Bill, of a much more bottom-up process is more appropriate and should be retained.

Lord Ramsbotham: Like other noble Lords, I listened intently to what the Minister had to say and I was not wholly taken by all that he put forward. I also listened carefully to the noble Baroness, Lady Sharp, who, as always, put her finger on some of the key issues. I have to say to the House, as I have said before, that I am deeply concerned about this Bill because of what it is storing up for the future.

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