House of Lords
Wednesday, 18 July 2012.
3 pm
Prayers—read by the Lord Bishop of Chester.
Death of a Member: Lord Chilver
Announcement
3.06 pm
The Lord Speaker (Baroness D’Souza): My Lords, I regret to inform the House of the death of the noble Lord, Lord Chilver, on 8 July. On behalf of the House, I extend our condolences to the noble Lord’s family and friends.
Flooding: Insurance
Question
3.07 pm
To ask Her Majesty’s Government what discussions they have had with insurance companies to ensure that affordable flood insurance is available for householders in areas considered to be at risk.
Lord De Mauley: My Lords, Ministers have met with a range of representatives from the insurance industry, including the Association of British Insurers. Together, we are looking to deliver a new approach that genuinely addresses the availability of flood insurance as well as securing its affordability for the first time. A number of options are being considered that would allow policyholders in high flood-risk areas to continue to secure affordable insurance without having an impact on bills more generally.
Lord Dubs: My Lords, the Minister’s statement is welcome but is he aware that, given that thousands of homes have been devastated by floods in recent years, at present some insurance companies are imposing swingeing increases on premiums in order to deter householders, some of whom have to go to other companies that then bear all the risk? The insurance industry needs to put its house in order. Will the Minister take all that into account in his negotiations with the industry?
Lord De Mauley: Yes, my Lords. Although this is not exactly a declaration of interest I ought to say that my former home was flooded in 2007, so I have been through the process of claiming on the insurance. We recognise that the price of insurance is rising in areas of flood risk and has the potential to become unaffordable for some. This is precisely why the Government, working closely with the industry, are considering an internal industry levy which would allow policyholders in high flood-risk areas to secure affordable insurance without having an impact on bills more generally.
Baroness Knight of Collingtree: My Lords, will my noble friend the Minister bear in mind when dealing with this matter not just the terrible inconvenience of having one’s house flooded but the fact that no mortgage can be obtained if insurance is not available? It therefore becomes almost impossible to sell one’s house if the deal does not go through.
Lord De Mauley: My Lords, that is a very important point. We recognise that there are concerns over the continued ability of existing and prospective mortgage-holders to find affordable insurance. We are working with those involved to get a better understanding of what the impact on the mortgage market would be of increased premiums and how lenders would choose to react.
Lord Gordon of Strathblane: My Lords, surely the answer is to ensure that planning permission is not given for building on the flood plain unless the developer takes precautionary measures to ensure that the area cannot be flooded in future?
Lord De Mauley: My Lords, that is also an important point, which the Government are fully apprised of.
Lord Greaves: My Lords, the affordability of insurance depends partly on the flood risk. I commend the Government and the insurance industry for all the work that they are doing to find an internal solution within the industry to this, but it also depends on how much money the householder has and their resources. Last December, the excellent report published as the road map states:
“The Government will look at further ways to encourage take up of insurance by low-income households, including the potential of insurance-with-rent schemes for social housing”.
Are the Government taking this forward seriously, as it is one answer to the problem? Do the Government understand that the people really in difficulty when it comes to insurance are often those in privately rented accommodation? Can insurance-with-rent schemes be promoted within that sector?
Lord De Mauley: Once again, my Lords, yes is the answer to my noble friend.
Lord Campbell-Savours: My Lords, it is not just a question of the availability of insurance. Just as important is the question of excess. Will that very important component be on the agenda?
Lord De Mauley: My Lords, I have first-hand experience of that very point. I think that in a number of cases, premiums have been held relatively steady but the excesses have been put up. The noble Lord is absolutely right.
Lord Elton: My Lords, I understand that the environment department has a complete set of maps of flood risk areas. Will my noble friend suggest that the Secretary of State should call in all planning applications that fall within those areas?
Lord De Mauley: I will certainly pass that suggestion on.
Lord Knight of Weymouth: My Lords, a week last Saturday the River Wey rose and chose to flow through the ground floor of my house. I now know the scale of difficulty that this is causing thousands of householders around the country. I take this opportunity to thank not only neighbours but staff in the Environment Agency and the insurance industry for their support. These people tell me in conversations that we will be lucky to end the summer with ground water at anything other than normal winter levels. Is it not therefore urgent that before Defra Ministers go on holiday, they must conclude a deal with insurers to incentivise householders to invest in flood resilience for householders’ homes to be insurable and for their premiums to be affordable?
Lord De Mauley: My Lords, there is a lot in that question. I agree with the general thrust of what the noble Lord has said. Like him, I pay tribute to the Environment Agency staff who have worked tirelessly for 24 hours a day through the recent floods, the front-line emergency services, the Flood Forecasting Centre staff and the local authorities, all of whom have been working extremely hard.
The Duke of Montrose: My Lords, does my noble friend the Minister have a scheme whereby if a levy is imposed on the industry, it can be got to agree to absorb the cost of this? Will it not otherwise be passed on to the rest of the householders?
Lord De Mauley: My Lords, although it is early days in the negotiations, there are certainly a number of options as to which route could be followed. What my noble friend says is a very valid point and will certainly be taken into account.
Lord Dubs: My Lords, perhaps I may feed in one further point for the negotiations. Does the Minister agree that postcodes in the country often cover very large areas, encompassing both high-risk and low-risk properties? Does he further agree that it would be better if the insurance industry used Environment Agency maps to identify the risk for more specific locations?
Lord De Mauley: My Lords, I am very grateful for that point, which I will certainly take back.
Economy: Growth
Question
3.13 pm
Asked By Lord Roberts of Conwy
To ask Her Majesty’s Government what steps they are taking to encourage demand to promote growth in the United Kingdom economy.
Lord De Mauley: My Lords, the Government have set out a comprehensive strategy to deal with the challenges we face. Fiscal, monetary, financial, tax and structural reform all play a role to deliver our objective of lasting economic recovery and sustainable public finances. That strategy has reduced the deficit and helped to deliver near record low interest rates.
Lord Roberts of Conwy: I am grateful to my noble friend for that reply. I am sure that the entire House would like to welcome the 65,000 fall in unemployment, which was announced today. Welcome as that news is, we must face the fact that demand for goods and services is slackening, if not falling, worldwide. It is reducing growth prospects in many countries, including our own. Does my noble friend agree that in these circumstances the best that we can do is concentrate on those sectors of industry that have full order books, especially of exports, and on the key areas of housing and infrastructure at home where we can be sure of a return in the longer term? Can we get on with it as soon as possible?
Lord De Mauley: I agree with my noble friend: each of these is vital and we are taking important steps in these areas of exports, housing and infrastructure. However, our strategy goes further. What we need to do is encourage the private sector through a competitive tax system; make the UK the best place to start, finance and grow a business; encourage investment in infrastructure; and improve the flexibility and skills of our workforce. As my noble friend will be aware, we have put in place a range of measures to achieve each of these.
Lord Barnett: Despite the excellent news that the noble Lord is pleased to give, would he agree that growth at the moment is near zero? Although increases in capital expenditure would be excellent, especially under some kind of loan guarantee scheme that was announced outside the House this morning, can he tell us more about that loan guarantee scheme? How will it work in practice? Will the Government be guaranteeing 100% of project?
Lord De Mauley: I cannot give the noble Lord the details that he asks for here because it would take too long, but I will write to him.
Lord Clement-Jones: My Lords, we all want to see a strong business and growth strategy legacy from the Olympics, particularly looking beyond the next few weeks, and we want to sell our capabilities internationally. However, does not the insistence by the IOC that some 75,000 of our businesses cannot associate themselves as having been suppliers to the Olympics rather militate against that?
Lord De Mauley: My Lords, my noble friend raised this point in a debate the other day. The building of the Olympic park and other Games venues for London 2012 has been a great success story for the UK. In order to secure over £1 billion of sponsorship, restrictions on marketing rights have had to be put in place.
The many thousands of suppliers for both the build and the staging of the Games have received a full commercial rate for their goods and services. However, the Government are committed to working with the British Olympic Association and others, and through them the IOC, to find a way to ensure that contractors and subcontractors can seek a form of recognition of their superb contribution to the Games.
Lord Foulkes of Cumnock: My Lords—
Lord Tomlinson: My Lords, does the Minister accept that the nub of the Question asked by the noble Lord, Lord Roberts, was about how to encourage demand and promote growth, and that those questions were the very ones that he did not really address in his reply? Would he take note that there is serious concern, not only on both sides of this House but in the country, about the failure to do those two things and that that is manifested in today’s Ipsos MORI poll, which shows Labour on 44%, the highest since the last general election, with the Government—the Conservatives —slumping to 31%?
Lord De Mauley: I congratulate the noble Lord on his performance; we are more focused on the economy. Of course growth is of concern but unemployment is falling. In the three months to May, the number of unemployed fell by 65,000 and 181,000 new jobs were created. Since the coalition took office in May 2010, more than 840,000 private sector jobs have been created, manufacturing output is up and exports of goods to outside the EU are up by 35% quarter on quarter from the first quarter of 2010 to 2012. Noble Lords will also know that inflation has fallen.
Lord Forsyth of Drumlean: Does my noble friend agree that we will only get growth from businesses being able to sell goods and services competitively throughout the globe? Would it be a good idea for the Secretary of State, Mr Cable, to spend his Summer Recess thinking of ways in which he can reduce the cost of doing business for our firms throughout the country? That, not demand, is the key to getting further employment and further tax revenues for the Treasury.
Lord De Mauley: My Lords, my right honourable friend the Secretary of State for Business thinks of little else.
Lord Foulkes of Cumnock: My Lords—
Lord Soley: Given that the IMF has downgraded our growth forecast from 0.8% to 0.2%—the lowest for any major economic power—will the Minister give his very full support to the Chancellor of the Exchequer, who would like to allow more private sector investment, specifically for the expansion of Heathrow? Will the Minister confirm his support for the Chancellor on that issue?
Lord De Mauley: My Lords, my support for the Chancellor of the Exchequer is unstinting. On the subject of the IMF forecast that the noble Lord raised, I point out that the forecast for the eurozone, where 40% of our exports go, is a contraction of 0.3%. It is of course concerning but hardly surprising that our forecast has been affected, so it is all the more impressive that the private sector jobs figures that I referred to earlier have outstripped so substantially the job losses in the public sector. Furthermore, as I said, manufacturing output is up, and exports to countries outside the EU are substantially up. All that must be good news, as is the news on inflation, which is good for both businesses and families. The director of the IMF’s fiscal affairs department said, following the announcement, that we should not change course on deficit reduction.
Lord Bates: My Lords, is my noble friend aware that the north-east of England is the only region of the country that exports more than it imports? Is he further aware that figures for the past quarter show that those exports are now at record levels? Is he further aware that today unemployment in the north-east fell for the first time in two quarters? Does he recognise that this is a welcome progression, and will he ensure that the Government continue to make sure that they back winners rather than pick winners?
Lord De Mauley: Yes, my Lords, I agree with my noble friend. The issue is one of confidence. I will tell noble Lords who else thinks that we are doing the right thing. Last month BMW announced a £250 million investment to increase production of Minis, on top of the £500 million investment it announced last June. Ford is putting £1.5 billion into R and D and manufacturing over the next five years. Nissan is building the electric Leaf car, with an associated battery factory, in Sunderland. Toyota is producing Europe’s first mass-produced fully hybrid car and engine in the UK.
Schools: Children in Care
Question
3.22 pm
To ask Her Majesty’s Government whether they have plans to enable more children in care to secure places at boarding schools in both the maintained and independent sectors.
The Parliamentary Under-Secretary of State for Schools (Lord Hill of Oareford): My Lords, we believe that in the right circumstances, boarding school can be a very good option for children in care and vulnerable children. Last month saw the launch of the Assisted Boarding Network by RNCF and Buttle UK, and also the National Foundation for Boarding Bursaries, which involves independent and maintained boarding schools. Both schemes aim to increase access to boarding for vulnerable and disadvantaged children. We very much support both initiatives and would urge local authorities to consider boarding as an option.
Lord Lexden: I am extremely grateful to my noble friend, with whom I have worked on educational issues in the past, for that reply—particularly as regards the new National Foundation for Boarding Bursaries and the Assisted Boarding Network. Will my noble friend confirm that the state spends annually more than £37,000 on each looked-after child, while the average cost of a private boarding school place is now some £24,000, and that assisted boarders achieve significantly better examination results than look-after children? While, as my noble friend said, boarding education will not be suitable for all children in care, is it not extremely heartening that the Assisted Boarding Network, backed by highly successful charitable organisations, is planning a significant increase in numbers over the years ahead? It is sad that some local authorities have in recent decades been firm opponents of assisted boarding. The noble Lord, Lord Adonis, who has been so determined a proponent of it, recently called for an end to what he called outdated thinking.
Lord Lexden: Will the Government give local authorities their full support to assist the progress of what the Princess Royal recently described as a really key partnership?
Lord Hill of Oareford: Yes, my Lords, we would certainly encourage all local authorities to think carefully about boarding as an option. Local authorities such as Norfolk are already doing it, and others are as well. As I said, boarding schools can play a role—I agree with my noble friend. I am grateful for the initiatives taken by RNCF/Buttle and by the independent and maintained schools.
The Earl of Listowel: My Lords, can the Minister give an indicative figure on the number of children in care, and the number of children on the edge of care, who are currently benefitting from this policy each year? Have the Government commissioned research into this area? I detect considerable interest among my Cross-Bench colleagues on the subject. Will the Minister consider a briefing for interested Members of the Lords and of the Commons on this interesting policy?
Lord Hill of Oareford: I would very much welcome further discussion with the noble Earl and any other Members of this House who are interested. I think that there is interest across the House in the potential of this initiative. As my noble friend mentioned, the noble Lord, Lord Adonis, was very keen on trying to make progress in this area, and the previous Government did some interesting trials. The numbers are currently very low but I think that, properly handled, there should be potential for the numbers to increase. The two initiatives which I have talked to perhaps have the potential to go up to, say, 1,000 places. That might involve children at the edge of care, in care or otherwise disadvantaged. However, I would very much welcome the chance to discuss it further with the noble Earl and anyone else who is interested.
Baroness Walmsley: My Lords, in 2008, under the previous Government, we had the Boarding School Provision for Vulnerable Children pathfinder. Since we should be in favour of evidence-based policy, can my noble friend tell me whether that pathfinder has been evaluated, what the results were and whether the Government will take action along those lines?
Lord Hill of Oareford: As I was saying, the numbers involved in the pathfinder under the previous Government were small—I think that only 76 children were considered for places, 17 of whom were placed; and of those, 11 stayed the course. So, the number was small. However, I do not think that that is a reason for us not to explore this further as a possibility, taking into account the fact that it clearly will not be the right option for everyone and that we should consider the interests of the child first and not look for a single solution.
Lord Elystan-Morgan: Does the Minister accept that, in general, the tale of children who have been in care is a gloomy and miserable one; that they are overrepresented in all the categories of failure and underrepresented in the categories of achievement; that the public school scheme seems to reverse that trend completely; and that, therefore, it deserves the most practical and committed support on the part of government?
Lord Hill of Oareford: I agree with both parts of the noble Lord’s point. It is a gloomy tale, and therefore it is incumbent on us to look at everything that can make a contribution to making it better.
Baroness Jones of Whitchurch: My Lords, does the Minister agree that although, as has been said, boarding schools may be the answer for the minority of pupils in care, the much bigger challenge is to address the disproportionate number of children in care who attend failing schools? What action are the Government prepared to take to ensure that these children are given greater access to schools rated as outstanding by Ofsted?
Lord Hill of Oareford: I agree with the noble Baroness’s basic point—that the contribution that independent or maintained boarding schools are likely to make will, proportionately, be a relatively modest one; and that, therefore, the Government’s reforms to try to improve educational performance will play an important part. It is the case that looked-after children, obviously, have priority for admissions, and that includes admission to the kinds of schools the noble Baroness described. I hope that other initiatives that we are taking—such as bursary support after the age of 16, the pupil premium and so on—will help. However, the key challenge for us in all schools is to raise those standards, bearing in mind that we need to focus on the particular group she described and shine a spotlight on their educational achievement and the gaps that there are.
Lord Eden of Winton: My Lords, on a more general point, does my noble friend agree that there are considerable educational advantages and benefits that come from the closest possible working relationship
between the maintained and the independent sectors? To that end, will he do all that he can in discussions with interested parties on both sides and with teachers’ union to ensure that such developments flourish?
Lord Hill of Oareford: My noble friend makes an extremely good point. The more that we can encourage the independent and the maintained sectors to work together and learn from each other, the better it will be. I am certainly keen to do everything that I can to take that forward.
Baroness Farrington of Ribbleton: My Lords, can the Minister tell us how many of the places identified in the independent sector are allocated according to ability and entrance criteria and how many are awarded on the basis of need alone?
Lord Hill of Oareford: I do not have detailed information on all the schemes that are currently running. The new scheme that I was talking about is being run by the independent schools and the maintained schools together. They are expressly clear that selection and attainment are not part of what they want to do. They want to make it available to disadvantaged children of all abilities.
Railways: Electrification
Question
3.30 pm
To ask Her Majesty’s Government what will be the economic and environmental benefits of the electrification of English and Welsh railways.
Earl Attlee: My Lords, electrification is expected to lead to a number of benefits, including higher acceleration and higher top speeds than diesel stock, greater capacity, and lower costs of leasing, maintenance and operation. These savings can lead to reductions in the long-term cost of the rail industry. Electric trains are more environmentally friendly than diesel trains and electrification should make rail freight more competitive with road, reducing environmental damage and congestion.
Baroness Seccombe: My Lords, I thank my noble friend for that Answer. I welcome the Statement on the electrification of the east Midlands and other lines most enthusiastically along with the upgrades to mainline stations and extensions to platforms. As the Prime Minister said,
“this investment will mean faster journeys, more seats … greater … links and a truly world class rail network”.
Does my noble friend agree with me that the specification for any future project should ensure that it is for the benefit of the many and not the few?
Earl Attlee: My Lords, my noble friend is quite ingenious. I have a feeling that she really wants to talk about HS2. I absolutely agree with her that future projects should be for the benefit of the many and not the few. However, HS2 is not predicated on a very high-cost service for senior businessmen paid for by everyone—a sort of Concorde on tracks. HS2 passenger demand forecasting is based on the current fare structure.
It is also essential to understand that the west coast main line will run out of capacity if we do nothing. It is only a matter of time.
Lord Wigley: My Lords, will the noble Earl accept my very great appreciation of the electrification of the line through to Swansea and the south Wales valley lines? However, will he accept, in the context of the reply that he has just given, that the line from Crewe to Chester and Holyhead also has very heavy needs, particularly the need to offload freight going through to Ireland? Can he give an assurance that the recent announcement does not preclude progress on that line also?
Earl Attlee: My Lords, the CP5 is not the end of the electrification process. We have announced what we will do in terms of electrification for CP5, but the process will go on.
Lord Bradshaw: The announcement this week means that more than 800 miles of electrification are now likely. That is good news for consultants, good news for planners and good news for those seeking apprenticeships. Would the Minister care to speculate on what would have been done by the party opposite?
Earl Attlee: My Lords, I would hope that the party opposite, if in power, would have carried on with the process of giving us a railway system that is fit for the people of the United Kingdom
Lord Davies of Oldham: My Lords, the “party opposite”, of course, produced the plans and had commitments for half the money which is to be expended on these proposals by this Government, expenditure which did not take place immediately after the election because the Government themselves induced the delay. Of course, we welcome the Government’s intention to make progress on electrification. Although the noble Earl referred in glowing terms to the HS2 project, we also note that there is no commitment in these proposals to the expenditure for HS2 and we wonder whether in fact the Government are running a little scared of their Back-Benchers, as they have been recently in the other House.
Earl Attlee: My Lords, I can assure noble Lords that the Government are not running scared of their Back-Benchers in respect of HS2. I would also remind the noble Lord that we are currently in CP4, which was devised by the previous Administration. The announcement is for CP5.
Lord Anderson of Swansea: My Lords, in the spirit of good will just before the Recess, may I say that the Government deserve full-hearted congratulations on the decision to extend electrification to Swansea and to the valleys? Does the Minister recognise that one of the major problems in Wales is the widening gap between the relative prosperity of south-east Wales and that of west Wales and the valleys? This decision will go at least some way to contribute to a non-extension of that widening gap.
Earl Attlee: My Lords, I agree with the noble Lord. That is exactly why we have done it. I would also like to pay tribute to the efforts of the noble Lord, Lord Touhig, who skilfully put pressure on the Government in respect of the Ebbw Vale electrification project.
Lord Shutt of Greetland: My Lords, I commend the Government on pursuing these electrification schemes but it is quite clear that there are plenty of further candidates, whether they be Holyhead, Plymouth, Hull, or indeed the Calder Valley. Is the Minister saying that he now sees a rolling programme going forward for electrification? That is what we want to see. We have had bust, and it seems that we have got a bit of boom, but is it going to be rolling forward?
Earl Attlee: My Lords, we want to avoid feast and famine for the civil engineering industry. We are saying now what we will do for CP5. I have already indicated to the noble Lord, Lord Wigley, that we will continue the process in CP6, but of course I cannot at this point make any suggestion as to what will happen in CP6.
Littering from Vehicles Bill [HL]
First Reading
3.37 pm
A Bill to make provision for a civil penalty for littering from vehicles and to require local authorities to publish details of contracts relating to litter clearance.
The Bill was introduced by Lord Marlesford, read a first time and ordered to be printed.
Safeguarding Vulnerable Groups Act 2006 (Controlled Activity and Prescribed Criteria) Regulations 2012
Safeguarding Vulnerable Groups (Miscellaneous Amendments) Order 2012
Police and Crime Commissioner Elections (Functions of Returning Officers) Regulations 2012
Police and Crime Commissioner Elections Order 2012
Police and Crime Panels (Modification of Functions) Regulations 2012
Motions to Approve
3.37 pm
That the draft regulations and orders laid before the House on 14 and 15 May and on 11 June be approved.
Relevant documents: 2nd and 3rd Reports from the Joint Committee on Statutory Instruments,3rd Report from the Secondary Legislation Scrutiny Committee, considered in Grand Committee on 13 June and 12 July.
Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2012
Motion to Approve
3.38 pm
That the draft order laid before the House on 14 June be approved.
Relevant document: 4th Report from the Joint Committee on Statutory Instruments,considered in Grand Committee on 17 July.
Business
3.38 pm
Baroness Royall of Blaisdon: My Lords, forgive me. Noble Lords may recall that yesterday I asked the noble Lord the Leader of the House to ensure that while Parliament was sitting, Statements were announced to Parliament and not to the media. Lo and behold, I woke up this morning to hear on the BBC an announcement about the £40 billion loan guarantee scheme. I have no comments about the scheme, which I am sure is perfectly reasonable, but if this is a new announcement of new money being made available, it should have been made to Parliament. If it is not new money, then the Government should tell us that it is recycled money. In any case, on the day on which an announcement was made, the Minister standing at the Dispatch Box should have been able to give an answer to my noble friend Lord Barnett when he asked about it.
Baroness Anelay of St Johns: My Lords, it is unfortunate that the noble Baroness, Lady Royall, did not give us advance notice of this. She might have asked a question when my noble friend Lord Sassoon moved his Motion. We do not have business questions in this House as yet. I know my noble friend Lord Sassoon could have made a comment at that time. I am aware that he has put down a written Ministerial Statement on this matter. I am also aware that the noble Baroness was able to meet with the Leader of the House yesterday to discuss this matter. I suggest that those discussions continue.
Lord Foulkes of Cumnock: My Lords, another point arises from that. Although the noble Lord, Lord De Mauley, answered the first two Questions immaculately, he is only a Whip and not a departmental Minister. When these detailed Questions arise, sometimes the Whips do not seem to be able to answer them.
On the second Question in particular, where was the Minister of State for BIS—the Scarlet Pimpernel of the House of Lords? Why do we never see the noble Lord, Lord Green of Hurstpierpoint? Why does he not come to answer Questions? Why is he not here? He could have answered that Question properly and substantially from the Dispatch Box, but he is not here today. Is it because he is so embarrassed that he was executive chairman of HSBC during the banking scandal?
Financial Services Bill
Committee (4th Day) (Continued)
3.41 pm
104ZB: Clause 5, page 16, line 7, at end insert—
“( ) As part of the FCA’s consumer protection and integrity objectives, the FCA will raise standards of professionalism in financial services by mandating a training and competence regime which must—
(a) apply to all approved persons exercising controlled functions, regardless of financial sector,
(b) specify minimum thresholds of competence including integrity, and professional qualifications, continuous professional development and adherence to a recognised code of conduct,
(c) be evidenced by individuals holding an annual validation of competence.”
Baroness Hayter of Kentish Town: My Lords, I am impressed that I will be standing opposite an immaculate Whip, which I am sure will make for a good day’s work on the Bill.
The amendments in the first group—
Baroness Anelay of St Johns: My Lords, I hesitate to interrupt the noble Baroness who is carefully moving her amendment, but I remind noble Lords that a substantial number of Peers wish to take part in the Committee stage of the Bill. Will noble Lords please leave the Chamber a little more quietly so that we can hear the noble Baroness?
Baroness Hayter of Kentish Town: I thank the noble Baroness for that assistance.
The amendments would raise the standards of professionalism in the financial industry; partly by adding professional standards to the definition of integrity, partly by introducing a code of conduct and partly by mandating a training and competence regime. That is only what other professions expect: training, a code, a qualification, CPD and proof of competence.
Part of the reason that we trust lawyers and doctors, architects and surveyors, is that they meet these requirements with proof of competence. That is why we trust them with our wills, our conveyancing, our divorces and our lives. A code of conduct enables us to know what is expected of them in terms of behaviour, ethics and integrity, as well as in particular skills and standards.
Let me quote from just one such code—that for solicitors. It reads:
“You must: …act with integrity ….act in the best interests of each client … provide a proper standard of service to your clients”—
—although, having checked lots of codes of conduct, I find that surveyors have to,
“always provide a high standard of service”,
so perhaps we could have some trading up there.
So you have to act in the best interests of clients, provide a good standard of service to your clients and not behave in a way that is likely to diminish the trust that the public places in you or the profession. If only bankers and the rest of the industry had signed up to that and it had been enforced by their professional body or regulator. Sadly, we have learnt the hard way that the culture and behavioural traits of those working in the financial services sector have not been sufficient with regard to professionalism, integrity and competence.
3.45 pm
It is not just me. Hector Sants argued in 2010 that some of the causes of the financial crisis were deeply rooted in the behaviour and culture which resulted in bad actions and decisions. Recent scandals, whether PPI, LIBOR, interest rate swaps, or endowment mortgages, should ensure that we make the Bill require the FCA to get the sector to improve standards of ethics, culture and behaviour. Redress and penalties are not sufficient, for the mischief is already done. While we endorse the amendment in the name of the noble Baroness, Lady Kramer, and the noble Lord, Lord Sharkey, I ask them why, when we had the opportunity of an independent review into the causes of all this mayhem and therefore the opportunity to draw broader lessons about the causes and the means to avert future misbehaviour, they failed to support us in the Lobbies. Their intervention on LIBOR in this amendment, simply to ensure that the penalty falls on the right half of the bank, although welcome, seems, I have to say, a rather timid response to a major scandal. We wish the noble Baroness well on the Joint Committee and we hope that her inquiring mind will fall on the wider issues covered in this group, which I trust she will also support today.
We know that the higher a practitioner’s commitment to professional standards, the lower is the likelihood of consumer harm and the higher is consumer trust and confidence. This is the case for the whole industry, not just the retail sector. As the Chartered Institute of Securities and Investments has said:
“It cannot be tenable … for the wholesale sector to have significantly lower standards than the retail market in terms of qualifications, CPD and ethics”.
The Minister may say that the varied nature of financial services and different needs of customers means that it is very hard to have a single qualification, but that is the case for doctors and lawyers. An ILEX member does not have the same qualification as a specialist family court QC, nor a GP the same as a cancer surgeon, but that does not mean that there cannot be mandatory qualifications for all, appropriate to their responsibilities. Qualifications can easily keep pace with the complexity of financial services to adapt to the changing nature of consumers, of products and of the external environment. If we are to restore trust and confidence we must upskill the workforce, the profession, both in technical standards and in ethics. We need a new code of conduct for bankers.
Stewardship banking relies on the idea that banking is a trusted profession, not a fly-by-night activity. If we are serious about banking regaining the status of teaching, medicine and law, we must act. Those professions have a code of conduct that lays down what is expected of people. We need the same for banking. Anyone who breaks the rules should be struck off, whether for manipulating markets or gaming indices, or deliberate mis-selling. People should not be able to work in banking again if they mis-sell a product. Confidence will not return until we strike off those whose conduct lets us down.
The second amendment in this group, in my name and that of my noble friend Lord Eatwell, is driven by the same belief: that professional standards are key to good behaviour in a sector that displayed a notable lack of integrity, standards and ethics. We cannot simply hope for change, we must work for change. This amendment would add professional standards to the definition of integrity and therefore to the FCA’s operational objectives. It would force supervisors to examine the extent to which firms have demonstrated their commitment to such standards, making them a core part of the FCA’s work and remit.
As long ago as 2002 Howard Davies, then the FSA chairman, admitted that despite the FSA’s principles being based on ethical values, it was,
“not clear that this ethos is fully understood or applied consistently by everyone working in the industry”.
Amendment 110ZB attempts to make amends for this oversight. Professional standards need to be embedded in a firm’s ethos and this must be supervised by the regulator. Left to themselves, too many firms simply do not pass muster. We need to enhance the integrity of our financial services sector in order to ensure good consumer outcomes and drive up standards. The FCA must send clear signals to the firms it regulates about the behaviours it expects and the professionalism that must be evidenced. These amendments are part of enabling that to happen. I beg to move.
Baroness Kramer: My Lords, I shall speak to Amendment 110ZC, which stands in this group in my name and that of my noble friend Lord Sharkey. I thank the noble Baroness, Lady Hayter, for her kind words. This amendment illustrates why I and, I suspect, this House and the other place had a preference for a parliamentary committee, which will report by the end of the year, over a judicial committee which will report in a couple of years, because the issue addressed in it would certainly have been resolved one way or the other by that point and, I suspect, with damaging effect. I hope that the Government will respond to the amendment by telling me that it is completely unnecessary, but it arises out of deep concern following various newspaper reports that have discussed the size of the liability that may fall on the banks involved in LIBOR manipulation. We are talking not just about the fines that come from the regulators—they are significant but small in the way of things for banks—but about the liabilities that may arise from the various actions that are now under way and others which I am sure will join them.
As the Committee will know, two cases are already under way in the United States. One is in the Southern District of New York, which is a class action lawsuit titled “In re LIBOR-Based Financial Instruments Antitrust Litigation”—the use of “antitrust” obviously has significant consequences—and the second is in the northern California district court, filed by Charles Schwab against a series of banks, including a number of UK banks. Charles Schwab claims in its complaint that “significant harm” has resulted from the mispricing of,
“tens of billions of dollars in LIBOR-based instruments”.
Its complaint outlines the methodology of comparing the banks’ LIBOR quotes with some market-based yields and CDS spreads. Some excellent work done by the securities analyst Cenkos estimates that the LIBOR quotes were understated by 30 to 40 basis points in some cases. Cenkos does a simple calculation to show that if LIBOR had been mis-stated by even five basis points over four years, on £1 trillion-worth of notional contracts, the damages would be £2 billion. We are therefore looking at multiples of billions of potential charges.
It struck us as we were looking at this and reading some of the stories about Barclays considering separating the bank into an investment bank and a retail bank—that is the direction in which we are going in this country through ring-fencing, and I am very much in favour of it—that there might be scope for organisations to decide that those liabilities generated by LIBOR manipulation could happily be sited in the retail part of banks rather than the investment part. I am afraid that that view comes with some cynicism, as many of us now would not put anything beyond the decision-making powers of some bank boards and directors.
We are seeking from the Government some stern comments to the effect that we have got this entirely wrong and that safeguards are in place. If it is not the case, we hope that someone will quickly pay attention, because the decisions that could set this process in train could happen fairly quickly. I think that every one of us here and the public at large would be shattered if that was the conclusion to this aspect of the scandal. This is in no way meant to be a comprehensive response to the amendments; it is one particular issue that struck us as being in need of immediate comment.
Lord Peston: My Lords, I listened with enormous interest to the noble Baroness, Lady Kramer, and am sympathetic to what she said, but I cannot see how the amendment fits into this section of the Bill. If I have read it correctly, new Section 1D(2)(b) states that the integrity of the financial system includes,
“its not being used for a purpose connected with financial crime”.
As I understand it, these people have engaged in financial crime and been fined for it already. If the noble Lord, Lord Carlile, is to be believed, they will be brought before the courts to be examined some more. What unfair allocation does the noble Baroness have in mind? If some American investors have lost a great deal of money as a result of criminal activities by people connected with British banks, it would not be unfair if those banks had to meet the cost of those criminal claims. Is she saying that that would be unfair, or have I totally misunderstood the purpose of the amendment? It is most likely to be the latter.
Baroness Kramer: I would hesitate ever to say that the noble Lord, Lord Peston, had misunderstood any issue. Perhaps I can clarify. This is a probing amendment, and I cannot pretend that it is drafted with skill or placed in the Bill where, ultimately, a sophisticated legal mind— or, perhaps, the noble Lord—would put it. We felt that it was an issue that needed to be raised promptly. I fully accept that if courts decide that there is liability, that liability will be met, but if the institutions are dividing themselves into separate pieces and there is flexibility on where the liability is then allocated—into a retail entity or the investment banking entity—that is of acute interest.
Lord Peston: This sounds a bit like tax avoidance in a new version. If they separate the institution into two parts, they will then claim that there is a part that is not guilty. Is that the point of the amendment?
Baroness Kramer: I think that this is an issue that I will hand off to the Minister.
Lord Davies of Stamford: My Lords, I want to intervene briefly on two amendments. One is that moved by my noble friend, Amendment 104ZB. I congratulate her on it and draw particular attention to paragraph (c), which is enormously important. Paragraphs (a) and (b) stand by themselves and no one will want to argue with them, but I particularly congratulate my noble friend on paragraph (c), which deals with the need to ensure that all those involved in managing money or advising retail investors should keep abreast with changes in financial markets, which, as we all know, have been great in the past 10 or 20 years, and in financial products.
The range of financial products available is enormously confusing. Inevitably, it totally confused retail investors. It is enormously important that IFAs are kept abreast of developments so that they can give good advice to their clients. Among the complex and dangerous instruments that have emerged have been all sorts of derivatives used both for hedging purposes—thereby reducing risk if they are used intelligently and properly—and speculatively and extremely dangerously. That can be an acceptable product for a very sophisticated investor to use as a way to leverage his or her risk if he or she is determined to do that.
Just as it is so important to ensure that doctors are kept abreast of changes in medical science, which in a career of, say, 40 years, can revolutionise the subject, it is enormously important that that should happen in financial services. An “annual validation of competence” would be an excellent discipline that will itself create a market. Professional organisations, business schools and others will arrange regular courses for people in the financial services industry who are affected by the clause and need to keep up to speed. I hope that those courses will involve some test or examination at the end, so that it will be possible to use that as validation. That will greatly reassure the public. I congratulate my noble friend on proposing this extremely intelligent contribution to the Bill.
I also congratulate the noble Baroness, Lady Kramer, first, on being selected for the very important committee. Even those of us who thought—and still think—that a
judicial inquiry is the right approach give our very best wishes to those who have taken on the important task of carrying out the parliamentary inquiry. The credibility of Parliament is at stake here, as is that of our financial services industry, so it is enormously important that people of the highest intellectual calibre and integrity have been selected. I know that the noble Baroness falls under both those categories, as does my noble friend Lord McFall, who is sitting behind me, and I also delighted that he has been nominated for the committee. That is very reassuring to us all.
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The noble Baroness raises a very important issue. There are several possible costs which may emerge to banks if they are found guilty of manipulating a market, in this case the LIBOR market. There are the regulatory fines, which—as the noble Baroness says—are probably the least important in monetary terms, and some of which are already foreseen in the regulatory reports. There is then the prospect of substantial damages for successful antitrust suits that may be brought by the Department of Justice in the United States or possibly the European Commission, or by other antitrust bodies in the future. Then there are the damages that may be awarded by courts, which are much more likely to be awarded if there are criminal convictions in advance of the civil actions.
These damages can be enormous; one thinks immediately of two categories of person or corporate that may be negatively impacted by the rigging of the market such as the LIBOR. First, there are the derivative traders, who will have found that the product in which they are dealing, such as interest rate futures or derivatives options based on interest rates, has been completely falsified so that when they come to their closing day the price is quite different from what it otherwise would have been. That sort of loss could be easily quantified and there will be substantial suits from derivative traders and dealers of that kind. Secondly, there are those who have borrowed on a LIBOR basis and who may find that at certain periods the LIBOR was falsified upwards. I leave all this open, as we do not know yet. In other words, they were paying more than they should have by way of interest rate—base rate and margin—and will obviously seek to recover that. Again, that can go into enormous sums.
The noble Baroness, Lady Kramer, is absolutely right to focus on the temptations that will exist here. If a bank has investment banking and commercial banking divisions, there is an obvious reason why it might want to ensure that all these losses emerge in the commercial banking division. It is not particularly because it hates retail depositors but because it knows that Governments tend to stand behind them, both with a retail deposit scheme and—if the bank gets into real trouble and is large enough that its failure might have a systemic impact—with the lender of last resort, which is the central bank in the relevant jurisdiction. That would not happen with the investment banks. People may well say, “Let’s take all these losses in the commercial banking division, and if the worst comes to the worst the central bank will pick it up”, which basically means the taxpayer.
One can easily see, therefore, that there is a perverse incentive present here. The noble Baroness is absolutely right to identify this problem, which, it is hoped, is entirely theoretical. No-one has ever conceived of doing anything of this kind. I trust that this is the case; I am sure the noble Baroness also hopes that it is not the case. However, we need to think about these things in Parliament. We need to ensure that the law is robust and that it deters wrongdoing as well as punishes wrongdoing when it occurs. That is the spirit in which the noble Baroness has presented this amendment and I greatly welcome it.
Lord Barnett: My Lords, I, too, congratulate the noble Baroness on her appointment to the Joint Committee. I hope she will be able to do something that, from what I have seen, the committee has not been able to do before; namely, focus on the job in hand. She said—and I disagree with her strongly—that this Joint Committee would be enough to do the job completely. I cannot see that happening from what I have seen of it now, although I am sure she will not be grandstanding as members of the committee are doing today. My noble friend Lord McFall will probably do a better job; I congratulate him too on his membership of the Joint Committee.
I strongly support my noble friend Lady Hayter on this amendment. I am concerned by the broader issue of the FCA. The Government have changed the name from the FSA to the FCA. I am not sure that the FCA will be any better at dealing with the problems that have arisen about LIBOR or anything else, or with all the mistakes that were made. Perhaps the Minister will have in his brief the number of FSA staff who have now simply changed their letters and become members of the FCA. While I am digressing slightly, perhaps I could digress a little more and ask the Minister if he can do what the noble Lord, Lord De Mauley, could not do earlier; namely, to answer my question about why the Government decided to make a statement about an important issue of loan guarantees on the “Today” programme this morning and not in the House. I look forward to hearing the Minister on that.
The whole issue of what the FCA is going to be able to do within the Bank of England disturbs me a great deal. I am not at all sure that it should have been done in this way. To give huge powers to the Bank of England, as I said, is hardly likely to help, judging by what has happened in the past. We now know from the governor of the Bank and others that they knew nothing whatever about what was going on, which is rather surprising, to say the least.
The noble Baroness, Lady Kramer, was able to bring LIBOR into this whole issue in her amendment. Like my noble friend Lord Peston, I am not quite sure how she managed to get it there but she did, and the best of luck to her. I hope that she gets a reply. For the moment, though, I wonder what changes the Minister hopes to see that will improve what went on before. The FSA was clearly not successful in the role that it had been given. I would like to see some of these amendments approved so that we can see the FCA doing a better job. I wish that that might be true but I am bound to say that I look forward to what the
Minister will tell us about how great this new FCA will be. For now, though, I will leave it with him and, as I say, perhaps he can digress slightly and answer my other question.
The Commercial Secretary to the Treasury (Lord Sassoon): My Lords, I hope that the Committee will agree that it is probably better, given the number of members of the committee here, if I stick to matters relevant to this group of amendments rather than wandering off into the long grass from where I might never come back. All three amendments in this group relate to concerns that have arisen in connection with the recent LIBOR scandal, and in that context I am sure that the Committee would like to thank not only my noble friend Lady Kramer and the noble Lord, Lord McFall of Alcluith, but my noble friend Lord Lawson of Blaby, the noble Lord, Lord Turnbull, and the right reverend Prelate the Bishop of Durham for kindly agreeing to join the parliamentary committee on banking standards, which goes to the heart of the concerns raised in the amendments.
I turn to the issue of professional standards. Amendment 104ZB seeks to place requirements on the FCA to impose a training regime. The object of the regime is to specify minimum standards of competence and integrity, and it will include continuous professional development and a code of conduct. Amendment 110ZB seeks to extend the non-exhaustive definition of the integrity of the UK financial system by adding a reference to the professional standards of those working in financial services.
As a former chairman of the IFS School of Finance—what was previously called the Institute of Bankers—I believe as firmly as anyone that professional education has to be a cornerstone of standards in the banking industry. Personally, I wish that more banks would insist on more of their employees going through structured professional education, not just at the start of their careers but right through them. In answer to the point made by the noble Lord, Lord Davies of Stamford, there are indeed providers of these courses of great distinction, including the IFS School of Finance, and many bankers go through them. However, we would all like to see many more going through them and on a continuous basis.
Having said that, particularly in the light of the LIBOR scandal, we must ensure that our regulators have the right powers to set and enforce high standards of behaviour in the financial services industry. That is why we have invited Parliament to set up an inquiry into standards in that industry. While I share many of the concerns of the noble Baroness, Lady Hayter, that does not mean that I can support these amendments, which I consider unnecessary and to be coming forward at the wrong time. Neither amendment gives the FCA powers to impose standards of integrity and competence that it does not already have. The FCA’s integrity objective contains an indicative and non-exhaustive list of matters that are relevant to the UK financial system operating with integrity. The conduct of those working in financial services is already covered by the objective, even if it is not listed here. The list contains a number of matters relevant to the LIBOR example,
including the soundness of the system and the orderly operation of markets. These can be ensured only if standards of professionalism are maintained by those in the industry.
Lord Davies of Stamford: The Minister agrees with me that it is highly desirable that there should be regular courses for people working in the financial markets, so that those advising the less sophisticated can be kept up to date. Yet I cannot understand why he resists the suggestion that that should be a statutory, mandatory requirement—that, as my noble friend’s amendment lays down, such people should be forced on an annual basis to have their qualifications validated. What is his reason for resisting that?
Lord Sassoon: If the noble Lord, Lord Davies, would permit me to complete the argument, I have explained that the FCA has an integrity objective, under which standards of professionalism need to be maintained by those in the industry. Within the overall integrity objective the FCA already has a mandate and powers to deal with these issues. It will specifically have powers to impose standards, including training and qualification, on individuals. Training, qualifications and minimum standards will be of considerable importance to the issue of re-establishing a proper banking culture. They are matters which will be relevant to the regulators’ consideration of applications by persons wishing to become approved to carry out significant influence functions, but it is a big step from that to the FCA mandating a training regime across all areas of financial services.
The forthcoming reviews, including that of the parliamentary Joint Committee, will show whether my analysis is right, or whether the committee believes that the FCA needs additional powers. To answer at least one of the challenges from the noble Lord, Lord Barnett, I refer back to the existence of the committee; this is going to be central to what it is looking at. I see one member of the committee nodding assent, but I think it is obvious.
Lord Peston: From what we know about the LIBOR scandal is it not valid to infer that, whoever these people engaging financial intermediation are, they are not a bunch of professionals? Is someone not going to have to be responsible for raising professional standards, or if not raising them then introducing them? I am surprised that the Government do not take this as seriously as they should.
Lord Sassoon: My Lords, we take it extremely seriously and that is why we thought that it was right to set up the Joint Committee. Unlike the noble Lord, Lord Barnett, I do not doubt that it will get through its work efficiently, effectively and quickly.
Lord Sassoon:I recognise that we are giving it a big challenge and I am grateful to it for taking the challenge on, and for the terms of reference, but we should wait to see what it comes up with in this area. Even if it came up with nothing, there are adequate provisions. On another point that the noble Lord, Lord Barnett,
raises, what will be different with the FCA? One of the things that will be different is that the Government are publishing new threshold conditions for all regulated firms. Indeed, they have been published today on the Treasury website in advance of the relevant clauses being debated in due course. They include tougher standards on the probity of staff and management in regulated firms. The noble Lord, Lord Barnett, is right to insist that tougher standards should be imposed by the FCA than the FSA, and that is exactly what we are doing. As ever, he is right on the ball and goes to the heart of the matter.
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That brings me briefly to the second point on these two amendments, which is to endorse their timeliness and to emphasise, as I have already done, that we should wait for the outcome of the Joint Committee’s inquiries. I confirm that we will consider very carefully the recommendations of that committee, including any recommendations for legislative change.
Let me turn to Amendment 110ZC. I will not dwell on the debate about the effectiveness or defectiveness of the drafting, which was identified by the noble Lord, Lord Peston, and owned up to by my noble friend. I shall not dwell on that as that was not the point of the amendment, but it is nice if amendments work in the Bill because we are talking about amending the Bill. This amendment raises an important point about not unfairly penalising the retail arms of our big banks in penalties that may arise for the manipulation of LIBOR. I put on the record again that it is important to recognise that the FSA found for attempted manipulation of dollar LIBOR, not sterling LIBOR. We know there are other investigations going on but, as the noble Lord, Lord Davies of Stamford, pointed out, at the moment we do not know whether the attempted manipulation had any effect, whether up or down. In any case, it is going to be very difficult to calculate the net effect.
There are two considerations: how things stand under FiSMA and the impact on the structure of the forthcoming Vickers Bill, the banking reform Bill, which will change the effect of the intended amendment significantly. If we take the current position, under Section 206 of FiSMA the FSA has the power to impose penalties on an authorised person who commits misconduct, and the FCA will have this power in future. We should be clear about that, but it is not a matter for the regulator to decide how the firm in question decides to pay and account for the penalty, and the regulator’s powers therefore do not extend to directing the firm in this respect. However, the critical point is the effect of the Vickers reforms because, as the Committee knows, we will be making very substantial changes to the banking landscape through the banking reform Bill when we come to implement the proposals of the Independent Commission on Banking. Once the Vickers proposals have been implemented, ring-fenced banks will be authorised persons in their own right, and they will not be liable to pay fines imposed on other authorised persons, so the substance of my noble friend’s concern will be addressed for the long term, not just in the case of this particular LIBOR scandal.
The regulator will also be required to make rules restricting the payments that a ring-fenced bank may make to other members of the group. This will make it difficult for another company in the group to require the ring-fenced bank to contribute towards the payment of fines. We need to get this right for the long term. Where fines fall should link to the authorised person and where there is an overriding concern to separate out parts of the industry, as Vickers has identified, that should be the driver for where fines fall. On the basis of these explanations, I ask the noble Baroness to withdraw her amendment.
Baroness Hayter of Kentish Town: Is that it?
I will start with a small correction. The Minister said that these amendments arose from LIBOR. If he had picked up my hints when I anticipated him—code for “That’s what his friend said in another place when it was going through Committee in March”—he would know that two of these amendments predated LIBOR.
Lord Sassoon: Just to be clear, I said that these relate to concerns that have arisen in connection with the recent LIBOR scandal. Of course, they arise in relation to the conduct of the industry more generally. I fully recognise that and I did not in any way exclude that from my remarks.
Baroness Hayter of Kentish Town: Not purposefully; I did not mean it like that. But these amendments are built on many other things. I thank those who have contributed to this debate—the noble Baroness, Lady Kramer, as well as my noble friends Lord Peston, Lord Davies and Lord Barnett. On a small issue, if there are new requirements on the Treasury website today, perhaps they could be shared with Members of the Committee.
I think the Minister gave us the ammunition that we are asking for. In talking about his role as chair of a training organisation or an accreditation organisation, he said that he wished more banks did structured training. That is the point we are trying to make. Because they do not all do it, we want it mandated. He also said that there will be a higher entry bar for new approved persons. But this is not just about people coming into this industry; something needs doing now. That is also what these amendments are about.
Most worrying, however, is that there was no reference to a code of conduct. That is why I was slow to get to my feet; I was awaiting another page. Obviously, the Government do not feel that is needed in this industry for financial professionals on whom we rely as clients and consumers. It is highly regrettable that the one thing the Minister did not bother to answer on was the need for a code of conduct. I do not know what it is about that that he cannot accept. I do not know why he cannot accept the demand for proof of competence. As was made clear, there need not be one proof of competence for everyone in this field; there can be a range of them. We are not asking for a single mandate; we are asking for the FCA to come up with a regime that would have competence requirements.
Finally, my question, like that of my noble friend Lord Barnett, is this: what will improve without such amendments? If this is just the FSA becoming the FCA, will we see anything different? I believe we need some signals about a code of conduct and raising standards. This may be something we need to return to later but for the moment I beg leave to withdraw the amendment.
Amendments 104A and 104AA not moved.
104B: Clause 5, page 16, line 30, at end insert—
“(9) The FCA shall work with the Department of Education to secure the provision of teaching on financial literacy at both primary and secondary level.”
Lord Flight: My Lords, everyone will be aware that the F:SMA included a key brief to the FSA to advance financial education. My observation is that pfeg and some of the other charities have done a reasonable job, and that certain banks such as RBS provide reasonable courses, but that still in our schools financial education is extremely mixed. If people have not had financial education at school, it is unrealistic to think that they will get it as adults when they need it. It is an absolute prerequisite of life today that children growing up should become what I will call financially literate. We all have to look after ourselves so much.
This amendment is not exactly what I would wish. I would like financial education to be part of the required curriculum in schools and I have asked a question on that matter in the past. However, I have put forward this probing amendment to see whether the Government have to offer rather more than we have at present in terms of making sure that there is universal financial education in our secondary schools.
Baroness Liddell of Coatdyke: My Lords, I have felt passionately about financial education for a long number of years and I support the probing amendment in the name of the noble Lord, Lord Flight. I first became interested in the issue in the late 1990s in the aftermath of the personal pensions mis-selling débâcle when many highly educated and sophisticated people were mis-sold products, largely because of the impenetrable nature of the language in the retail product being presented to them and, harking back to some of the issues raised in the previous debate, the less-than- adequate performance of some independent financial advisers.
Since then my concern has become even greater as we have seen more mis-selling scandals, such as payment protection insurance and inappropriate hedging instruments for small businesses against interest rate movements. Added to that, there is constant pressure on people to get involved in financial instruments at very great cost—everything from store cards through to payday loans. There should be a fundamental understanding on the part of people that when they
take out something like a payday loan, it is not a printing error when the rate of interest is in four figures. It is there deliberately as a means of making money.
This issue comes up regularly. FSMA looked at it. Every time there is a debate on financial services, financial literacy is raised. It has become motherhood and apple pie. However, a point will come when we start to take this seriously. I was lucky enough to go to a school in an area that had a mutual bank, the Airdrie Savings Bank, which continues to exist as the last surviving mutual savings bank. It provided certain financial education in schools. I have to say that there was probably a subplot because I still have the little silver bank and I still retain a passbook for the Airdrie Savings Bank. I have no doubt that the Royal Bank of Scotland did exactly the same when it did its work in schools. That is laudable, but at the end of the day the issues are now too great to leave it to charitable and well meaning organisations. There is a need now, for the well-being of the citizenry as well as the well-being of our financial services sector, to put financial literacy firmly on the curriculum, and I would hope not just here in England but in Scotland as well. I support the amendment in the name of the noble Lord, Lord Flight.
Baroness Turner of Camden: My Lords, I support what my noble friend has just said. For a number of years, I was chair of the ombudsman council of the PIA, which later merged into the FSA. We used to discuss the reports from the ombudsman and one of the things which bothered us enormously was the level of illiteracy in financial services. We began to worry about this and to wonder what we could do about it. Eventually we set up a sort of panel of interested, qualified people who would talk to schools and so on to ensure that we were doing at least something to try to remedy what we saw was an enormous problem with regard to education. Therefore, I very much support what my noble friend has said. She is absolutely right. We did our best then, but we were taken over and I have no idea whether the FSA continued what we had begun. Certainly we wanted to do that and we did it and it was quite popular for quite a long time. I hope that this amendment is taken seriously by the Government because it is a very important issue.
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Lord Stewartby: A brief point of order: the screen has got stuck.
Lord Hodgson of Astley Abbotts: My Lords, my noble friend has moved a very interesting amendment. We may be in danger of confusing two issues. The noble Baroness referred to impenetrable language. I quite accept that, but that is a question not of financial literacy but of improving the form in which the communication is made. To try and deal with financial literacy is a much narrower issue than impenetrable language. I support her entirely, but I would also add the form and content. How often do we get a letter from our credit card company saying that it is going to amend the terms in which the credit card is offered? It is four pages of closely packed print and what do we do but drop it straight in the waste
paper basket. However, the company has complied with the requirement. In those cases, the famous phrases “less is more”—less information, better focused—is what we should be all about.
That is an important point though not exactly what my noble friend was driving at. I think my noble friend was driving at something designed to deal with people at an earlier stage of their life. In particular, it has relevance to Amendment 104C, in the names of the noble Lords, Lord Peston and Lord Barnett, about the unavoidability of some risk. One of the issues that has somehow got about in the world is that we can actually insulate people from risk. When we have financial literacy lessons, we need to emphasise to everybody that there is no product anywhere that does not carry some level of risk. I am looking forward to hearing the two noble Lords on this issue in a few minutes. I have only one question on my noble friend’s amendment. Who pays for all this?
Lord Peston: Is the noble Lord going to answer that first?
Lord Flight: My Lords, at present it is effectively paid for via the charges of the FSA, which then go in a charitable form to pfeg and others and which is inadequate. However, one could turn it the other way round—one could do it how one wants. With schools teaching English literature, that is part of their budget. In my view, schools should be obliged to teach financial literacy and that should be part of their budget as well.
Lord Peston: My Lords, I am very sympathetic to the amendment and to what has been said by my noble friends. Unlike them, I am much less optimistic about what can be achieved, if anything. First, I will give the personal side. When I was at school, I was indebted, and have been indebted for the rest of my life, to my teachers for the guidance they gave me on the subjects that were taught in school. My love of English literature and my love of mathematics are two very good examples. However, if someone had said “Now we are going to have a class in finance”, I cannot believe that it would have been other than a turn-off. It would not have been what I went to school for.
Times have changed. I agree with that. However, the other thing is that is amazingly difficult to explain to people even the most elementary examples of financial literacy. To give one example, which is one of my bête noire, I come from a family of gamblers. I know that gambling is a mug’s game because to be a successful gambler, there are only two possibilities. Either one is corrupt and has some inside information or one is claiming—with the bookmaker creaming 10% off the top—that one is 10% cleverer than anybody else around, and there is absolutely no reason to believe that. When I have tried to explain that elementary proposition in financial literacy, I have found it impossible to persuade anybody at all. That is my personal experience. It does not mean that we should not try, but it does mean that there is a genuine question mark over what we can achieve. I am not saying that we should not try, but I am pessimistic.
I turn to the technical side of financial literacy. Perhaps noble Lords have read a brilliant speech given by Andrew Harvey of the Bank of England in 2009. It is on the Bank of England website. My strong advice to noble Lords is to look it up under “Speeches” rather than “Publications”. I wasted a good hour knowing that it was there but unable to find it. It is a brilliant analysis of the behaviour of financial intermediaries—which is after all the essence of financial literacy—and it is based on network analysis, which is a rather esoteric part of mathematics. I will read one paragraph from Andrew Harvey’s lecture, which I strongly recommend.
Lord Lawson of Blaby: Andrew Haldane.
Lord Peston: Sorry—Andrew Haldane. I am not good on these things. Names are one of my Alzheimer’s problems. Mr Haldane says, in a typically short paragraph of his brilliant lecture:
“This evolution in the topology of the network”—
that is, the network of financial intermediaries—
“meant that sharp discontinuities in the financial system were an accident waiting to happen. The present crisis is the materialisation of that accident”.
Financial literacy means being able to understand those two sentences. I am not a bad mathematician but even I had difficulty with the topology of networks. That is the problem in this area. What you can teach at the level at which the noble Lord, Lord Flight, wants to teach, is very little indeed. As I said, that does not mean that we should not do it, but we should not delude ourselves that we can produce a financially literate population because most people simply do not have the mathematics to understand this kind of work. I cannot believe that anybody could write a non-mathematical explanation of what Andrew Haldane said.
Nothing I have said should stop us from trying—I am not going against the noble Lord, Lord Flight, on this—but financial literacy is not the easiest thing to achieve.
Lord Hodgson of Astley Abbotts: Does the noble Lord not agree that two or three basic things could be taught relatively easily? The first is the impact of inflation and how it affects the value of savings. The second is the impact of compound interest and the costs and returns of borrowing. Those two subjects do not require the brilliant mathematics of which the noble Lord alone is capable. Quite realistic, real-life examples could be given to people in their final two or three years at school.
Lord Peston: I have had a little experience of this. In my younger days in the Treasury we tried to persuade senior Treasury officials that capital investment projects ought to be dealt with by discounted cash flow. We were talking to senior officials who were brilliantly clever, but it was nearly impossible to teach them even about compound interest. When we had taught them compound interest, they had no idea how to convert it into discounting. Again, I am not saying that we should not teach compound interest in schools—quite the contrary. All I am saying is that it is not easy.
Lord Northbrook: I support the amendment of my noble friend Lord Flight. Financial literacy is not sufficiently taught in schools. Perhaps the Department for Education could encourage the BBC, which is very weak in the area of discussing business, let alone business education, to ask Robert Peston to do a programme on it.
Lord McFall of Alcluith: My Lords, I agree not with the pious nature of the amendment of the noble Lord, Lord Flight, but with the realism of my noble friend Lord Peston. I chaired a workplace retirement income commission last year for the National Association of Pension Funds. We have seen a flight from defined benefit schemes to defined contribution schemes. As a result, we invited a Harvard professor to examine and explain the defined contribution scheme. He told us that he was unable to understand his own defined contribution scheme, never mind anyone else’s. Therefore, while financial education may be good, it is not the whole show.
Lord Flight: My Lords, although I acknowledge the issue, I do not believe it is that difficult. I observe that my own parents learnt basic accounting some 90 years ago at ordinary grammar schools in London as part of the general certificate. That stood them in pretty good stead. Even in my time, when I was doing basic economics, what I learnt was pretty fundamental to understanding what equity was, what debt was, and so forth. The courses that are up and running are pretty effective—for example in my own school, of which I have been a governor for many years—although I do not say that they are perfect. One of the problems is that since the Second World War, money has almost been thought of as dirty within the educational world. This is something to shy away from. One of the crucial things is for the schools themselves to have staff who can be taught to teach and be enthusiastic about the subject.
Lord Stevenson of Balmacara: My Lords, we support this amendment in the name of the noble Lord, Lord Flight, although in saying that, like a number of noble Lords, we worry that it does not go far enough in simply calling for the FCA to work with the Department for Education. Surely all children and young people should have access to a planned and coherent programme of personal finance education so that they leave school with the skills and confidence to manage their money effectively. Knowing how to manage money and be a savvy consumer is a vital life skill in an increasingly complex world. Education is about giving young people the skills and knowledge they need to get on in life, which is why we should get behind a campaign, so that every child should not only learn the three Rs at school, but also learn about pensions, savings, borrowing and mortgages.
As we have heard, personal financial education is covered in the primary curriculum at present, but it is only there as part of the non-statutory framework for PSHE—personal, social, health and economic education. There are, of course, opportunities with a number of subjects across the curriculum to learn about financial matters, including citizenship—compulsory for all 11 to
16 year-olds—mathematics, business studies, careers, and enterprise education. However, we think this important life skill should be made compulsory, as the previous Government were indeed planning to do in the last Session of the preceding Parliament. Sadly, there has been no legislative progress for the past two years.
As the Minister will be aware, an e-petition calling for financial education to be a compulsory part of the curriculum got more than 100,000 signatures last year and led to a Westminster Hall debate, which is worth reading in Hansard. Many Members of your Lordships’ House will know of Martin Lewis of the website moneysavingexpert.com, who has been campaigning on this issue for several years now, and was indeed the man behind the petition. He has recently corresponded with the Prime Minister, and the most recent exchange was an open letter to the Sun, which provoked a response which I would like to share with your Lordships’ House.
The Prime Minister writes to “dear Martin” and thanks him for the letter. He goes on to say,
“It is true that young people should have access to good quality personal finance education, so that they leave school with the knowledge and confidence to manage their money effectively”.
“The PSHE non-statutory programmes of study include elements aimed at ensuring that, by the time they leave school, pupils should be able to manage their money, understand and explain financial risk and reward and identify how finance will play an important part in their lives and in achieving their aspirations”.
This goes some way toward answering some of the points made by my noble friend Lord Peston. The Prime Minister goes on to say:
“This economic wellbeing and financial capability strand of PSHE was only introduced in September 2008 and Ofsted reported in 2010 that schools had not yet got to grips with this”.
We understand some of the reasons for that now. We are aware that some aspects of PSHE are patchy and, as you say, there are some schools that are not able to access good resources. However, the letter concludes:
“We believe it is important that schools are given the freedom and space to provide a truly rounded education, including important things such as finance education”.
However, Martin Lewis’s response to the letter says it all. He thanks the Prime Minister for his comments, but he says that,
“financial education must be deemed a core skill. It’s the cheapest way, long term, to prevent millions being screwed by scandals such as PPI, bank charges and endowments, to help people keep energy costs down and tackle our debt epidemic”.
“So far, your government’s only commitment has been Schools Minister Nick Gibb saying: ‘It'll be looked at in the curriculum review.’ That's good, but please ensure this isn't political double-speak for being filed in the bin”.
We believe that every child deserves to be supported in the development of the behaviours, attitudes and skills which will allow them to effectively manage their finances in order to fulfil their potential. However, it must be part of the core curriculum, and it must be compulsory. The recent Impact Review of Financial Education for Young People conducted by MAS, confirmed that attitudes to money are formed early. All the experts in this area agree that financial education has
to begin as early on in a young person’s school career as possible and should continue in a progressive way year on year.
We agree with the amendment of the noble Lord, Lord Flight, but regret that it does not go far enough, simply calling for the FCA to work with the Department for Education. As Martin Lewis said, that sounds to me a little like political doublespeak for filing it in the bin.
As the Minister will be aware, a Private Member’s Bill was introduced recently in the Commons, which would require financial literacy to be included in the national curriculum. So the Government have the luxury of a choice here. They can take the low road and accept the amendment from the noble Lord, Lord Flight, or the Minister could take the high road and indicate today the Government’s support for the Private Member’s Bill, which would get us to where we all surely want to be on this motherhood-and-apple-pie issue.
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Lord De Mauley: My Lords, Amendment 104B, as my noble friend Lord Flight has explained, would require the FCA to work with the Department for Education to secure the teaching of financial literacy in primary and secondary schools. I am sure, as the voices around the House have confirmed, that we all agree on the importance of financial education for young people and indeed for adults. The Government share this view.
As the noble Lord, Lord Stevenson, said, finance education is currently taught as part of non-statutory personal, social, health and economic education. I think that was how the previous Government set it up. The Department for Education is reviewing PSHE education, including whether any aspects of it should become statutory as part of the basic curriculum, and will be carefully considering the position of finance education. The Money Advice Service is feeding into this review.
However, the FCA is being set up as a focused conduct of business regulator. The Money Advice Service is the appropriate body to work with the Department for Education at an operational level on matters of financial literacy. MAS was established by the FSA, and its objectives are set out in new Section 3R of FiSMA, as inserted by Clause 5 of the Bill currently before your Lordships. They include an objective,
“to enhance—
(a) the understanding and knowledge of members of the public of financial matters”.
I cannot see how MAS could discharge this function without working closely with the Department for Education.
MAS was established by the FSA as an independent body with similar oversight arrangements to the FOS and FSCS. It has a statutory function to enhance the understanding and knowledge of members of the public of financial matters and their ability to manage their own financial affairs. The FSA must take such steps as are necessary to ensure that MAS is, at all times, capable of exercising its consumer financial education function.
The FCA will take on the FSA’s responsibility for consumer protection and conduct regulation, and will oversee MAS in the same way as the FSA does now. MAS will continue to have operational independence. To give the FCA responsibilities in the area of financial education would not only risk diluting its focus but would duplicate the role of MAS. So, in short, I do not believe that this amendment is necessary. I ask my noble friend to withdraw it.
Lord Stevenson of Balmacara: I wonder whether the Minister can answer my point about the Private Member’s Bill which is going through the other place. It seems to me to offer a way forward on this issue. If he cannot give me a reply today because he has not been briefed on this matter, perhaps he could write to me.
Lord De Mauley: My Lords, I think I addressed it, although I did not express it in those terms. I said that the department is reviewing PSHE education, including whether any aspect of it should become statutory. That was intended to be my response. The noble Lord knows the Government’s approach to Private Member’s Bills.
Lord Flight: My Lords, as I said, this was intended, largely, as a probing amendment. I am glad that MAS is continuing with its role. I am strongly of the view that financial literacy should be part of the core curriculum. The teaching of it at present is mixed and, in general, I do not think it is adequate. We have had a useful discussion of the subject and I beg leave to withdraw the amendment.
104BA: Clause 5, page 16, line 30, at end insert—
“1BA Memorandum of understanding between FCA and Office of Fair Trading
(1) The FCA must co-ordinate with the Office of Fair Trading (OFT).
(2) In particular, the FCA and the OFT must prepare and maintain a memorandum of understanding which sets out their respective roles and responsibilities and how they will work together.
(a) lay before Parliament a copy of the memorandum and any revised memorandum, and
(b) publish the memorandum as currently in force in such manner as it thinks fit.”
Baroness Hayter of Kentish Town: My Lords, Amendment 104BA stands in my name and that of my noble friend Lord Eatwell. Much will change in the OFT, partly as a result of the Public Bodies Act, the forthcoming Enterprise Regulation and Reform Bill, and this Bill, with responsibility for consumer credit moving from the OFT to the FCA.
This amendment is not so much about that but about the all-important competition role of the OFT, until that, in due course, moves to the CMA. That
includes competition references and market studies, as well as super-complaints and promoting competition. Meanwhile, as we know, and welcome, the FCA has also taken on a new remit to promote competition in financial services.
On 14 June in another place, Mark Hoban for the Government welcomed the fact that the Office of Fair Trading and the Financial Conduct Authority will take forward the ICB recommendations to improve transparency across all retail banking products. If the OFT retains the right to conduct market studies in relation to financial service markets, the ABI is concerned about the risk of duplication and/or the lack of co-ordination between the FCA and the OFT. Therefore, the ABI feels that the OFT should be subject to a statutory duty to cooperate and to produce an MoU. It would certainly be the preference of the ABI for the FCA normally to take the lead on competition matters, and for the OFT to undertake market studies only in exceptional circumstances.
Meanwhile, the consumer world, not dissimilarly, would like the relationship between the FCA and the OFT changed from that set out in the Bill. The consumer world would like the FCA to have the same powers as a number of other sectoral regulators to make competition referrals themselves—that is, the equivalent of Section 131 powers. I am attracted to that but have not tabled an amendment specifically on that at this stage, in the hope that this amendment will give the Minister the chance to explain why he has not replicated such an enabling power within the present Bill. Without such a power, the FCA will still have to refer cases to the OFT for market analysis before a referral to the Competition Commission can take place. It sounds—and I guess it will be—a bit slow. It also adds additional, possibly unnecessary, hurdles. The Joint Committee agreed. It said:
“The Government should review its decision on the FCA’s competition powers. The FCA should be given concurrent powers alongside the OFT to make market investigation references to the CC. The FCA will need greater competition powers to achieve its recommended objective than is currently set out in the draft Bill.”
We know from the debate in the other place that the Government, however, prefer the FCA to continue to have to make a referral to the OFT, which would allow the FCA to draw on the expertise of the OFT. However, the Government have agreed that they will review whether the FCA should have specific competition powers in five years’ time.
It is hard to see why a new authority, set up with a specific and new remit to promote competition, should not have the requisite powers. But perhaps we will hear the rationale when the Minister replies. Meanwhile, the OFT is itself keen to establish greater clarity for interested parties on how the OFT—and subsequently the CMA—and the FCA will work together, and the OFT is very happy for this issue to be raised today. The OFT judges it important for effective debate on the Bill that there is an understanding of how the OFT and FCA will work together.
There is, of course, also the matter—a smaller matter, perhaps—of the handover of consumer credit responsibility from the OFT to the FCA, and various transitional issues. The handling of these should no doubt also be included in any MoU.
The current OFT acknowledges that a key issue will be the publishing of a memorandum of understanding setting out the respective roles of the OFT and the FCA, their responsibilities and how they will work together. Indeed, I understand that the OFT has already begun working with the FSA on a draft MoU and is keen to establish greater clarity for those two parties and for those of us looking from the outside.
I am aware, although my eyesight is not that good, that the Minister has a file entitled, “say no to everything”. I hope in this case that he might drop that and just agree that an MoU may be without that remit. I beg to move.
Lord Flight: My Lords, my Amendment 173D covers essentially the same point, but is in that part of the Bill that deals with the practical operation of the competition objective for the FCA. There is clearly a risk of duplication or lack of co-ordination between the OFT and the FCA, so Amendment 173D proposes a legally binding MoU setting out how the two bodies will co-operate together and who will do what. It should be made clear that the FCA would normally take the lead on competition matters in financial services and the OFT would undertake market studies in exceptional circumstances. The competition objective for the FSA is very well worded, very clear and extremely appropriate. Consumers need a healthily competitive market. I am still of the view that the PRA should have a competition objective. It is the lack of competition that led to a cartel in banking. Whenever you get a cartel you get bad habits, so, in my book, a major aspect of having a much healthier banking system is having more competition.
Lord De Mauley: My Lords, Amendments 104BA and 173D both relate to co-ordination between the FCA and the OFT. Amendment 104BA would require the FCA to co-ordinate with the OFT and to prepare and maintain a memorandum of understanding to be laid before Parliament and published as it sees fit. Amendment 173D, in my noble friend’s name, is similar, but the duty to co-ordinate, and to establish an MoU, relates solely to the promotion of competition. Amendment 173D would also require the MoU to make it clear that the OFT will conduct a market study into a financial services market within the regulatory remit of the FCA only in exceptional circumstances.
Before turning to the question of the need for statutory provision for co-ordination between the FCA and the OFT, it might help if I explain the approach taken elsewhere in the Bill. The Bill provides for a properly focused regulatory system in which the individual regulators have clear roles and responsibilities and the right tools to deliver them. It is right, therefore, for the Bill to provide explicitly for co-ordination and MoUs between the key players in the system for regulating financial services—the Bank of England, the FCA, the PRA, the Financial Ombudsman Service, the Financial Services Compensation Scheme and the Treasury—so that they can work together effectively without the boundaries between their roles and responsibilities getting blurred, and of course the legislation sets out a procedure for laying these documents before Parliament.
Clearly, the FCA will need to work closely with the OFT and, in due course, the Competition and Markets Authority. In fact, the FSA already has an MoU with
the OFT on a non-statutory basis and the FSA is already working with the OFT on putting in place a memorandum with the FCA.
To address the need for particularly swift and effective co-ordination in cases where a large number of consumers have suffered detriment, such as the mis-selling of payment protection insurance, the FSA has put in place additional formal mechanisms for co-ordination such as the Coordination Committee of the FSA, the OFT, the FSCS and the FOS. Statutory duties to co-ordinate and maintain MoUs are not needed to underpin that co-operation. That already happens and is effective.
On the specific issue of competition, which Amendment 173D addresses, the FCA, as the lead regulator for financial services, clearly will need to work closely with the OFT, as the central competition authority. Of course, the regulators will have to co-ordinate their work so that their own resources are used effectively and duplication is avoided. Although they will need to take into account their respective regulatory objectives and priorities, powers, expertise and resources, I contend that we should allow the regulators, based on careful consideration, to develop an effective protocol for working with each other in order to promote competition.
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I am particularly concerned with the part of the amendment that would stipulate, from the outset, that one of the regulators—the OFT—could only be involved on an “exceptional” basis. Such a rigid approach would not help the regulators to deliver arrangements which focus on the best way of promoting competition. I note that the OFT does not have a statutory MoU with any other of the sectoral regulators with which it currently works to promote competition.
The noble Baroness, Lady Hayter, made reference to the OFT and suggested that it would be inefficient if there were two sets of market studies, one after the other. She makes an important point. If the OFT receives a referral from the FCA which is accompanied by appropriate evidence and analysis, the OFT may go straight to the consultation stage without conducting a further market study of its own. There is precedent for this in the OFT’s approach to the audit market. In that case, when the OFT received the report of the House of Lords Economic Affairs Committee, it went straight to consulting on a reference to the Competition Commission, rather than conducting its own market study.
I hope that I have persuaded your Lordships of the importance of flexibility in this area. Although my file does not say, “Say no to everything”, as the noble Baroness, Lady Hayter, suggested, in this case I do ask her to withdraw her amendment.
Lord Peston: My Lords, I very much agree with my noble friend Lady Hayter and with the noble Lord, Lord Flight, that competition is the best means of consumer protection. There are occasional counterexamples, but overwhelmingly that is what matters. However, it occurred to me while listening to the noble Lord’s reply that I do not now know which is the primary body in dealing with competition in the financial intermediary sector. Is there a straightforward answer to that? If I had been asked to guess, I would have
guessed that it must be the new Competition and Markets Authority, because its remit is about competition, whereas the FCA’s remit is not. Can we have an answer to that? If we do not know the answer, could we be told the next time we meet who is the prime mover in this?
Lord De Mauley: I am pretty sure that the noble Lord is correct in his analysis, but if there is any change to that, I will write to him.
Baroness Hayter of Kentish Town: My Lords, the fact that the Minister does not know the answer to that seems to me to make the case for why we need an MoU. In fact, in his answer he went through the sorts of things that the OFT and the FCA would need to look at—their objectives, their resources and their method of working. We are not setting out what those should be. We are simply saying that there should be an MoU that sets out those sorts of things, things such as when one will take the lead and when the other will.
I accept, sadly, that the specifics in the amendment of the noble Lord, Lord Flight, which we were attracted to, are probably more than we could hope for from the Government. However, as the Minister has admitted that there need to be MoUs for all the other key players—the Treasury, the Bank of England, the FOS, the compensation schemes and so on—it would be extraordinary not to have one for what he now accepts is the prime competition authority: the OFT currently, but the CMA eventually. I hope that the Government will think about this again. The lack of an MoU for the prime competition authority would seem to create a slightly opaque situation for the other market players that want to know who leads on certain items. In the hope that the Minister will think about that, although he did not promise to, I beg leave to withdraw the amendment.
104C: Clause 5, page 16, line 35, at end insert—
“( ) the need to inform and educate consumers with special emphasis on the unavoidability of some risk;”
Lord Barnett: My Lords, the amendment stands also in the name of my noble friend Lord Peston. It is fairly self-evident, referring to,
“the need to inform and educate consumers”—
which I assume everybody is in favour of—
“with special emphasis on the unavoidability of some risk”.
Life is full of risk, certainly in the financial area— I hope that everybody accepts that. New Section 1C(1) states:
“The consumer protection objective is: securing an appropriate degree of protection for consumers”.
If the Minister is unable to accept our amendment, I hope that he can explain what,
“appropriate degree of protection for consumers”,
the Government have in mind. It is unclear to me what is “appropriate” in this case. I hope that,
“emphasis on the unavoidability of some risk”,
can be considered seriously. When my noble friend talked a little earlier about his experience in school, he said that he did not think that he would not have been terribly interested if anybody had taught him about financial affairs, but I think that risk would be fairly simple to explain even to most teenagers at school. In those circumstances, this amendment seems reasonable to me and I hope that the Minister will be able to accept it. I beg to move.
Lord Flight: My Lords, it strikes me that the Bill slightly buries “buyer beware”, which was in FiSMA, and that we are creeping towards a culture where a lot of people think that if they lose money on any investment they are entitled to compensation. I do not wish to be overly harsh but it is fundamental, as the noble Lord said, that people understand risk and graduations of risk. That is backed by financial education.
Lord Borrie: My Lords, in agreeing with my noble friends Lord Barnett and Lord Peston in their amendment, I agree also with what the noble Lord, Lord Flight, has just said. He did not used the famous Latin phrase “caveat emptor”, perhaps because we are not supposed to use Latin any more—that is the case in the courts; it may be not so here. If it is convenient to the Committee, I shall speak to Amendment 106, which is grouped with my noble friends’ amendment.
The Bill states that the Financial Conduct Authority, in assessing the degree of consumer protection that is desirable,
“must have regard to … the needs that consumers may have for the timely provision of information and advice that is accurate and fit for purpose”.
The noble Baroness, Lady Oppenheim-Barnes, has kindly joined me in Amendment 106, because, while we agree about information and advice having to be accurate, we are not happy about the phrase “fit for purpose” and would prefer it to be replaced by “intelligible”.
“Fit for purpose” is a vague and uncertain phrase. As the consumer organisation Which? has said in briefing to me and no doubt to others, it is a woolly phrase and invites the question: whose purpose? It has become fashionable to use the phrase “fit for purpose” for all sorts of reasons, and despite its perfectly respectable origins in Section 14 of the Sale of Goods Act and indeed previous common law, it is now used to such a wide extent in all sorts of circumstances that it would be better replaced in the Bill with “intelligible”.
Baroness Oppenheim-Barnes: My Lords, I was delighted to add my name to that of the noble Lord, Lord Borrie, on this amendment. We go back a very long way to when I first entered the Department of Trade and Industry. The position of director-general of fair trading was coming up for renewal and my officials said to me, “Well, you will obviously want to appoint somebody from your own side, Minister”, to which I replied, “There is only one person with whom I would be entirely satisfied”. That was the noble Lord, Lord Borrie, and this has proved to be the case ever since.
This amendment is important. Perhaps I am not so happy with the term “fit for purpose” because I spent a great deal of my consumer life trying to find a better one, which I never did satisfactorily, in order that people could pursue their Sale of Goods Act rights. However, I will have more to say on this later—on Amendment 108, I think—when we reach that.
Lord Peston: My Lords, I supplement what my noble friend Lord Barnett and others have said about the built-in risk of pretty well every financial instrument that one might acquire. This amendment is very much in line with that made earlier by the noble Lord, Lord Flight, on education. Therefore, again I must add my cautionary note that it is very hard to persuade people that the world is full of risk, particularly when it comes to instruments that look risk-free—for example, a government bond, which our Government have never reneged on. However, if it is a bond fixed in nominal terms, there is always the risk of inflation so that the real rate of return is highly risky. In a second example, the date of repayment of the bond can be an issue, so that even with a perfectly honest Government who intend to pay on the due date, if you have to cash the bond in at a different date then there is risk involved. It is vital that people understand these kinds of examples.
The other risk, and I am not quite clear how we can approach it, essentially stems from the possibility that the people one is dealing with are corrupt. To take the obvious example, if you are offered a particular asset with a high nominal rate of return, is this because the financial intermediary offering you that asset is particular inefficient or because they are up to no good and the only way they can lay their hands on this money is with a high rate of interest?
It is often immensely hard to disentangle whether you are running a risk by acquiring such an asset, and perhaps the great WC Fields’s dictum is relevant here:
“Never give a sucker an even break”.
The world is full of people like WC Fields, but how is the ordinary person to know if they are dealing with one? It seems to me, therefore, that the relevant authorities have a responsibility at least to take on board their duty to be of assistance to people, partly in an educative way, and partly by controlling the behaviour of people themselves.
I very much look forward to hearing the noble Lord’s reply on the question of risk. However, to summarise, my main point is that if you are living in an area where there is no risk, then you are dead.
5.15 pm
Lord May of Oxford: I shall make a couple of comments in favour of the amendment. As I understand it, its general sense is to state that there is a duty of care. The medical profession and the legal profession have an explicit duty of care. An interesting seminar brought together economists, lawyers and philosophers in Oxford over the past year and a half, working towards trying to say something sensible about this. As I understand it, the amendment is intended to say that, of course, we have to understand that there are risks, but that we know of specific examples where customers have had cheerfully and aggressively marketed
to them investment instruments that the vendor itself, Goldman Sachs, was betting against. The gist of the amendment—and other things that I would like to be in the Bill in a much more explicit and in-your-face way—is to assert that there should be a real duty of care.
Lord Hodgson of Astley Abbotts: My Lords, I very much support the amendment, as I said when speaking to my noble friend’s amendment a few minutes ago. There is a real danger of failing to distinguish between risk and fraud. They get intermingled in the public’s mind. Clearly, fraud is absolutely unacceptable and needs to be chased down and prosecuted with all possible vigour. Too often, in this compensation-culture era, a risk that goes wrong is seen as fraud: “I should not have lost money”. One difficulty with the interesting concept, proposed by the noble Lord, of duty of care is that although you can explain very clearly to people the risks that they are taking, when it does not happen as you and they hope—things are volatile—they are inclined to forget that they were given the appropriate warnings. Our emphasis must be on making sure that risk is understood; and that fraud is unacceptable; but that the two are completely distinct. There is a confluence in the public mind, sometimes encouraged by the way that the newspapers report it, of two issues. There are plenty of cases where fraud has happened—that is wrong—but there are also cases where people have taken risks which they anticipated would deliver them huge returns. When they did not, because they were highly risky, they did not see themselves in any way responsible; they sought someone else to blame.
Baroness Hayter of Kentish Town: My Lords, I was particularly grateful to hear the words of the noble Lord, Lord May of Oxford. We will shortly come to a specific amendment about a duty of care. I hope that he will be here to repeat his words in 20 minutes or whenever we reach the amendment. I also hope that the Minister can pick up a briefing note that says “support”. His face tells me possibly not.
At Second Reading, I talked about caveat emptor, not having realised that it is no longer the accepted term. I have concerns about it because it is rarely used as an excuse for ordinary consumers to say, “Oh, I lost money”; it is far more used by producers to say, “Well, we told you so”, even if it was, as the noble Lord, Lord Hodgson, said on an earlier amendment, on page 4 of small typed script of something that had been sent to them. I remain of the view that responsibility for ensuring that consumers know what they are buying rests with the provider by producing intelligible and appropriate information. We will turn to the issue of duty of care shortly.
The Joint Committee on the Bill wrote that, should it be essential for the FCA to have regard to the behaviour of consumers, the FCA duty should be amended as set out in Amendment 105, in my name and that of my noble friend Lord Eatwell. As the Joint Committee stated,
“provision of information alone will not significantly improve consumers’ ability to make well-informed decisions. The information needs to be easily understandable and accessible”.
There is widespread suspicion that many purveyors of financial products deliberately try to keep certain customers in the dark. That confusion can mean that some, blinded by graphs and numbers, sign up to a product and later down the track find themselves caught by certain clauses and conditions of which they had, sadly, been unaware.
An issue just as difficult, of course, is the ability to compare prices and thus to shop around—an essential element of the much-vaunted caveat emptor, or competition, on which the Government rely to improve services. Martin Wheatley, the chief executive-designate of the FCA, has described the difficulty for consumers in comparing products such as bank accounts, which are structured in a way that makes it really difficult to establish whether the product is good value. We all know of practitioners who talk in terms so remote from the common-sense understanding of contractual agreements that people are unaware of what they are signing up to. This was undoubtedly the case with the recent interest rate swaps.
Asked whether firms had a duty to go beyond their legal responsibility to consumers, Mark Hoban MP said in another place:
“It is in the interests of firms to ensure that consumers do understand the products that they are buying because it then minimises the risk of problems further down the track”.
Although I agree with those sentiments, that answer seems to be about not having to pay redress later, rather than trying to prevent the mischief in the first place. Unless we do something to reduce such occurrences—today we have already mentioned PPI, personal pensions and mortgage endowments—we will have learnt nothing from what has gone wrong.
However, as the amendment moved by my noble friend Lord Peston makes clear, it is not simply language—the “crystal mark” of plain English—that is important. This is about explaining the risk to which the consumer is signing up, or for which they are paying money so that someone else takes that risk in exchange for the payment. So they might buy a product that covers the risk of inflation but does not cover longevity, or vice versa. Or a product might cover their life expectancy but not that of their surviving spouse. The permutations are endless. What is key is that, in addition to the language being clear, the limits of the product should be clear so that—in the famous words—there are “no surprises”. If I buy a bottle of Coke I will know its size, volume, sell-by date and taste. Regulation has sorted out much of that. We need to give this regulator the ability to expect no less from the providers of services which they are selling to largely unsuspecting customers.
In the other place, the Minister said:
“The Government recognise that there can be significant information and capability asymmetries between firms and consumers”,
and that poor “provision of information” could be a key factor in,
“a consumer ending up with an unsuitable product”.
“the intention behind the amendments”—[
Official Report
, Commons, Financial Services Bill Committee, 1/3/12; col. 261]—
in the other place, and therefore the intention behind the amendment that is in my name in this group. I hope that the Minister will now go further than his colleague in the other place, who accepted only the intention behind the amendments, and that he will accept the amendments as they stand. If it would make him feel better, perhaps he could agree to the intention now and bring back a suitably worded amendment on Report.
Lord De Mauley: My Lords, this group of amendments is concerned with the information provided to consumers, so that they are able to make empowered choices and decisions. Amendment 104C seeks to add a new ‘have regard’ subsection to the list of matters that the FCA must consider in advancing its consumer protection objective—namely,
“the need to inform and educate consumers with special emphasis on the unavoidability of some risk”.
I agree with the noble Lord that consumers need to understand that there will necessarily always be an element of risk involved in engaging in a financial transaction, and that they must consider carefully their own risk appetite and the ability of their personal finances to absorb any loss, and enter in to any contract with full information. We cannot pursue a zero-failure regime in financial services, and consumers must understand this. The regulator cannot shoulder the responsibilities that consumers should take for their own decisions and actions, but it can take steps—as my noble friend Lord Hodgson said—to ensure that consumers have the best possible information when they make those choices.
Both financial education—which we spoke of earlier—and effective conduct of business regulation have a role to play in educating consumers about risk. The Money Advice Service will have a key role in improving financial literacy so that consumers understand the difference between available financial products and their uses, what information they should seek out before entering into a contract or transaction, and what rights they have when things do not go to plan. We covered the role of the MAS when we discussed Amendment 104.
Baroness Oppenheim-Barnes: On that point, the majority of those consumers who are more at risk than anyone else from misleading terms are those least likely to benefit from financial literacy tests. They will be properly informed only if this is done in a manner, and with the type of wording, that would be simple to understand, not complicated.
Lord De Mauley: That is right, my Lords. In fact, when we debated the previous group of amendments I spoke about the deliberations that the Department for Education is going through on that exact point, so I thank my noble friend for that.
The FCA will set the conduct-of-business regime within which firms will operate and the requirements with which they will have to comply. Just as the FSA does today, placing firms under detailed obligations to assess the suitability of products for individual clients, as well as specifying that warnings must be given to
consumers who express an interest in buying a product that does not appear appropriate for their needs or their tolerance of risk. In addition, these requirements specify which risk factors must be highlighted in the case of specific products—for example, income withdrawals or the purchase of short-term annuities.
However, none of this means that it is the FCA that should be required to have regard to the need to educate consumers about the unavoidability of risk. The FCA is not a consumer education body—that is the role of the Money Advice Service—and neither is it an interlocutor between firms or advisers and consumers. So I cannot agree with that amendment.
The noble Lord, Lord Barnett, asked what an appropriate degree of protection would be. “Appropriate” is used to allow the FCA to differentiate between the different needs that consumers may have. The detail is set out in the FSA’s rules and will be transferred into the new FCA’s rules. I will not offer to send the noble Lord a copy of them because I suspect they might be quite voluminous, but if he would find it helpful I am sure I could send a reference to that particular point in them.
Lord Peston: Before the Minister goes on to the next amendment, my noble friend Lord Barnett’s and my amendment, if I may draw his attention to it, appears in a clause that is headed “The consumer protection objective” and refers to the FCA. How can the Minister make the illogical leap of saying that that does not concern the FCA? It says categorically in the clause that it concerns the FCA; its acronym appears under the consumer protection objective, in the words,
“the FCA must have regard to”.
It therefore seems entirely reasonable that the FCA should have regard to what my noble friend and I have suggested. You cannot possibly say that someone else should have regard to it, when the FCA is clearly a body that must do so.
Lord De Mauley: My Lords, I hope I have explained that the FCA is doing that through its conduct-of-business regulations and that the issue of education is dealt with in the ways that I have explained.
Lord Peston: As a matter of elementary logic, though, the Minister cannot wriggle away and say that the FCA is doing it some other way. This amendment is about consumer protection and the FCA must have regard to that. I would like an answer to why the Minister will not accept an amendment that says that the FCA must have regard to it in this specific way.
Lord De Mauley: My Lords, I think that I have said that the FCA has regard to it, but I cannot go much further than I have.
Lord McFall of Alcluith: Is this not just part of the muddled thinking that took place at the beginning of this whole process when the word “consumer” was changed and the name became the FCA? Consumer protection lies with the FCA, whether the Minister sees it or not. Given the muddled thinking, and given
that the Money Advice Service—which, by the way, was lacerated a few months ago when it went to the Treasury Select Committee—is not a consumer protection body, we need a little rethink. The Minister should take the pills and come back, and then we can get some clarity.
5.30 pm
Lord De Mauley: I am sorry that the noble Lord is confused. I do not see the confusion that he does. Perhaps I may move on to Amendments 105A and 106.
Lord Peston: I would still like a rational answer to what I have put to the Minister. The least he can do is to say that he would like to think about it and come up with the right answer. Apart from anything else, it would do him a world of good.
Lord De Mauley: My Lords, I think that I have given the right answer but I am happy to write to the noble Lord, Lord Peston, if I can express it in a way that he might find more acceptable.
On Amendments 105A and 106, it is important to note that if we are to create the conditions in which consumers can make better choices for themselves, we need to address some of the asymmetries of information between consumers and providers that still prevail in financial services. I think that that is a point that noble Lords are making. That is why the Government added new subsection (2)(c) to new Section 1C, which will be inserted by Clause 5, before the Bill’s introduction to the parliamentary process. This provision requires the regulator to consider,
“the needs that consumers may have for the timely provision of information and advice that is accurate and fit for purpose”.
This provision complements the FCA’s new power to require firms to withdraw a financial promotion and disclose the fact that it has done so, as well as a new power to disclose at an early stage to the public that disciplinary enforcement action has commenced against a firm or individual. The FSA will carry out a root-and-branch review of transparency and disclosure on the part of firms and the regulator to be completed ahead of commencement of the Bill.
I agree with many of the points made by the Committee in terms of the improvements that we want to see, but I do not agree that Amendments 105A and 106 are necessary. I argue, for example, that referring to information being “fit for purpose” is, in modern idiom, a better way of achieving the aims that we all share. “Fit for purpose” is an umbrella term that includes, for example, information being legible, intelligible and appropriately presented. Information could not be fit for purpose if it was not also those things.
“Fit for purpose” is also broader and allows the regulator to differentiate between the needs of different consumers, to adapt its approach and perhaps to place additional requirements on firms where it considers this necessary. There may be requirements that we cannot anticipate at this point. Using a broad term such as this therefore gives flexibility and allows the regulator to be responsive to changing circumstances and market conditions. Being too exhaustive in the
Bill could be unhelpful. However, it is also not appropriate, as the detailed requirements will be set out by the FCA in its rulebook.
I therefore argue that Amendment 105A is unnecessary, as fit for purpose already captures information being intelligible and appropriately presented. Amendment 106 could restrict the FCA’s ability to design a regime on the provision of information to consumers, as “intelligible” is a narrower term than “fit for purpose”.
Baroness Hayter of Kentish Town: Before the noble Lord moves off that particular amendment, perhaps I may point out that the provision also uses the word “advice”. He has covered only the information that has to be clear, but not the point about access to advice.
Lord De Mauley: My Lords, I apologise if my argument covered only one aspect, but it should be taken to cover both.
The noble Lord, Lord May of Oxford, to whom I am grateful for his intervention, asked about a duty of care. Subsection (2)(e) of new Section 1C, which is headed “The consumer protection objective”, states that providers should,
“provide consumers with a level of care that is appropriate … to the … risk … [of] the investment … and the capabilities of the consumers”.
I hope that I have made it clear that the Government are fully committed to improving the provision of information to consumers, and that I have succeeded in convincing the noble Lord to withdraw his amendment.
Lord Barnett: My Lords, I do not think that the Minister has convinced anyone. I think he said that my noble friend Lord McFall was confused, but he was not confused. None of us is confused except about the way that the Bill is drafted. The whole of this section refers to consumer protection objectives. We also have new Section 1G, on the “Meaning of ‘consumer’”, and new Section 1H. The whole lot should be removed, because we are now told that the MAS will have to deal with it. The Minister has not convinced me, and I hope that we will come back to this at a later stage. For the moment, I beg leave to withdraw the amendment.
105: Clause 5, page 16, line 38, after “of” insert “ability, disability and vulnerability generally”
Lord McFall of Alcluith: My Lords, I shall speak also to Amendment 136. Amendment 105 inserts the terms “ability, disability and vulnerability” of consumers into new Section 1C which is entitled: “The consumer protection objective”, as the noble Lord said. Given that only one body—the FCA—is referred to within
this section, it cannot be deduced otherwise than that the FCA has a consumer protection objective. That issue has to be cleared up.
The noble Lord, Lord May, made a very good point about the duty of care. The duty of care issue has been sidestepped by the Government. The Minister referred the noble Lord, Lord May, to subsection 2(e), which states that,
“those providing regulated financial services should be expected to provide consumers with a level of care”.
Being expected to provide consumers with a level of care is a world apart from a duty of care. That issue has to be debated further.
I mentioned the terms ability, disability and vulnerability because they are crucial to consumer protection. I shall deal first with the ability to understand. Noble Lords have mentioned that we have seen examples of products being shrouded in complexity. I well remember that back in 2002 I looked into split-capital investment trusts. These products were being sold on a retail basis to individuals, and nobody could understand them. Indeed, I got the architect of the splits in to the committee and asked him a question. Believe it or not, his name was “Dotty” Thomas. I said, “Dotty, did you understand what you were producing?”, and Dotty said, “No, I didn’t understand”. An unmarried 35 year- old woman came to see me. She had put £40,000 away for the care of her mother. Within three months, that £40,000 became less than £400. When looking at consumers and duties of care, it is important that we understand the issues and how products are being sold, even down to the mundane level. We are talking about ability here. Let us take two credit cards, both with an APR of 8%. Given the algorithms involved—we needed to recruit a professor of mathematics from Cambridge—two cards with the same APR can have a 75% difference in payment. Who is on the losing end with complex products? It is the consumer, so the issue of ability is very important.
The industry keeps telling us that innovation is at the heart of financial services and that if you stop innovation, you stop creativity. Most weeks, I go up and down to Glasgow on a plane. If the pilot said to me when I got on, “Mr McFall, would you like to have an innovative flight to Glasgow today where the plane goes upside down?”, I would say, “No. Give us it simple. Get me there”. That is what consumers want from financial products: simplicity and what is written on the can about what they get out for every pound that they put in. We do not have that. Paul Volker made the point a while ago in a speech in London in which he said that over the past 40 years there has been only one innovative product in the financial services industry: the ATM. Everything else, you can forget. So when they tell us that we have innovative products, I suggest caution.
The noble Baroness, Lady Liddell of Coatdyke, mentioned the mis-selling of personal pension plans when she was a Minister. The compensation scheme cost over £12 billion. The money put aside for payment protection insurance, which I was asked by the industry to negotiate with consumers just a couple of months ago, is £8 billion. The LIBOR scandal, according to the FT last Saturday, will cost about £20 billion. If we
add 20, 12 and eight, we get £40 billion. Let us look at some of the countries that had a GDP of less than £40 billion in 2011: Luxembourg, Cyprus, Ghana and Uruguay are just four I have picked out. The scale of the problem is enormous. We are living in a world where consumers do not have the ability to understand the complexities—and I include everyone here—so we need to do something about it.
I mentioned earlier that I was asked to chair the Workplace Retirement Income Commission for the National Association of Pension Funds. What people are paying for their pensions is enormous. I note on the Daily Telegraph front page today that fees can halve the value of your pension. When someone puts their money in a pension pot, they do not know what they are going to get out at the end of the day because of the complexity that arises. So the issue of consumer protection and consumers’ ability is central to the debate on the Financial Services Bill. As I mentioned earlier, I challenge anyone to understand the ins and outs of their portable defined contribution pension schemes.
I also mention disability and vulnerability because one of the complaints I got regularly from the good people working in the financial services industry in our banks and building societies on every high street up and down the land was: “John, I am asked to sell the ‘product of the month’ and I am getting pushed by my bosses to do that. If Mrs Quinn, 75 years of age, comes in, I push the same product to her as I push to her grandson James Quinn, who is 26 and starting out in life. I know in my heart that that is the wrong thing to do”. I know a number of people who have resigned from their bank as a result of that, so the vulnerability element is important.
The asymmetry of knowledge between the consumer and the industry is enormous and we need that balance to be reasserted. I have said to the industry, which has many decent people working in it, that regulators and politicians will not solve this problem because we come to it from the side. The ones who will solve the problem are the ones who are in the industry. And if they solve that problem, if they have that self-regulation, then there will be less need for stricter regulation and there will be the rebuilding of trust and confidence in the industry. This proposed new Section 1C is central to the future of the financial services industry. I regret that the term “consumer” was taken out of the name of the body known as the FCA.
So vulnerability, ability and disability are central to the issues which confront the industry. If the industry takes that seriously, with a push from the FCA maybe we will have a better future. There is a long way to go but this proposed new section is crucial in ensuring that we get a better financial services industry. I beg to move.
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Lord Northbrook: My Lords, I support the views of the noble Lord, Lord McFall, on split-level trusts. When I was a private client investment manager I came across these extraordinary products, which offered marvellous returns. Income shares were offering 8% and capital shares looked very exciting in the forecasts and prospectuses of what would happen if the market
went up 5%, 10% or 20%. But the prospectuses did not say that if the market went down 5% or 10% your shares would be wiped out. It seems to me that, for all those vulnerable people, the FCA has to warn of the downside risks of these vehicles.
Baroness Liddell of Coatdyke: My Lords, I support my noble friend Lord McFall in this amendment but I greatly regret the fact that the amendment is necessary. One of the reasons for my regret is the appalling reputation that the financial services industry is earning now as a consequence of the events of the past few years. It is a vital industry for the United Kingdom. It was based initially on the probity of the United Kingdom, which now has to be seriously questioned. It should not be necessary to put into a Bill a duty of care on vulnerable people. It should be a matter of course.
When my noble friend Lady Hayter began this afternoon’s debate, she referred to the issues that have caused such convulsions in the past few months and have led to a serious loss of trust in financial services in general. It would come as no surprise that some particularly vulnerable people, especially the elderly, would nowadays prefer to put their money in a sock under the bed because it is about the only place where it is likely to be safe.