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The noble Lord, Lord Higgins, asked about macro-prudential regulation. This is a very new concept to address an old problem. It is sometimes summarised in the press as taking away the punchbowl before the party has gone out of control, or leaning against the wind. It will need a globally co-ordinated approach. It is high on the agenda for the G20 and the IMF. It raises some questions about whether monetary policy that targets consumer or retail inflation is necessarily appropriate as an instrument to address asset inflation, which was clearly at the heart of the crisis. Mr Greenspan has been very clear that this is something that was missed by the Federal Reserve. I am sure that other central bankers share a concern that they have yet to find the answer to that.

I do not, however, agree with the noble Viscount, Lord Trenchard, that you cannot support macro-regulation and supervision without also being responsible for the micro. They are very different. Micro is about the regulation of individual institutions and judgments about their capital adequacy, the competence of the management and the sustainability and achievability of their business plans. Systemic risk is where the micros of individual institutions come together. Macro is about the broader economic context. You cannot establish macro policy without micro awareness. Nor can you have good micro-regulation focus, particularly on interconnectivity and complexity, if you do not also have macro awareness. The Council for Financial Stability will provide that overarching co-ordination. Under our structure, it is not necessary for micro and macro to be performed necessarily by the same bodies.

My noble friend Lord Stoddart of Swindon asked whether Parliament will have a role in scrutinising the results of the wash-up. As the Committee knows, I am still relatively inexperienced-I think I am now right at the borderline of being able to use that as an excuse for not being quick enough on my feet in saying the right things. There are a number of things in Parliament that I have yet to experience, although I am looking forward with great excitement to the experience and joy of being re-elected to government in the next couple of months. But that is some time off.

Earl Ferrers: My Lords, is the noble Lord going to be elected to the Government?

Lord Myners: I apologise to the noble Earl, Lord Ferrers, for once again evidencing the fact that I still have much to learn. Of course I will not be elected, but I am looking forward, as I am sure the noble Earl understands, to the Labour Party being re-elected.

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I was going to say that I have even less experience of wash-up; in fact, it meant something very different to me until about a month ago when I began to hear the term being used. As I understand it, wash-up requires all Bills to go through their remaining stages in each House and therefore to be subject to whatever scrutiny Parliament is able to provide. At a certain point the usual channels will then address the issue of what is to be done with Bills that have not completed their full parliamentary process, but I suspect that almost everyone in the House knows more about the practice of wash-up than I do.

With the exception of the noble Baroness's amendment which I have indicated that the Government are happy to accept, I urge her not to press her other amendments.

Viscount Eccles: My Lords, before the Minister sits down, with regard to the question asked by the noble Lord, Lord Newby, I draw the Minister's attention to Part 2 of the new Schedule 1A, which is headed "Funding". New paragraph 11(1), headed, "Meaning of 'the relevant costs'", says:

"In this Part of this Schedule 'the relevant costs' means ... the expenses incurred by the Authority in establishing the consumer financial education body",

while new paragraph 11(2) says:

"For the purposes of sub-paragraph (1)(a) it does not matter when the expenses were incurred".

It is normal practice for this Government to write into Bills something that means that if they become Acts, all the expenditure that has been made before the Bill was passed will be whitewashed. I suspect that that is exactly what is happening on this occasion.

Lord Myners: I thank the noble Viscount, Lord Eccles, for that intervention. I am happy to reassure him and other Members of the House that 1 April, as referred to by the noble Lord, Lord Newby, is merely a number that has been used for planning-assumption purposes when the FSA is preparing itself for the creation of the CFEB. As I said earlier, no decisions or actions have been taken, and they will not be taken or implemented until legislation is passed.

Lord Stoddart of Swindon: My Lords, I will not delay the House very much longer.

A noble Lord: The Minister has sat down.

Lord Stoddart of Swindon: No, this is Committee stage; you can talk as many times as you like. The noble Lord should not delay the proceedings. I was going to remind the noble Lord, Lord Myners, that he is indeed privileged, as are the rest of us, in that, following dissolution, he will get a registered letter in the post containing his personal Writ of Summons, which I hope that he will be there to receive, open and, in due course, answer.

However, I am still concerned about this question of wash-up. The Minister says that he has not heard the term before, but I have been around for a very long time and I had not heard it either until this afternoon-and I was a Whip in the other place. Apparently the parties are going to make decisions that then have to be agreed by both Houses of Parliament. I am concerned

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that both Houses will be stampeded into agreeing matters that should be properly considered over a period of time. That really concerns me, and it ought to concern the Committee as well.

5 pm

Lord Myners: I note what the noble Lord says, which of course applies to this Bill and to others, but I understand that the practice of wash-up has been used by Parliament in the past in these situations. I am a regular reader of the excellent website Lords of the Blog, where the noble Lord, Lord Norton, regularly informs me on this and on other matters. While I note what my noble friend says, I have nothing further to add.

Lord Howard of Rising: I am not quite clear. Although the noble Lord says that this new council is not an executive body and is purely advisory, he also says that he disagrees with the amendments tabled by my noble friend Lady Noakes which seek to define what the authorities do. How will people know what to do when, for example, there is a crisis of confidence, as there was with Northern Rock, and queues form outside banks and people ask for their money but no one is quite clear about who is doing what on the day?

Lord Myners: My Lords, I have no doubt that the chairman and chief executive of the FSA, the governor and deputy governors of the Bank of England, the Chancellor of the Exchequer and his junior Ministers all know precisely what their roles are. They know where they operate with their independent executive authority and where they co-ordinate their actions through the tripartite organisation or through the new Council for Financial Stability. Nothing in the noble Baroness's proposals would in any way lead to a superior response in a situation such as that of Northern Rock.

I listened very carefully to what the noble Lord, Lord Howard, said about the need for executive clarity and the avoidance of any confusion about lines of authority and accountability. Our structure delivers precisely that, whereas I believe that the noble Baroness's amendments, as I have suggested, obfuscate and confuse. They grant executive authorities and powers that the Council for Financial Stability is not designed to exercise.

Lord Forsyth of Drumlean: I do not wish to detain the Committee, and I think that there is general agreement that whatever we do will not make any difference to the passage of the Bill, as it is perfectly obvious that the Bill is not going to reach the statute book or go through all its stages. There is a kind of Alice in Wonderland feel to this debate. However, I am very surprised that the Minister does not know on how many occasions the tripartite group got together prior to the crisis. After all, that structure was put in place by the Prime Minister as Chancellor, and I suspect that the role that this Bill has to play is that of a fig leaf for the Prime Minister.

I think that I am right in saying that there were only two occasions when the principals met under the old tripartite structure; that was the evidence which I think we received in the Economic Affairs Committee during our inquiry into banking regulation. I am very

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surprised if the Minister does not know on how many occasions it happened. I listened to his explanation of why my noble friend's amendments should not be accepted-it was very much based on the idea that those three parties working together and co-ordinating is essential to the proper conduct of affairs. If that is the Government's position, one is left to conclude that it is an open acknowledgement by the Government that they took their eye off the ball when they were not meeting as a tripartite group at principal level in the run-up to the crisis.

My anxiety concerns the question of why setting up a formal structure-with all of the costs, paraphernalia, stationery and everything else-would make any difference. It was perfectly apparent at the time of the Northern Rock crisis that the Government were, as my noble friend said, at sixes and sevens, and that it was unclear who was in charge. The Treasury was forced to take control. I remember at the time that the governor's line was all about moral hazard, and we had great debates in this House about whether the governor was right to refuse the bid that was then made by Lloyds TSB to deal with Northern Rock. So, without going back over all that ground, it seems that the Minister is simply replicating a structure which failed and assuring us that by having some kind of formal structure it will be different. That is one point.

My second point is that I am totally confused now about what the Minister said in response to the points made by the noble Lord, Lord Newby. Is he saying that no expenditure has been incurred and nothing has been done to pre-empt this legislation by the FSA or any other body-that nothing is being changed in anticipation of the Bill becoming law? If that is the case, can he state it clearly? I have not got the sharp eyes of my noble friend Lord Eccles, and I had not seen that provision. If not, is the Minister saying that this expenditure will be covered because there is a provision in the Bill which he hopes will be carried forward in the wash-up? We should know.

Also-and I am sure that the noble Lord, Lord Newby, is correct-if there are people in the FSA who are being told their jobs are changing or may be at risk on the basis of the Bill getting on the statute book, that is called forward planning and I fear for the planning of the FSA. Can no one in the FSA see what the noble Lords, Lord Barnett and Lord Peston, see, that the Bill has no possibility of reaching the statute book as it exists? It would be very foolish indeed to make forward planning on the basis of what might happen to the Bill, and what might happen after 6 May.

Lord Myners: In response to the noble Lord, Lord Forsyth, throughout its life the tripartite arrangement involved regular meetings at deputy level. The number of meetings attended by principals may well have been two; the noble Lord advises me that that is the case and I have no reason to believe it is not. Perhaps it is not altogether surprising: it was during a period of extraordinary growth. The Governor of the Bank of England described it as the "nice" decade-non-inflationary consistent expansion. The deputies-that is the deputy governor, the chief executive and the Permanent Secretary to the Treasury; senior people leading their organisations-did meet very regularly.

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It would be wrong to suggest that the governor, the Chancellor and the chairman of the FSA did not meet regularly. Even last week I attended two meetings involving the governor, the Chancellor and the chairman of the FSA. They meet very regularly outside the formality of the old informal tripartite structure. We are now giving the structure much more formality. I hope there is not confusion there.

In answer to the question from the noble Lord, Lord Newby, about expense being incurred, I think I am on solid ground in saying that no material expense has been incurred in anticipation of legislation being passed. It is of course necessary for these bodies to contemplate a piece of legislation that is going through Parliament, and to plan for what that legislation would mean. It is an entirely good thing to communicate to the people involved in consumer affairs in the FSA, for instance, that if this Bill is passed this is what will happen, and it would be atrocious not to respect people by sharing that with them. However, no commitments have been made, no legal agreements entered into, no new leases written, software commissioned or computer boxes acquired in anticipation of this legislation. I do not even think we have printed any special paper for the minutes of the CFS meetings. This is a very low-cost response to an enhanced superior product.

Lord Howard of Rising: If it is such a superior product and all these senior people had been meeting on such a regular basis for such a long time, how on earth is it suddenly going to work any better now?

Lord Myners: I think I detect a tactic at work here. Notwithstanding the fact that the Opposition Benches talk about the need to ensure proper parliamentary scrutiny, we will proceed very slowly if we have this number of amendments while Members of the Conservative Benches provide more opportunity for the noble Baroness to assemble her responses.

The world experienced financial system structural failure. We have to learn the lessons, but we also have to ask how we can make the system work better. We published our reflections on the crisis and concluded that the structure that is embodied in the tripartite approach is fundamentally sound. Based on my experience of working for an organisation that was regulated by the FSA, of being on the board of one of the predecessor bodies of the FSA and of being a member of the Court of the Bank of England, the idea of giving the Bank of England responsibility for micro-regulation-as the noble Viscount, Lord Trenchard, would describe it-for 15,000 or so regulatory bodies, from the Tolpuddle building society or an independent financial adviser to the largest bank or insurance company, is a preposterous proposal. It is born out of the youthful enthusiasm of a shadow Chancellor of the Exchequer who has zero business experience. We need to get on with considering this legislation. I look forward to hearing the noble Baroness's response to my comments and those of the Committee on her amendments.

Baroness Noakes: The Minister rather spoilt it at the end. I was going to thank him for accepting Amendment 5, but I think I will bank it and not thank

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him. We have had a very interesting debate on Amendment 1. The noble Lord, Lord Barnett, who unfortunately is not in his place-

Lord Peston: There is a meeting of the Labour group and my noble friend Lord Barnett has a commitment to be there. As it happens, so have I, but I am desperate to hear what the noble Baroness, Lady Noakes, is about to say.

Baroness Noakes: That is an even more interesting piece of information. We can see where the priorities of the noble Lord, Lord Barnett, are. I am very glad that the noble Lord, Lord Peston, remains with us. The noble Lord, Lord Barnett, said that Parliament would be dissolved shortly after Easter. This is the first time that I have heard this from the Benches opposite. Perhaps the Minister will confirm whether Parliament will be dissolved immediately after Easter, as his noble friend Lord Barnett suggested. Can the Minister help on that?

Lord Myners: I think the noble Baroness is on the verge of abusing process. She fully understands that I have no idea when the election will be held, other than that it has to be held, I think, before 3 June. My right honourable friend the Prime Minister might conceivably like to go for the afternoon of 3 June for all I know.

Baroness Noakes: The reason is that there has been much talk in this Committee about the process of wash-up, but the plain fact is that we do not know when Parliament will be dissolved. We do not know for how many days we will be processing business. We, as the House of Lords, have to carry on as if the Bill will have the normal process of Committee, Report and Third Reading. That is what we seek to do. We cannot possibly work on any basis other than that a Bill that the Government choose to put before the House will be considered in the normal way. Noble Lords might want to anticipate both the timing of the election and the nature of the decisions that will be made by the parties in dealing with legislation that has not completed its passage before then, but it is not an appropriate topic for this Committee to debate. We have to take the Bill as we find it and scrutinise it in the way that we normally undertake our work.

It is of course disturbing, as the noble Lord, Lord Newby, pointed out, that arrangements are apparently being made within the FSA as if the Bill will receive Royal Assent by 1 April. The Minister shakes his head, but I, too, have heard what the noble Lord, Lord Newby, appears to have heard about the preparations being made with a specific date in mind; it is more than a mere planning assumption. Indeed, they are incurring expenditure on recruiting somebody to head the new consumer financial education body. It has been clear for some time that this Bill could not receive Royal Assent by 1 April by any stretch of the imagination. So that clearly raises some questions which need to be answered, and I hope that at some point we will get proper answers.

The real meat of what we have been talking about for the last hour and a half-

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5.15 pm

Lord Forsyth of Drumlean: I thought we had an absolutely clear undertaking from the Minister that no expenditure had been incurred at all. I thought we did get that undertaking.

Lord Myners: The language I used was "no material expenditure".

Baroness Noakes: Perhaps we will learn in due course what "material" actually means. It is one of those words that is capable of an infinity of meanings.

The heart of our debate is about the new Council for Financial Stability and whether that has any meaning at all. I tabled my amendments to probe whether this new body would have any impact on the real world. Clearly, a body which simply comes together to monitor and to co-ordinate is no different from what happened before-no different from the tripartite authorities. The Minister said, in response to the question of my noble friend Lord Stewartby about how it would behave differently, that there would be transparency and minutes. That has nothing to do with behaving differently at all. If this body does not have any powers, if it is a non-executive body where people come together to talk-a "talking shop", as my noble friend Lord Hodgson said-this Bill will not make any difference.

My noble friend Lord Higgins said that, if this is just the tripartite authorities, then it is not worth while. That, in effect, is the critique we have of this part of the Bill. There is no significant difference from what existed before, other than fancy new titles and some structure around minutes. There is no improvement being made in the arrangements within government, the FSA and the Bank of England. I remind noble Lords that the tripartite arrangements did fail, and since there is nothing evident about how they will operate differently in the future, there is no reason to believe that those arrangements will do any better when they deal with issues at a later stage.

Lord Peston: Several noble Lords have made that kind of point. To my certain knowledge, not a single economist of any standing in the whole world predicted what happened in 2007. It is not in the least surprising, therefore, that the decision-makers in this country were somewhat taken aback. To the extent that they did not work optimally, it was not remotely because of the tripartite arrangements; it was to do with the fact that the event was a staggering event which, for the moment, some of us still do not fully understand. So I do not think the position of the noble Baroness has any logic or basis whatsoever.

Baroness Noakes: I am interested to hear what the noble Lord, Lord Peston, says because I know he believes that the answers to all questions must be given by economists.

Lord Peston: A major financial crisis falls within the field of economics rather than politics, to put it mildly.

Baroness Noakes: I say to the noble Lord, Lord Peston, that analyses were done by, for example, the Bank of England on the way in which leverage was building up in the system. That went completely unnoticed, and I will be developing that point at a later stage.

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Some of the sources of what we had to cope with came from a shock from outside the UK, but the way that we dealt with it impacted hugely as a result of the way that arrangements had been set up by the current Prime Minister from 1997 onwards. That is the fundamental position of my party. My noble friends Lord Hodgson, Lord Stewartby, Lord Higgins, Lord Trenchard, Lord Forsyth, Lord Northbrook and Lord Howard approached this in much the same way. We cannot see what is in this new Council for Financial Stability. It does not appear to do anything to solve anything from the past. It does not represent an advance. It leaves many questions completely unanswered, as I said in my opening remarks.

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