The commissioners argued that a two-tier system is the right way to deal with the issue. The expectations on senior managers must be high. However, it is also right that those who are not part of the senior
management of the bank should have high standards. The noble Lord, Lord Eatwell, has addressed this. By making it explicit that the rules of conduct and the definition of misconduct in Clause 22 refer to,
“employees whose actions or behaviour could seriously harm their employer, its reputation or its customers”,
the amendment is aimed at ensuring that the FCA and the PRA focus their regulatory duties on those employees who could inflict the most significant and material damage on their institutions and on the banking system as a whole. These are not always the most senior employees. They could be a junior dealer, fairly new in the business, who, ignoring his internal limits, deals in a way that does great damage both to customers and to his employer. He can be fired and even sent to prison, but the deals are still the responsibility of the bank.
It is therefore necessary to have an amendment that not only widens beyond the senior management, obviously, but narrows so that it does not try to cover all the employees but has a very focused look at those who are going to be able to do the most damage the most often, and who are at highest risk. In our regular and ongoing conversations with the regulators and in the light of their official responses to our work, the commission has not yet been convinced that they would go far enough to ensure that this specific group of material risk-takers would be central in any further regulation and thus that neither the spirit nor the letter of the commission recommendations would be implemented.
Amendment 51 seeks to correct the failings of the approved persons regime that this new two-tier system replaces. The noble Lord, Lord Turnbull, also stated previously that this regime operates mostly as an initial gateway to taking up a post rather than serving as a system through which regulators can ensure the continuing exercise of responsibility.
The amendment also deals with another concern articulated by the noble Lord, Lord Turnbull, that there is still no requirement that the regulator operate a licensing regime. The Bill states that the regulator may make rules relating to conduct if it appears “necessary or expedient”. By setting out explicitly that the,
“relevant authorised person has a duty to ensure that all relevant employees comply with rules of conduct”
made by the regulator, the amendment makes it clear that the rules of conduct for material risk-takers who are not senior management are just as seriously applied as those governing senior management. This gives a clear identity to the new second tier of the system, which is vital if it is to be taken seriously by regulators and banks.
As I said a few moments ago, I am aware of ongoing conversations between my colleagues and the Treasury over a few remaining issues around the implementation of the licensing regime. I believe that these are mostly in relation to the most appropriate names for the licensing regime and the senior persons regime and, I hope, to some of the matters that I have raised this afternoon. I hope that the Minister will be able to update the House on these areas and that the news can be welcomed by myself and my colleagues.
Lord Davies of Stamford (Lab): My Lords, I remind the House that for a number of years I was a director of a quite large British investment bank—in those days called a merchant bank. We had a substantial lending book as well as a much bigger investment banking business. The firm was the basis of the present London activities of Deutsche Bank.
The noble Lord, Lord Lawson, said earlier that we were focusing on an area where we could actually use legislation to address effectively a major human problem. It is not always possible to address human problems with legislation—he is absolutely right about that. We have spent much of the afternoon talking about separation and ring-fencing, which is important because there is a theoretical risk that any institution could be destabilised for example by speculation in high-risk instruments such as derivatives and that could undermine the rest of the business. That is a theoretical risk; it is sensible to address it and think about it. It has to be managed. It is not actually the reason why we had the collapse in 2008 or any of the recent banking difficulties.
Similarly, the much praised Glass-Steagall regime, which existed in America between the 1930s and 1980s, was premised on the theoretical risk that if an institution could be involved in both underwriting securities and making loans, and that if the underwriting losses were such as to compromise the capital of the bank, the deposits of the bank would be at risk. Again, that is a straightforward, plausible, coherent risk that it is sensible to address but that was not the reason for the banking crisis in America in the 1930s. I will not waste time by going into the reasons for that crisis. Nevertheless, it was a sensible thing to do.
We have been talking up to now about theoretical risks. I do not resent or reject that and I very much agreed with—and just voted for—my noble friend Lord Eatwell’s amendment to try to deal with some of those risks. Now, however, we are on the really key ground, because Amendments 21 and 51, in the names of my noble friend Lord Eatwell and the most reverend Primate, address the real problem that we have encountered face to face in this country in the past few years. That is human error, and even worse than human error, human negligence—and even worse than that, systematic human negligence and systematic human incompetence. I do not think that those words are in any way excessive to describe the activities of the British banking system, and banking systems elsewhere, in the past decade and a half.
Before 2008 there were an enormous number of bankers who appeared to be able to persuade themselves, and their boards, that when yields were coming down in the market, they could somehow preserve their yields without increasing their risk. In other words, fantastic sums of money were paid to people who appeared to be competent, whom the regulators seemed to trust—as we now know, the regulators were asleep at the time—and who appeared to have completely forgotten the first rule of financial theory, which is that there is always a positive relationship between reward and risk: if you get more of one, you will always have more of the other. That is an extraordinary state of affairs to have in a sophisticated society, but that is exactly what we had.
Again, this was systematic. It was not just one bad apple, or one bad individual. In the process of trying to preserve their yields, banks were putting enormous amounts of their assets into new instruments such as CDOs—collateralised debt obligations, which were, basically, securitised mortgages and other loans—without ever investigating what they actually contained. They acted simply on the basis of endorsements by rating agencies that were themselves incompetent. It is hard to imagine the state of Denmark being more rotten than the state of the City at that time. It was an extraordinary systematic problem. People were, for example, lending on real estate with 5% or less equity. They were making absurd and dangerous mistakes, doing things we cannot imagine they were not told about when they were 25 and doing their accountancy exams, or an economics course. We have to focus on that human area and ensure that we have procedures, filters and incentives that are robust and not perverse. Evidently, in this area we have been absolutely inadequate up to the present time.
We are making some progress this afternoon. These two amendments are moves in the right direction. We must ensure that we have the right professional qualifications and the right conduct standards, so that people are being properly monitored. We could—indeed, we should—go further afield and do more, particularly in terms of making individuals responsible. In the United States, when there are serious cases of negligence and breach of the rules, not only is the institution fined—institutions are fined here—but individuals are regularly fined. Individuals are never fined here. In this country, the people making the appalling mistakes that I just referred to have got away scot-free, without paying a penny. That is a national scandal; indeed, it is a national stupidity. It means that there is a real moral hazard: if you can get away with the irresponsibility, the money is for you—“Well done, congratulations”—and if you do not get away with it, you still will not pay anything.
That is why we had the appalling culture of bonuses, in which people in lots of institutions were regularly piling on to their book a whole lot of supposedly high-yielding rubbish and then taking massive bonuses based on the discounted present value of the supposed yield over future years. Then, when they got a large bonus on that completely bogus basis, they would move on to another institution and spread their poison further through the system in that way.
I have described this in dramatic language, and I do not think that I have exaggerated in any way. That is the awful reality of the situation. It is something that regulators—and the public—ought to think about. It is certainly something that legislators must think about. I congratulate the most reverend Primate and my noble friend on their amendments, which we should put to the vote. I hope that they do so, and I look forward to supporting them.
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Lord Phillips of Sudbury: My Lords, I support Amendments 21 and 51 as strongly as I can. We all know that the vast majority of people in the City of London and other financial centres are decent people who try to do good rather than bad, but the system of
which they are part has been largely stripped of its ethical underpinning. Although you cannot inculcate morality by statute law, you can at least provide support for the forces of good and truth in dealing.
These two amendments are the very minimum required. I wonder whether the wording of Amendment 51, which refers to “rules of conduct”, is ideal. As a lawyer, whenever I see the word “rules”, I slightly draw back, because lawyers spend their time avoiding rules on behalf of their clients.
I would have hoped, and still hope, that if either or both these amendments were incorporated into the Bill, they would be construed in a wide way. There is no shadow of doubt but that too many people arrive in positions of responsibility without regard to these rules. As the most reverend Primate said, you can have a junior dealer who can cause devastating damage to a bank or other firm. So I hope that the Government accept these amendments or agree to come back at Third Reading with something comparable, bearing in mind the astonishing fact that the vast majority of our business schools have no ethical component in their curriculum at all. I do not think that 10% of them do anything in terms of ethics. If anyone says to me that it is a waste of time and a lot of hot air, they need only glance back at where we have come from. As other noble Lords have said, the degree of cynicism manifest in the policies and actions of so many financial institutions is stunning.
I hope that, if these amendments are brought into the Bill, they are construed widely by those who have to implement them. I am particularly happy that Amendment 51 would require any breach of standards of conduct to be reported to the relevant authority, because that is a real deterrent. People would be anxious about that. This proposal must be the absolute rock-bottom minimum to provide some underpinning for the future of financial services.
Lord Flight: My Lords, I come down to a very practical issue. In the territory that we are discussing, pre-approval is absolutely necessary for dealing with staff and anti-money-laundering requirements.
Baroness Warnock (CB): My Lords, I support this amendment, which we have heard is really at the heart of the disasters of 2008. I have felt a creeping horror since the 1980s, when I was head of a college. People would frequently come up to me and say, “I’ve changed my mind, I’m not going to go on to a further degree or teach classics—I have had an offer that I can’t refuse”. This would be a young man or woman of about 21. You could see that their ethical standards had dropped away; they did not exist anymore. That was a shock to me then and it has been a shock to me ever since, so I very strongly support the amendment.
Lord Hope of Craighead (CB): I shall add just a bit, particularly to what the noble Lord, Lord Phillips, was saying. When I entered the legal profession about 40 years ago, the branch that I joined had no rules of conduct at all, and gradually we appreciated that the public would not stand for that. The position now is that the legal profession has rules of conduct, although they are sometimes called codes rather than rules for
the reason that was mentioned. I support the amendment against that background. I also suspect that, if we do not take that step now, we will have to take it in five or 10 years’ time when some other crisis emerges. It is an important step and, I respectfully suggest, an inevitable one, in line with what all the professions have had to deal with over the past 10 or 20 years in modernising how they behave and making their behaviour acceptable to the public. There is a lot to be said for the amendment against that background.
Lord McFall of Alcluith (Lab): I do not think that we should run away with the idea of codes of conduct because, if you look back over the past 10 or 20 years, you will have seen a proliferation of codes of conduct and ethics from banks. When they had rules, they circumvented them, so we must have something deeper here.
On the Parliamentary Commission on Banking Standards, if we heard the phrase, “This time it’s different”, once, we heard it 10,000 times. We were told that there was new management and a new executive, that the past was behind us and the future here, with new staff—and that everything would be better. Since we have taken evidence, tumbling out every month there has been another scandal. So we need to attest to something deeper here.
The lack of individual responsibility at the top is at the core of the problem. I say this with no understatement: many of the very senior individuals who came before the Parliamentary Commission on Banking Standards were economical with the truth. I give an example on PPI, where we now have a scandal of about £25 billion to £30 billion. There was a “no see, no tell” policy from those at the top. Why? Because they preferred to be seen as incompetent than to have any responsibility. There was a hiatus of responsibility from the top to lower down.
My own view was not accepted by the banking commission, which was fair enough. I thought that every year there should be an individual meeting between the chairman and chief executive of a bank and the regulator. That meeting would be recorded but it would not be made public—but they would have to attest to the regulator that they were responsible for their institution and what went on in their institution was their responsibility. If we implement a code, we will only repeat the mistakes of the past; there has to be a deeper cultural change.
Culture has been mentioned. Again, we had individuals coming before us saying, “Look, we have a new chief executive and a new culture—everything is okay”. You would ask how many employees were in that organisation and be told that it was 150,000. When we asked how long it would take to change the culture, they said, “Oh, three months”. That is for the birds. So the responsibility needs to start at the top.
The example I give of PPI is of a chief executive who came along to the commission and said, with a straight face, “As far as PPI is concerned, my organisation is on the side of the angels”. That organisation is the one with the highest PPI penalties in the United Kingdom. So do not let us kid ourselves that we can sort this problem with codes. We need to give the regulator authority—and we have seen a regulator
that was captured, cowed and conned by the industry. There should be someone to go to in the organisation to whom we can say, “That was your responsibility”. If we are told, “Well, that person left”, we need to ask for the handover document that indicates that there was a transfer of responsibility that can be understood.
The director of enforcement at the FSA came before the commission at the time of the UBS scandal, which cost the bank billions of pounds. We had four from the top management of the bank before us and, when we asked them if they knew who the individual was, they said that they did not know at all. Then we asked them how they found out, and they said, “Bloomberg wires”. That is how corrupt the institutions are in terms of accountability.
We need to change. I am happy for the Government to accept this amendment, but I am certainly not happy for warm words or for anyone to say, “This time is different”. This time ain’t different. The scandal has kept going and will continue, and we need to do something severe to ensure individual accountability by those at the very top of those organisations.
Lord Spicer: I have enormous respect for the noble Lord, Lord McFall, but I think the idea of legislating to be more responsible—in fact, legislating for human character—is a very dangerous path. It is why I intervened on the question of minimum standards of integrity: you are either honest, or you are not honest. It is quite dangerous to keep loading the statute book with matters which attempt to affect human characteristics. I think that there should be some caution about some of these amendments.
Lord Newby (LD): My Lords, this is a very large group of amendments dealing with another key aspect of the Government’s reform-namely, how to drive up standards across the banking system. The Government’s amendments in this group, and in the following group, widen the range of firms covered by the reform. They respond to points made in Committee, and I am grateful to the noble Lord, Lord Eatwell, for his welcome for them, but we will deal with them in more detail when we come to the next group.
I would like first to respond to the concern that the Government’s Committee stage amendments did not implement the commission’s recommendations for what it calls the licensing regime. To be completely clear, the Government are committed to implementing the vast majority of the commission’s recommendations on the regulation of individuals in banking, including its recommendations to introduce a licensing regime. The regulators, in their responses to the commission published in October, confirmed that they would do this.
The Government’s amendments in Committee put in place all the essential features of the commission’s licensing regime proposals in Clauses 22 and 23. These clauses give the regulator power to make rules of conduct imposing binding standards on employees and ensure that the regulators can take action when there is any breach of these rules. The relevant provisions would form part of FiSMA and confer powers on the regulators in the normal way.
However, we recognise that this may not be seen as giving the full weight and impetus to the commission’s proposals, so we are looking to see whether we can
bring forward at Third Reading amendments which will highlight the proposals more and put beyond doubt the determination which we all share to see real change in this area. In the light of this, the Government are looking to introduce amendments at Third Reading to impose obligations on banks and PRA-regulated investment firms, first, to verify before appointing someone as a senior manager, an employee in a role that could do significant harm to the firm or another role requiring regulatory pre-approval that the person is fit and proper to perform that role in the firm; secondly, to maintain up-to-date lists of such persons which could be made available to the regulators when required; thirdly, to notify the appropriate regulator when they take formal disciplinary action against such persons—formal disciplinary action could include giving a formal written warning, dismissal, suspension or clawing back remuneration; and, fourthly, to notify all such persons of the banking standards rules that apply to them. All these obligations will be regulatory requirements under FiSMA. Failure to comply with the obligations will be a breach of regulatory requirements, and actions could be taken against the bank concerned by the regulators. In addition, deliberately or recklessly submitting a materially false or misleading list of persons to a regulator will be a criminal offence.
The Government will also look at tabling amendments requiring, rather than simply empowering, the regulators to set out those functions for which a bank must do the above. We anticipate that this class will match the category of staff defined in the PCBS report as being those whose actions or behaviour could seriously harm their employer, its reputation or its customers. I hope that when we produce those amendments they will satisfy the concerns addressed by the most reverend Primate.
There are certain detailed respects in which the Government have decided not to follow the recommendations of the commission. These do not change the substance of the impact of the regime, but they will ensure its effectiveness. First, the commission envisages that the licensing regime provisions would entirely replace the regime of regulators, giving pre-approval to people below senior management level. That would mean dropping regulatory pre-approval for all appointments below senior management level, including in areas such as money laundering, with which the noble Lord, Lord Brennan, and others were particularly concerned in Committee.
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The Government thought carefully about that but decided it would not be appropriate to remove entirely the possibility of regulatory pre-approval below senior management level. There may be critical roles in banks at lower levels with important responsibilities in relation to protecting consumers, maintaining market integrity or preventing financial crime where prior regulatory scrutiny of appointments continues to be essential. The FCA will therefore also be able to require prior regulatory approval of appointments of persons who are to perform control functions designated in their rules. Both the Government and the FCA support the philosophy behind the commission’s proposal that regulatory pre-approval should be required only for
senior roles. We expect that for banks the regulators will over time substantially reduce their pre-approval requirements for individuals who are not senior management. Further, I can confirm that the PRA will not be able to designate any functions except senior management functions as requiring regulatory pre-approval.
Finally, I am aware that another concern of the members of the parliamentary commission is the name of the regime. The commission itself has spoken of a licensing regime, and we are happy to use that term as an informal title for the new regime. However, we do not believe that it is the right description for the regime the commission recommended. Anybody coming across the term “licensing regime” would naturally assume it meant that a licence would be granted by a regulator or some other public authority. That is, however, precisely what the parliamentary commission did not want.
I hope that in any case we can all agree that the name given to the regime is not the most important thing. What matters is what it does. The regime we have legislated for cannot be called a licensing regime, but it delivers precisely what the parliamentary commission called for in its report. There will be a regime of regulatory standards for employees encapsulated in enforceable banking standards rules. Firms will inevitably have a role in ensuring their staff comply with those standards and taking action if they do not, while the regulator will be able to take action if needed.
Lord Lawson of Blaby: Before my noble friend sits down, can he give an undertaking that he will produce the further amendments he proposes to introduce at Third Reading in good time so that we can thoroughly evaluate them and decide whether they go far enough in meeting the commission’s requirements? There has been a tendency recently—I know that a lot of work is involved—to produce complicated amendments at the last minute which do not give noble Lords time to assess them properly.
Lord Newby: I have a great deal of sympathy with what the noble Lord says, and I can give an assurance that we will bring the amendments forward at the earliest possible point. I cannot say what day that will be, and we may of course have different definitions of “giving short notice”, but we will do our best to give the noble Lord several days’ notice. We hope that, as we get towards Third Reading, the number of amendments we bring forward will be much lower than at the previous stage.
A noble Lord: That’s not saying much.
Lord Newby: It is not saying a huge amount, but it is saying something, and I hope that because we are talking about a much smaller number of amendments we will be able to concentrate the entire brainpower of the Treasury on them so that we can bring them forward with the maximum possible notice.
Lord Davies of Stamford: Does the noble Lord agree that if we are to make a real difference this time—and he will sense a scepticism about that, which
we face in this country and even in this House as a result of the appalling situation that we have had—we will need to emphasise, and really substantially emphasise, the issue of personal responsibility? Would it not in that context be necessary that individuals in this country should in future be subject to fines for regulatory breaches, as happens elsewhere?
Lord Newby: My Lords, that is the key focus of the senior managers regime—that, for the first time, senior managers and their banks will have to tell the regulators what the specific responsibilities of those people are, and we are introducing enhanced penalties if people do not stick to those responsibilities and break the rules. I think that we are indeed doing what the noble Lord requires us to do. I hope that when the noble Lord, Lord Lawson, and the most reverend Primate see our amendments, they will feel that we have done everything we can to meet their requirements.
Amendment 21, proposed by the noble Lords, Lord Eatwell and Lord Tunnicliffe, is an amendment which we saw in Committee. As I explained on that occasion, it would really just rename the existing approved persons regime as a “licensed” persons regime. The only extra feature in the proposal is for annual validation of competence by the regulator. This would have the effect of increasing the number of approved person applications from around 30,000 to around 150,000 a year. This would mean an unnecessary and costly extra burden on firms and regulators.
The Official Opposition’s amendment would not deliver the real reforms proposed by the parliamentary commission, which Clauses 14 to 26 of the Bill deliver and which we will enhance. It would just add to regulatory burdens without producing any real improvement in standards of conduct in the industry. I hope, therefore, that the noble Lords, Lord Eatwell, will agree to withdraw his amendment.
Lord Eatwell: My Lords, I was intrigued by the proposals which the Minister suggests will be brought forward at Third Reading and I look forward to having the opportunity to see them—perhaps in good time—before we have to debate them.
The key issue in Amendment 21 is that of qualification: professional qualification, minimum thresholds of competence and continuous professional development. These are fundamental to any serious professional standards and are vital if we are to have in the future the sort of people who can deliver a banking industry of which we in Britain can once again be proud.
I should make it clear that Amendment 21 is not in any way contrary to Amendments 50 and 51 by the commission; it is complementary. It adds to the overall structure of the requirements to be met by those who seek to pursue a banking profession. It is that word “profession” which we regard as central. It is no accident that we have labelled our amendment “Professional standards”. That is what this amendment seeks and that is what I believe it would achieve in addition to, and complementary to, the amendments by the commission and, as I hear it, the endeavours by the Government to develop a framework of rules which ensure that standards are met. The professional
standards must be the bedrock. That is why I have moved Amendment 21 and why I wish to test the opinion of the House.
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Contents 222; Not-Contents 217.
CONTENTS
Adams of Craigielea, B.
Allen of Kensington, L.
Alton of Liverpool, L.
Anderson of Swansea, L.
Andrews, B.
Armstrong of Hill Top, B.
Armstrong of Ilminster, L.
Bach, L.
Bakewell, B.
Bassam of Brighton, L. [Teller]
Beecham, L.
Best, L.
Bew, L.
Bichard, L.
Billingham, B.
Birt, L.
Blackstone, B.
Blood, B.
Borrie, L.
Bradley, L.
Bragg, L.
Brennan, L.
Brooke of Alverthorpe, L.
Brookman, L.
Browne of Belmont, L.
Browne of Ladyton, L.
Butler-Sloss, B.
Campbell-Savours, L.
Canterbury, Abp.
Chandos, V.
Christopher, L.
Clancarty, E.
Clark of Windermere, L.
Clinton-Davis, L.
Cohen of Pimlico, B.
Collins of Highbury, L.
Corston, B.
Crawley, B.
Dannatt, L.
Davidson of Glen Clova, L.
Davies of Coity, L.
Davies of Oldham, L.
Davies of Stamford, L.
Dean of Thornton-le-Fylde, B.
Deech, B.
Donaghy, B.
Donoughue, L.
Drake, B.
Drayson, L.
Dubs, L.
Eatwell, L.
Elder, L.
Evans of Parkside, L.
Evans of Temple Guiting, L.
Evans of Watford, L.
Falconer of Thoroton, L.
Falkland, V.
Farrington of Ribbleton, B.
Filkin, L.
Ford, B.
Foster of Bishop Auckland, L.
Foulkes of Cumnock, L.
Fritchie, B.
Gale, B.
Gibson of Market Rasen, B.
Giddens, L.
Gloucester, Bp.
Gordon of Strathblane, L.
Goudie, B.
Gould of Potternewton, B.
Grantchester, L.
Greenway, L.
Grenfell, L.
Hameed, L.
Hannay of Chiswick, L.
Hanworth, V.
Hardie, L.
Harries of Pentregarth, L.
Harris of Haringey, L.
Harrison, L.
Hart of Chilton, L.
Haskel, L.
Haskins, L.
Hattersley, L.
Haughey, L.
Haworth, L.
Hayter of Kentish Town, B.
Healy of Primrose Hill, B.
Henig, B.
Hilton of Eggardon, B.
Hollick, L.
Hollis of Heigham, B.
Hope of Craighead, L.
Howarth of Breckland, B.
Howarth of Newport, L.
Howe of Idlicote, B.
Howells of St Davids, B.
Hoyle, L.
Hughes of Stretford, B.
Hughes of Woodside, L.
Hunt of Chesterton, L.
Hunt of Kings Heath, L.
Hutton of Furness, L.
Irvine of Lairg, L.
Janner of Braunstone, L.
Jay of Paddington, B.
Joffe, L.
Jones of Whitchurch, B.
Jones, L.
Judd, L.
Kennedy of Cradley, B.
Kennedy of Southwark, L.
Kennedy of The Shaws, B.
Kidron, B.
Kilclooney, L.
Kingsmill, B.
Kinnock of Holyhead, B.
Kinnock, L.
Kirkhill, L.
Knight of Weymouth, L.
Laming, L.
Lawrence of Clarendon, B.
Layard, L.
Lea of Crondall, L.
Liddle, L.
Lipsey, L.
Lister of Burtersett, B.
Listowel, E.
Low of Dalston, L.
Lytton, E.
McAvoy, L.
McConnell of Glenscorrodale, L.
McDonagh, B.
Macdonald of Tradeston, L.
McFall of Alcluith, L.
McIntosh of Hudnall, B.
Mackay of Drumadoon, L.
MacKenzie of Culkein, L.
McKenzie of Luton, L.
Mar, C.
Martin of Springburn, L.
Masham of Ilton, B.
Massey of Darwen, B.
Maxton, L.
Meacher, B.
Mendelsohn, L.
Mitchell, L.
Monks, L.
Moonie, L.
Morgan of Drefelin, B.
Morgan of Ely, B.
Morris of Aberavon, L.
Morris of Handsworth, L.
Morrow, L.
Noon, L.
O'Loan, B.
O'Neill of Clackmannan, L.
Palmer, L.
Pannick, L.
Parekh, L.
Patel of Blackburn, L.
Patel of Bradford, L.
Patel, L.
Pendry, L.
Phillips of Sudbury, L.
Pitkeathley, B.
Plant of Highfield, L.
Ponsonby of Shulbrede, L.
Prescott, L.
Prosser, B.
Puttnam, L.
Quin, B.
Radice, L.
Rea, L.
Rendell of Babergh, B.
Richard, L.
Robertson of Port Ellen, L.
Rogan, L.
Rogers of Riverside, L.
Rooker, L.
Rosser, L.
Rowlands, L.
Sawyer, L.
Scotland of Asthal, B.
Sherlock, B.
Simon, V.
Smith of Basildon, B.
Smith of Finsbury, L.
Smith of Gilmorehill, B.
Smith of Leigh, L.
Soley, L.
Stevenson of Balmacara, L.
Stoddart of Swindon, L.
Stone of Blackheath, L.
Sutherland of Houndwood, L.
Symons of Vernham Dean, B.
Taylor of Blackburn, L.
Temple-Morris, L.
Thornton, B.
Tomlinson, L.
Tonge, B.
Touhig, L.
Trees, L.
Triesman, L.
Tunnicliffe, L. [Teller]
Turnberg, L.
Turner of Camden, B.
Uddin, B.
Walpole, L.
Warnock, B.
Warwick of Undercliffe, B.
Watson of Invergowrie, L.
West of Spithead, L.
Wheeler, B.
Whitaker, B.
Whitty, L.
Wigley, L.
Wilkins, B.
Williams of Elvel, L.
Wills, L.
Worthington, B.
Young of Norwood Green, L.
NOT CONTENTS
Addington, L.
Ahmad of Wimbledon, L.
Allan of Hallam, L.
Anelay of St Johns, B. [Teller]
Ashdown of Norton-sub-Hamdon, L.
Ashton of Hyde, L.
Astor of Hever, L.
Attlee, E.
Baker of Dorking, L.
Bakewell of Hardington Mandeville, B.
Balfe, L.
Barker, B.
Bates, L.
Benjamin, B.
Berridge, B.
Black of Brentwood, L.
Blackwell, L.
Bonham-Carter of Yarnbury, B.
Borwick, L.
Bourne of Aberystwyth, L.
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6.07 pm
Clause 14: Functions for which approval is required
Lord Newby: My Lords, this group of amendments, and similar amendments in the previous group, respond to concerns expressed in Committee that the scope of the reform of the senior managers and banking standards regime should be extended beyond ordinary banks to cover what are known, in common parlance, as investment banks. A number of noble Lords were concerned about this point and I undertook to relay the feelings of the House to ministerial colleagues. These amendments are the result.
The definition that we propose is that of the UK investment firms that are regulated by the PRA as well as by the FCA. This captures all those investment firms the activities of which—above all, substantial wholesale market dealing in securities as proprietary traders—are systemically important. These are the most important City firms, and consequently would be treated by the senior managers and standards regime in the same way that banks are. It therefore excludes all investment firms that are regulated solely by the FCA.
The noble Lord, Lord Turnbull, tabled an amendment to a different part of the legislation that would have used the existing definition of “investment firm” in FiSMA. This would have encompassed investment firms solely regulated by the FCA. As explained in Committee, that would cover a wide range of ordinary investment firms—several thousand, in fact. This would include firms far outside what most people would think of as investment banks. The Government have shared this definition with the members of the PCBS and are hopeful that the scope now captures those firms that the PCBS had in mind.
Noble Lords who have had the opportunity to read the paper placed in the Library yesterday know, as the noble Lord, Lord Eatwell, has pointed out, that it covers only nine further firms. They also know that it covers the investment banks that everybody has heard of and would expect to see covered. The small number may be surprising, but the reason for that is simple. Many firms that would be thought of as investment banks will already have a deposit-taking permission, so they will already be covered by the definition in
Clause 24. That definition is already broad enough to catch all retail and wholesale banks, whether ring-fenced or not. It covers any UK institution which has the permission to take deposits. It does not cover big City institutions which are not deposit-taking businesses. These amendments will bring them into the scope of the senior managers and banking standards regime. I beg to move.
25*: Clause 14, page 27, line 29, at end insert—
“(6D) For the meaning of “relevant authorised person”, see section 71A.””
Clause 15: Senior management functions
26: Clause 15, page 28, leave out lines 4 to 7 and insert—
“(b) those aspects involve, or might involve, a risk of—
(i) serious consequences for the authorised person,
(ii) serious consequences for business or other interests in the United Kingdom, or
(iii) conduct or omissions by or on behalf of an authorised person otherwise than in accordance with the requirements of a relevant financial scheme giving rise to criminal liability.”
Lord Brennan (Lab): My Lords, I declare an interest, as I have done before, as chairman of Global Financial Integrity. In Committee, the Minister, the noble Lord, Lord Newby, said:
“The scale of money-laundering is very large, and the Government and the regulators are determined to cut it down”.—[Official Report, 15/10/13; col. 406.]
The phrase “cut it down” was prudently chosen. Money-laundering, in its widest sense, never goes away. By “its widest sense”, I mean any attempt to create an illicit flow of money for illegal objectives: money-laundering, drugs, terrorism, bribery—whatever it might be. I will use the term in that sense throughout what I am about to say.
The purpose of this group of amendments in my name and that of my noble friend Lord Watson is to identify as clearly as possible a legislative framework within which our banks can be regulated and monitored so as to achieve one of the Financial Conduct Authority’s objectives: to preserve the integrity of the British banking system. I will deal with them briefly. Amendment 26 deals with a scope of responsibility of senior management so as to specify, in a very broad phrase,
“a relevant financial scheme giving rise to criminal liability”.
That is carefully chosen as an omnibus phrase to cover all the kinds of money-laundering activities that I have just described and relates such irresponsibility directly to senior management.
Amendment 28 deals with two issues: redundancy and specificity. “Redundancy” is in inverted commas because it was suggested in Committee that these changes were entirely unnecessary. Plainly, the Financial Conduct Authority and everybody else have a duty to obey the law—of course they do. However, equally, legislation has a component in it that should be designed to relate the existing law to the specific responsibilities to be carried out. No harm is done by such identification, and clarity is achieved. Nobody can say that they did not know. On specificity, subsection (4)(a) of proposed new Section 59ZA in Amendment 28 deals with a general provision for dealing with these schemes that might produce criminal liability. Paragraph (b) sets out the main statutes under which such activities can arise. Paragraph (b)(viii) makes clear that the FCA and the PRA themselves can refer to other relevant statutes, regulations or the like as they think appropriate and are specified in their rules.
Amendment 30 is an attempt, in substance, to achieve the objective of making all persons responsible who engage in money-laundering activities, so that there are no loopholes between different levels of staff and management. Amendments 45 and 47 would provide that the FCA and PRA should, in the banking standards rules, make rules about money-laundering similar to the effect of what these amendments seek to achieve.
6.15 pm
I suspect that the velocity with which this legislation is being managed by government managers is certainly not matched by the capacity of the Treasury officials and Ministers to keep up on the days on which they have to explain what is going on. That certainly makes it extremely difficult for us, when dealing with matters of such grave importance, to be able to ensure that debate is comprehensive. Therefore, the noble Lord, Lord Newby, having stated in Committee a month ago that he would write to me to explain why my amendments were unnecessary, in a way did so at 9 pm last night, when an e-mail arrived from a Treasury official which enclosed a note from the Financial Conduct Authority. I hope that he has had time, as I have this morning, to read it, if it represents government policy on the question.
I will turn to that important piece of information from the Financial Conduct Authority about money-laundering in a moment. However, it refers to the annual report of the anti-money-laundering activities of the Financial Conduct Authority, published in July of this year, which I had not previously seen. The Financial Conduct Authority was set up with effective powers on 1 April this year, eight months ago. That is certainly long enough to find out what the problem is and its scope, but probably not long enough properly to devise all the measures that are necessary to combat the problem. Your Lordships will be enlightened by the following conclusions of the FCA anti-money-laundering group. First,
“We concluded that it was likely that some banks were handling the proceeds of corruption and other financial crime”.
“More recently, our … review … found that most banks, including a number of major UK banks, were not giving adequate attention to money laundering red flags in trade finance transactions”.
“The root cause of these problems is often a failure in governance of money laundering risk, which leads, among other things, to inadequate anti-money laundering resources and a lack of (or poor quality) assurance work across the firm”.
That is within the past eight months, after the banking crisis and during the passage of this Bill. Do we need any better evidence of the gravity of this problem than what I have just summarised? The report says that, in seeking to achieve its objective of integrity in our financial system, the Financial Conduct Authority will issue annual reports to meet the increasing public interest in this problem. Finally, they will do everything, in so far as they can, with transparency. Those are excellent objectives.
I turn to the note, which I assume is what the Government intend the Financial Conduct Authority to do. First, it says that combating this problem is a “priority”. Secondly, it says:
“Our approach is intensive and intrusive”.
Further, it will “take enforcement action”, as it has done against two banks; one last year, one this year. Finally, it will seek to intervene early. In the light of this note, as I understand it, it is the Government’s view that the Financial Conduct Authority should police this sector without further statutory change. I invite the Minister to confirm the following: first, that the Government have no reason to doubt the reliability of the annual report’s conclusions; and, secondly, that they undertake properly to finance the anti-money-laundering group in the Financial Conduct Authority. It has about 100 cases a year and polices 14 major banks and many other firms; yet the group, by the end of this year, will have increased its staffing numbers from 17 to 22. That is an extraordinarily low number of people to combat such complicated and wide-ranging money-laundering problems. Is there to be a financial commitment? Lastly, on the note itself—put out last night as, I presume, a summary of the Government’s view of what should be done—will the Government say clearly whether it is their policy that that which is set out in this document is what the Government intend should be done by the Financial Conduct Authority on behalf of all of us in combating money-laundering?
The problems of banking affect everyone and they have done so in recent years. There are many problems to be dealt with in these debates. The one thing, surely, that must be dealt with adequately is criminality associated with banking; that is, criminality—criminal offences—not just one risk-take. It is a remote second for most people but has an enormous financial impact. I call on the Government and the Minister today to state with absolute clarity their position on the points that I have raised and on which I have invited them to agree. I beg to move.
Lord Eatwell: My Lords, in the past, anti-money-laundering legislation tended to be associated with crime, typically drugs or gun-running. These days it has achieved a much greater importance in the sense that it is also associated with terrorism. Therefore, the need to maintain the strictest anti-money-laundering
rules and to ensure that they are adequately enforced is an element not only of the maintenance of the law, but of national security. Therefore, I would like to commend my noble friends who have put forward these amendments to strengthen the anti-money-laundering regime and to ensure that appropriate levels of criminality or criminal conduct are so defined within this area that suitable penalties for ignoring anti-money-laundering legislation or laundering money in various ways can be enforced.
I hope the Government will accept these amendments; they are hugely important and send a very important signal to the world that London is not a place in which money-laundering will be tolerated in any shape or form. If the Government are not able to accept them at this stage, I hope they will commit to providing in writing both a commentary on the amendments that my noble friend has put forward and a discussion of the relationship between the new personal responsibility mechanism for bankers and the AML compliance. Surely AML compliance should be included as one of the areas of responsibility that is allocated to a named senior banker under the new senior person regime; it should be in the banking standards rules to which all staff at banks will have to adhere, and one of the conditions of the new remuneration code, which makes deferred pay and bonuses contingent on upholding standards. There is no more important standard than those which my noble friend has dealt with in his amendments. I hope that the Government will be able to accept them—if not actually in form, then in spirit—and commit to bringing forward the appropriate form, if necessary, at Third Reading. The best move, however, would be to accept them now.
The Archbishop of Canterbury: I want briefly to add my support to the amendment of the noble Lord, Lord Brennan. Money laundering affects not only the areas that have been mentioned, but in my 10 years’ experience of dealing with conflict management and mitigation work in Africa, it was particularly significant in the ways in which illegal regimes or militias managed to fund and supply themselves. My experience, particularly in some parts of Africa, has shown that London, over time, as one of the deepest and most liquid financial markets on earth has, contrary to the impression given by many senior bankers, played a significant role—not through their collusion in any way at all, but because of its size and the complexity of preventing it. I believe that this amendment and the suggestions put forward by the noble Lord, Lord Eatwell, will contribute extensively to restricting that.
Lord Flight: My Lords, all Members of this House are what is known as PEPs for the purposes of anti-money-laundering. This means that any bank has to pay extra-special attention to any of our transactions. It is perfectly justified. The thought crossed my mind—and I have great sympathy with the noble Lord’s aspirations—that money laundering for corrupt purposes, for armaments, for terrorism and the rest of it, does not particularly come from an ordinary British family living in a suburb. It comes very much from parts of the world where such things are more prevalent. There
is a case for requiring a more judicious anti-money-laundering regime for any form of transfer that comes from such parts of the world in an analogous fashion to a PEP if we really want to get to grips with the horrific money-laundering that can come from some parts of the world, causing misery to citizens there. As arrangements presently stand, there is no difference between an evil regime somewhere and an ordinary British citizen living in Birmingham.
Lord Harris of Haringey (Lab): As I understand it, the money-laundering regulations specifically exclude British citizens, including parliamentarians, from their scope. What has happened is that the banks, as a matter of policy, following what they expect to be European directives on this subject, treat British parliamentarians as though they are politically exposed persons. The actual regulations do not.
Lord Flight: I think the noble Lord may be right, but in practice, we are thus treated as a more dangerous category. I was merely using that as an example of how the more obvious areas of money-laundering offences might be more carefully policed.
6.30 pm
Lord Watson of Invergowrie (Lab): My Lords, I am pleased to associate my name with all five amendments in this group, but I also want to speak to some extent about the FCA note which appeared at about 9 o’clock yesterday evening—typically late in the day, not just literally, as regards the progress of this Bill. I reiterate the point made by my noble friend Lord Brennan that the Government have provided no grounds for reassurance that their amendments adequately deal with the serious issue of anti-money laundering. The fact that the Minister’s promised letter of comfort has not materialised demonstrates that the House should be concerned by the absence of any coalition assurances on this crucial issue. I am not sure whether the FCA note is intended to be in place of such a letter, and I will come on to that later. However, I said in Committee that not only were the Government naive to assume that the amendments we tabled then were unnecessary, they were also complacent. I very much regret to say that the failure to produce the letter setting out the Government’s position which my noble friend Lord Brennan was promised clearly suggests that that complacency remains intact.
We also heard in more general terms in Committee about the devastating human cost caused by the banks’ failure to comply with anti-money-laundering laws. That has not been mentioned this evening but it bears repeating: it is not just a question of what happens in relation to the financial sector in this country but also of money laundering that often amounts to the state looting of developing countries’ aid and haemorrhages billions of pounds from their national budgets, trapping millions of the world’s poorest people in extreme poverty. However, as mentioned in the previous debate, it also threatens the economy of the UK. The integrity of our financial system is hugely compromised by banks failing to prevent access by the worst types of criminals from around the world, whether they be corrupt dictators, drug smugglers, arms dealers or
terrorists, as other noble Lords have said. This shows that the stakes could not be higher. I wish that that were reflected in action taken by the Government to counter this problem. It makes their lack of willingness to deal meaningfully with the issue quite unfathomable. Their continuing naivety is potentially dangerous. I apologise for using the word “naivety” again but I feel that I have to do so.
As the noble Lord, Lord Phillips, rightly noted in Committee, should there be any doubt, following the Minister’s letter, about whether the Government’s amendments adequately dealt with money laundering or not, the House should err on the side of caution and choose the alternative amendments. We now know that no such letter has materialised. My noble friends and I have taken great care to move new and refined amendments which reflect the extensive and helpful debate in Committee. In stark contrast the Government have not even offered the explanation they promised. This should leave the House in no doubt as to which set of amendments should be favoured.
I turn to the note from the Financial Conduct Authority that appeared yesterday evening. My noble friend Lord Eatwell said in his opening remarks on Amendment 3, I think, that everything seemed to be done at the last minute as far as the Bill is concerned, and that has been very much the pattern since it first appeared. It is unhelpful in terms of enabling noble Lords to respond meaningfully to new information or, indeed, to draft amendments. It is not clear whether the FCA note on its anti-money-laundering supervision and the new senior managers regime proposed in the Bill is in lieu of the Minister’s letter to my noble friend Lord Brennan, as I said earlier. That letter was intended to outline why the latter’s amendments seeking the explicit inclusion of anti-money laundering in the new senior persons regime and other personal liability mechanisms were unnecessary because the government amendments implicitly did this. However, I submit that the note does not achieve what is required; namely, a guarantee that the FCA will include anti-money-laundering compliance as a key risk and make every bank name a senior banker with personal responsibility for it.
The FCA’s note is largely about what it does and has done, and even refers to what the FSA did. There are just two paragraphs at the end which focus on the proposed new senior managers regime. As the Bill stands, this could give the FCA the power to hold named, individual senior bankers accountable for failures to uphold key standards and risks. However, it seems to me there is a loophole in the Bill which means that it will be left open to the FCA’s interpretation as to whether it uses this power and insists that anti-money-laundering compliance should be one of the issues covered. The note does not indicate that the FCA will include this. It uses terminology such as, “We will consult”, “This will allow firms”, and it, “will help regulators”. These are key phrases in any document but I suggest that they are weak, possibly ambiguous and certainly open to interpretation. I believe that the word “consult” simply means that the outcome is by definition not certain. We should require firms to do something, which is a stronger word than “allowing” them to do something.
My next example is fundamental to the way we deal with anti-money laundering. Instead of the phrase, “for example, anti-money laundering systems”, we should state unequivocally, “including anti-money-laundering systems”. The language that is used is permissive and uncertain rather than being mandatory, which is what I and the noble Lord, Lord Brennan, seek to achieve with these amendments. The content of the note is disappointing and it would be helpful to have clarification of whether it is provided in lieu of the Minister’s letter.
I believe that anti-money laundering compliance should be included as one of the areas of responsibility that is allocated to a named senior banker under the new senior persons regime, is written into the banking standards rules to which staff at banks will have to adhere, and should be one of the conditions of the new remuneration code which makes deferred pay and bonuses contingent on upholding standards. Will the Minister, on behalf of the coalition, ensure that these important requirements are included?
Lord Newby: My Lords, we are dealing here with an issue that everybody realises is an extremely important one in terms of the way banks behave and the way that they are seen to behave. As the noble Lord, Lord Eatwell, pointed out, the importance of money-laundering in financing terrorism has given it an added twist.
These amendments are an expanded version of an amendment tabled by the noble Lord, Lord Brennan, in Committee. Since then, my colleagues in the Treasury have met the noble Lord and explained their view of his original amendment. I hope I can convince the House that the Government’s approach meets the requirements which the noble Lord, Lord Brennan, seeks to impose. These amendments would expand the scope of the senior managers regime to include all persons who are responsible for ensuring that a firm complies with specific obligations under the criminal law, irrespective of the level in the organisation at which they work.
No one doubts the importance of robust action to tackle financial crime such as money-laundering, but I can assure your Lordships that these amendments are not necessary to ensure that financial crime is adequately addressed under the reforms that the Government are bringing forward.
These amendments would bring subordinate staff with relevant responsibilities within the scope of the senior managers regime. That could lead to confusion at least and is contrary to the PCBS recommendation to narrow the senior persons regime to very senior people, and parts of the regime, such as the reversal of the burden of proof, make sense only when applied at the senior level. It is not necessary to bring subordinate staff with specific responsibilities for financial crime within the senior managers regime in order to ensure that these staff are subject to enhanced regulatory scrutiny. It will still be possible for the FCA to ensure that appointments of persons to be money-laundering reporting officers, for example, will be subject to prior regulatory scrutiny and approval under the approved persons regime, if that is considered appropriate, and then subject to rules and standards applicable to their
role. This is because the approved persons regime is being retained for financial services firms that are not banks. It is also being retained within the banking sector for appointments below senior management level. The Government have always considered this necessary as there may be critical roles below senior management level with important responsibilities for consumer protection, market integrity or preventing financial crime where prior regulatory scrutiny of appointments remains necessary.
In addition, of course, the regulators will have the ability to make rules of conduct for bank employees who are not approved persons. This will mean that rules of conduct can be applied to staff with more limited roles in preventing financial crime in banks, as well as to approved persons and senior managers.
There is also no need to refer explicitly to breaches of the criminal law to bring senior managers with relevant responsibilities within the scope of the senior managers regime. Under the Government’s proposals, a function can be designated as a senior manager function if a person holding it would be responsible for aspects of the bank’s business that could involve serious consequences for the bank, or for business or other interests in the United Kingdom. There is no doubt that a serious breach of criminal law could have serious consequences for the firm as well as for other people. So senior managers in this area would be covered by this new regime.
The noble Lord, Lord Brennan, asked me three specific questions and for assurances on those points. First, he asked me to confirm that there was no reason to doubt the reliability of the conclusions of the FCA paper. There is no reason to doubt them. Secondly, he asked whether the FCA was properly financed to undertake the level of activity required for it effectively to fulfil its responsibilities under the rules on money-laundering. The FCA budget, as he will know, is funded by the sector as a whole. The FCA is therefore unconstrained, in practical terms, regarding its budget. It is for the authority to determine the resources that it thinks it requires and it can then get them. So no budgetary constraint is imposed on the FCA which reduces its ability to employ as many staff as it feels it wants in this area. Thirdly, he asked whether the FCA represented government policy. The FCA does represent government policy. I am sorry that the note was transmitted later than would ideally have been the case but that in no way undermines its significance as a definitive statement of government policy in this area.
I recognise the concern that noble Lords had in Committee, and still have, in this area. It may be of some minor comfort to know that since Committee I have had a meeting with one of the senior relevant staff at one of the largest UK banks to discuss whether, in its opinion, the FCA was pursuing money-laundering with greater rigour than had been the case in the past. The bank said that the FCA was doing so. It also said that the bank itself had recognised that it simply had to give greater priority to this area.
Two things must happen if we are to achieve the level of compliance that the noble Lord would like. The first, which the noble Lord has concentrated on
now, is that the FCA has to do its job properly. As I say, it is putting more resources in and is being, as it states in its list of objectives, more intensive and intrusive. Secondly, as we have discussed in relation to a number of other areas, the banks have to accept that they must adopt a zero tolerance approach to money-laundering. It is clear from the evidence which the parliamentary commission received, and from much other evidence, that this has not always been the case. I believe that the banks are giving a priority to this that they have not done in the past. Is it adequate? It is a great improvement, but it will take some time to be fully clear about whether it is adequate. However there has been a sea change which has been effected in part by the regulatory regime and in part by the pressure put on the banks by a whole range of external stakeholders, not least your Lordships’ House.
The noble Lord, Lord Eatwell, suggested that a further letter might be of help between now and Third Reading to confirm the exact position. I am happy to agree to provide a letter in the terms that the noble Lord suggested. With that assurance, I hope that the noble Lord, Lord Brennan, will feel able not to press his amendments.
6.45 pm
Lord Watson of Invergowrie: Perhaps the noble Lord could clarify something. He made it absolutely clear that the FCA note represents government policy. It therefore seems strange that that policy is allowed to be as—shall I say?—ambiguously worded as the FCA note is. It is of concern that it is left that way. Will he commit to write to the FCA before Third Reading to ask it to make anti-money-laundering explicit in the personal responsibility requirements of senior bankers?
Lord Newby: My Lords, I will cover that issue in my letter. I am sorry that the noble Lord thinks that the FCA note is ambiguous, because the fact that it is giving greater priority to this issue and being more intrusive and energetic should give him some comfort. However, as I say, I will write to him.
Lord Brennan: My Lords, first, I had a meeting with officials from the Treasury, the content of which was, in short form, declaratory and, in long form, advisory. It was declaratory when I explained to them that I and my colleagues with whom I am working on this problem were convinced that these amendments were necessary and that the Treasury officials and the Home Office man who was there should revise their thinking accordingly. So they informed our side of the argument of nothing new, except that they felt that they were right. The advisory part of the meeting related to a simple proposition that took a little time to adumbrate. I invited them—both officials were, I am sure, competent young government lawyers—to take advice on this issue and on the terms of the offence, which we shall turn to shortly, from senior Treasury counsel who would be independent and objective as to whether the government views on the strength of the Bill on this point were correct. I do not know whether that has been done. The fact is that the meeting took place but was not productive.
There are times in legislative life when those who see cannot persuade the blind where they are going. In Amendment 30 no attempt is made to disadvantage junior staff and every attempt is made to ensure that senior staff are not allowed to use the fault of junior staff as an excuse for their own responsibility. That is what that amendment is plainly directed at. It makes the senior management’s job crystal clear. It is necessary to consider what the Minister has said in reply and, for the moment, I beg leave to withdraw the amendment.
27: Clause 15, page 28, line 11, at end insert “but excludes the provision of legal advice in taking decisions or participating in the taking of decisions”
Lord Mackay of Drumadoon (CB): My Lords, the amendment seeks to amend Clause 15, and I will speak to Amendment 49, which seeks to amend Clause 22.
When those clauses were introduced into the Bill in Committee they provoked a measure of interest and concern on the part of the Law Society of Scotland, which suggested amendments to be introduced on Report. For that reason, it is necessary that I declare an interest as having been a qualified lawyer in Scotland since 1971, initially as a solicitor and thereafter as counsel at the Scottish Bar.
I mention that with a measure of diffidence, having regard to the comments made earlier about the ethical training of lawyers in general. Joking apart, it is right that your Lordships should be aware that the introduction of these two clauses gave rise to the concern to which I have referred.
I offer no criticism about this because I am aware that on the second day in Committee a considerable volume of amendments were dealt with, but the amendments that introduced Clauses 15 and 22 took place without any detailed discussion. Clause 15 would add an additional section, Section 59ZA, to the Financial Services and Markets Act 2000, the terms of which are relevant to determining whether the carrying on of a controlled function in relation to a regulated activity of an authorised person is for the purposes of the Act “a senior management function”.
Clause 22 would add a further section to the 2000 Act, Section 64A, which gives the Financial Conduct Authority and the Prudential Regulation Authority power to make rules of conduct for approved persons. Clauses 15 and 22 have given rise to concern from the Law Society as to how their provisions impact on the duty of Scottish solicitors to maintain confidentiality in all their dealings with their clients. As your Lordships will be aware, solicitors in Scotland are regulated by the Law Society of Scotland. They are bound to observe their professional obligations and are liable to be sanctioned at the instigation of the Law Society if they fail to meet those obligations. The duty of confidentiality is set out in detail in the Law Society of Scotland’s Rule B1.6. It places a duty on solicitors not to disclose information about their clients, including
communications between solicitor and client unless permitted by the client, or compelled by a court or Parliament to do so. This ethical duty of maintaining confidentiality provides for checks and balances, as a solicitor is never the final judge as to whether the information must remain confidential. Legislation and court process, as well as client consent, provide means by which information might legitimately be disclosed. The policy considerations behind this rule of confidentiality are that the rule affords full and open exchange between clients and their lawyers. It also helps to ensure that full and frank advice is provided.
Legal professional privilege, which is also mentioned in the amendments, has a similar, albeit not identical, effect. It protects from disclosure confidential communications and evidence of those communications between a professional legal adviser and their client, provided the communications are for the purposes of preparing for litigation or the client seeking and receiving legal advice. For these purposes, the tendering of legal advice is not confined to informing a client what the law is; it includes the solicitor or counsel involved giving advice as to what action the client should prudently and sensibly take in the relevant legal context.
The need for these amendments was, as I have indicated, identified by the Law Society of Scotland, having consulted a number of its members. It sent earlier drafts of the amendments to among others, the Treasury and the noble and learned Lord, Lord Wallace of Tankerness, the Advocate-General for Scotland. The Law Society and I are grateful to the Treasury and indeed the Advocate-General for responding to that approach and giving us an indication of the Government’s thinking on the issues involved. Before saying a few more words about the details of the amendments, I think it right to note that other regulatory bodies in the United Kingdom which have members who are either solicitors or counsel may have similar interests in the subject matter of these amendments.
The arguments in support of Amendment 27 to Clause 15 can be put very shortly. They relate to the terms of the new Section 59 of the 2000 Act. Those provisions appear to open up the opportunity of legal advice given to a bank by a solicitor being deemed, whether by the Financial Conduct Authority or the Prudential Regulation Authority, as amounting to the taking of decisions or alternatively,
“to participating in the taking of decisions, about how one or more aspects”,
of a serious management function should be carried on. If such a view could be taken of the actions of a solicitor, such actions could be deemed to provide a factual basis for determining, in terms of new Section 59ZA(1) of the 2000 Act, whether a function within a bank is a “serious management function”. The Law Society is concerned that such events might lead to an erosion of the distinct professional relationship between solicitor and client and the obligations that solicitors undertake to provide advice to the client.
What is unclear from new Section 59ZA(3) is whether the Government intend that such solicitors, advising on legal issues alone, will also be considered as having participated in the taking of decisions. The Law Society of Scotland considers they should not be and it believes
that that should be made clear in the Bill. That is what Amendment 27 seeks to achieve. If the Minister takes a different view, I am sure he will recognise that this issue is a concern to members of the legal profession in Scotland and I respectfully invite him to explain to your Lordships his reasons for doing so, so that those lawyers will be made aware of them.
The need for Amendment 49 arises out of Clause 22, which was introduced into the Bill on the second day in Committee. It would insert a new Section 64A into the 2000 Act, which would grant power to the regulatory authorities, the FCA and the PRA, to make rules of conduct for approved persons under Section 59 of the 2000 Act and persons who are employees of banks. Both categories could include solicitors, counsel and advocates in different parts of the United Kingdom. They would be under duties of confidentiality and legal professional privilege with regard to communication between agent and client.
It seems abundantly clear that the rules of conduct made by the regulatory authorities could conflict with the duty of confidentiality on solicitors and with legal professional privilege as they are understood and apply in Scotland. Amendment 49 is designed to resolve any potential conflict. In particular it provides in the proposed new Section 64A(12)(b) that in the application of new Section 64A of the 2000 Act in Scotland, no professional legal adviser, either advocate or solicitor, could be required, under the rules of conduct made by the FCA or the PRA, to answer any question that he would be entitled to refuse to answer by virtue of any rule of law relating to confidentiality. In that important respect, it adds to the protection currently afforded to professional legal advisers by Section 413 of the 2000 Act, which severely limits the extent to which a person can be required under the 2000 Act to produce, disclose or permit the inspection of protected items. What Section 413 does not do is make any reference to a lawyer refusing to answer a question.
There is concern that Section 413 of the 2000 Act as currently drafted would not entitle a solicitor in Scotland to refuse to answer questions posed in terms of rules of conduct made by either the FCA or the PRA, even though answering those questions would breach their duty of confidentiality to their client. The Law Society accordingly seeks to have this issue clarified. The society’s view, with which I agree, is that it is important to ensure that rules of conduct made in terms of new Section 64A of the 2000 Act do not place a solicitor who is either a senior manager or employee of a bank in a position where there would be a conflict between his or her duties under the rules of conduct and his or her duties as a professional legal adviser, duties that are regulated by the Law Society of Scotland.
I argue in terms of both amendments that these issues should be addressed now and not deferred until such time as the FCA or the PRA seek to exercise the new statutory powers they are to be given. Against that background, I beg to move.
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Lord Flight: My Lords, these amendments have the support of the Law Society of England and Wales as well as that of Scotland—certainly for Amendment 27.
The issue is pretty clear. The objective is to ensure that the provision of legal advice is not to be construed as taking decisions or participating in the taking of decisions, and for situations where solicitors or other legally qualified professionals frequently give advice on decisions which a bank or other institution may take. They do not make the decisions, but purely advise on legal issues where the Bill is currently unclear as to whether advising would be included in,
“participating in the taking of decisions”.
Amendment 27 seeks to clarify the position.
There is an irony here in that, as I understand it, Clause 15 creates a broad definition of a senior management function, and the term,
“participating in the taking of decisions”,
as currently drafted will capture legal advice. This could have some perverse results and disproportionate consequences, and a danger that all legal advice is considered as participating in decision-making. If that were to be the case, all banks’ lawyers might need authorisation from the Financial Conduct Authority to give legal advice, whereas of course they are already regulated through the Solicitors Regulation Authority.
Lord Newby: My Lords, I understand the concern of the noble and learned Lord and that of the Law Society about the position of lawyers under the new regime, and I hope very much to be able to reassure him.
Amendment 27 would amend Clause 15, which inserts new Section 59ZA into FiSMA, which provides the definition of a senior management function. A person becomes a senior manager only if they perform a function which has been designated by a regulator as a senior management function and have been approved to perform that function by the appropriate regulator on the application of the authorised person; that is, the firm concerned. A senior management function is one that will,
“require the person performing it to be responsible for managing one or more aspects of the authorised person’s affairs”,
“those aspects involve, or might involve, a risk of serious consequences—(i) for the authorised person, or (ii) for business or other interests in the United Kingdom”.
It is therefore highly unlikely that the regulators would designate being a legal adviser as a senior management function simply because giving advice does not constitute management as set out in the definition of senior management.
Clause 22 inserts new Section 64A into FiSMA, which allows the regulators to make rules of conduct for approved persons, including senior managers, and for bank employees. This implements the Parliamentary Commission on Banking Standards recommendation regarding the introduction of a “licensing regime”. This broadens the population who can be subject to the regulators’ rules, which could for example now apply to an in-house legal adviser in the capacity of an employee. In addition, the regulators already have a broad power to require firms to provide information, as set out in Section 165 of FiSMA. However, the regulators cannot make rules which would trump the
protection of legal privilege. Section 413 of FiSMA provides expressly that no power under the Act can be used to require the disclosure of “protected items”. These are defined in terms which are materially identical to the definition of items subject to legal professional privilege in Section 10 of the Police and Criminal Evidence Act 1984. Consequently, FiSMA already prevents the regulator from obtaining legally privileged material.
The noble and learned Lord’s amendment would also introduce a protection against the disclosure to the regulator of “excluded materials” as defined in Section 11 of the Police and Criminal Evidence Act 1984. This includes personal records generated in the course of business and held in confidence, human tissue and journalistic material held in confidence. Clearly, the regulators would not request some of the categories of material included in this section. However, in relation to confidential information such as that compiled during the course of business, it might be appropriate, and indeed sometimes essential, for the regulators to receive it. However, FiSMA itself provides strong protection for confidential information received by the regulators when carrying out their regulatory functions. Section 348 of FiSMA prevents any such information being disclosed to a third party except for very narrow purposes. Further, where any such information constitutes personal data, it would be subject to the Data Protection Act.
The noble and learned Lord asked whether Section 413 of FiSMA covers communications as well as documents. I can give him that assurance. The section is not limited to documents, so regulators cannot require the disclosure of privileged communications. With those reassurances, I hope that the noble and learned Lord will feel able to withdraw his amendment.
Lord Mackay of Drumadoon: My Lords, I am grateful to the Minister for giving a very clear and detailed explanation of the Government’s position in regard to these very complicated statutory provisions. I always think that when you start running out of enough section numbers so that you have to add letters to them, it makes the construction of the contents of those sections much more complicated than it might otherwise be. For these reasons, I beg leave to withdraw the amendment.
Clause 16: Statements of responsibilities
29: Clause 16, page 28, line 18, leave out “bank” and insert “relevant authorised person (see section 71A)”
Clause 17: Power to give approval subject to conditions or for limited period
38: Clause 17, page 29, line 35, at end insert—
“(7) For the meaning of “relevant authorised person”, see section 71A.””
Clause 19: Variation of approval
43: Clause 19, page 31, line 45, at end insert—
“(6) For the meaning of “relevant authorised person”, see section 71A.”
44: Clause 22, page 35, line 10, leave out “banks” and insert “relevant authorised persons (see section 71A)”
46: Clause 22, page 35, line 20, leave out “PRA-authorised banks” and insert “relevant PRA-authorised persons”
48: Clause 22, page 35, line 22, leave out from beginning to “and” in line 23 and insert ““relevant PRA-authorised person” means a PRA-authorised person that is a relevant authorised person (see section 71A),”
50: Clause 22, page 35, line 43, at end insert—
“(7) This section applies only in relation to employees whose actions or behaviour could seriously harm their employer, its reputation or its customers.”
The Archbishop of Canterbury: I have already spoken to the amendment standing in my name. The members of the commission are delighted that the Government are broadly finding agreement with their recommendations, and on all the areas on which the Minister spoke we hope and expect that the government amendments at Third Reading will reflect closely the assurances that we have been given. To ensure that we get this right, we re-emphasise the need to see the amendments as early as possible and reserve the possibility, if we are not content and feel that they do not reflect what has been said, of returning to them at Third Reading. If I have those assurances, I will be happy to withdraw the amendment. I beg to move.
Lord Newby: You have those assurances.
The Archbishop of Canterbury: I beg leave to withdraw the amendment.
Clause 23: Definition of “misconduct”
53: Clause 23, page 36, line 27, leave out from “of” to end of line 28 and insert “a relevant authorised person, an employee of the authorised person.”
57: Clause 23, page 37, line 2, leave out “an authorised person that is a bank” and insert “a relevant authorised person”
59: Clause 23, page 37, line 17, at end insert—
“(9) For the meaning of “relevant authorised person”, see section 71A.”
61: Clause 23, page 37, line 27, leave out “PRA-authorised bank” and insert “relevant PRA-authorised person”
62: Clause 23, page 37, line 37, leave out from “of” to end of line 38 and insert “a relevant authorised person, an employee of the authorised person.”
63: Clause 23, page 37, line 46, leave out “PRA-authorised bank” and insert “relevant PRA-authorised person”
66: Clause 23, page 38, line 11, leave out “an authorised person that is a bank” and insert “a relevant authorised person”
68: Clause 23, page 38, leave out lines 33 and 34 and insert—
““relevant PRA-authorised person” means a PRA-authorised person that is a relevant authorised person;”
69: Clause 23, page 38, line 38, at end insert—
“(9) For the meaning of “relevant authorised person”, see section 71A.””
70: After Clause 23, insert the following new Clause—
After section 66B of FSMA 2000 (inserted by section 23 above) insert—
(1) The Treasury shall commission an independent report in relation to the effectiveness of—
(a) any rules implemented under section 64A; and
(b) any action taken by the FCA or PRA by virtue of section 66.
(2) The Treasury shall ensure that the report prepared under subsection (1) shall—
(a) include such recommendations as considered appropriate for legislative and other action;
(b) be laid before Parliament by the end of 2018; and
(c) be published in such manner as it sees fit.””
Lord McFall of Alcluith: This amendment is in response to government amendments to the Bill which amend the Financial Services and Marketing Act 2000. The amendment would require the Treasury to commission a review to provide an opportunity to evaluate the effectiveness of the regulators, particularly the FCA, in implementing and effectively enforcing new powers in relation to individual standards rules and the licensing regime.
The amendment should allow for recommendations that may include the removal of powers from the current regulators or further separation within the current body. That would potentially allow for aspects covering licensing and individual standards rules to be considered for moving across to an independent professional body, should that be appropriate. That echoes the amendment that we on the Labour Front Bench successfully moved a short time ago.
Given the competing priorities for resources—which have the potential to be compounded with the inclusion of consumer credit regulation in 2014 and the payments system regulation, if approved—there is the concern that the FCA may struggle to carry out this challenging role it faces. Therefore, an independent review can assess the effectiveness of the FCA and PRA in being able to implement the recommendations made by the Parliamentary Commission on Banking Standards and, in doing so, provide feedback on how this can be improved, and whether it is more effective for the oversight and enforcement of the professional standards to be undertaken by a genuinely independent professional body.
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With more than 150 government amendments alone and just three sittings to discuss them, it is impossible to give them the amount of scrutiny that we would have wished. Therefore, it is sensible to ensure that mechanisms are in place for an independent review of both the FCA’s and PRA’s implementation of these changes. There are more than 50 actions, such as reform of the register and remuneration, with which the Government tasked the FCA and PRA in their response to the PCBS recommendations that do not require legislative scrutiny. There are also areas being included in the Bill that empower the regulator to develop and implement rules and enforce them. Given that the regulator in its previous incarnation as the FSA failed to hold anyone responsible for scandals such as the mis-selling of payment protection insurance, it is prudent to ensure that the reforms work effectively and that any amendments are made to maximise the protection of consumers. Indeed, the PCBS in its final report, Changing Banking for Goodmade this point in paragraph 195, when we said:
“Regulators have the power to impose significant penalties on individuals who engage in inappropriate behaviour, unlike banks, who can generally only impose penalties if they are within the terms of their contracts with their employees. The prospect of public censure, significant fines or being banned from the industry
could provide a meaningful downside to balance the significant upsides in banking. However, there has been negligible use of such sanctions against individuals”.
It continues in paragraph 196:
“In relation to the financial crisis, despite the ample evidence of widespread failures of management, leadership and risk control, the FSA has only brought a single case against an individual ... The Commission considers it a matter for profound regret that the regulatory structures at the time of the last crisis and its aftermath have shown themselves incapable of producing fitting sanctions for those most responsible in a manner which might serve as a suitable deterrent for the next crisis … The only other senior executive from a large UK bank to face any enforcement action in recent years was John Pottage, a former UBS wealth management executive, whose fine for misconduct was overturned by tribunal in 2012”.
There needs to be a promotion of cultural change, which I suggest should be through an independent professional body. While there is currently no independent professional body that could adequately take on these responsibilities of overseeing the banking standards rules or licensing regime, there appear to be some developments with Sir Richard Lambert’s plans for a new independent organisation to monitor standards in the UK banking industry. That looks like a step in the right direction, but we must remember that it is the banks themselves that have established that. The criterion for independence has still to be judged in that area. The parliamentary commission indicated that there is scope for a truly independent professional standards body to,
“share or take over formal responsibility for enforcement in banking”,
should it be able to fulfil the milestones laid out in the report. This was something that the commission recognised as important in changing the culture within the industry. It was the Parliamentary Commission on Banking Standards that looked at the culture in the industry. The Vickers commission did not look at culture. Indeed, when the Financial Services Bill Committee was going through the House, being a member of that Committee, I asked Vickers about culture because I noted that it was mentioned only four times in his report. His inadequate answer at that time was, “That wasn’t in our remit”. This is the centrepiece of changing the industry, and it is important that that concept is up front.
Paragraph 138 of the Commission’s report says:
“We believe that the influence of a professional body for banking could assist the development of the culture within the industry by introducing non-financial incentives, which nonetheless have financial implications, such as peer pressure and the potential to shame and discipline miscreants. Such a body could, by its very existence, be a major force for cultural change and we have already recommended that its establishment should be pursued as a medium to long term goal alongside other measures such as new regulatory provisions”.
However, to facilitate this, an independent review of the regulator’s performance must be undertaken to determine whether responsibilities for oversight and enforcement of professional standards should be moved across to a genuinely independent professional body. Now, why do we insist on that? There is a need to restore trust to this industry. Consumer confidence in the banking industry remains low since the crisis. There is a need for these reforms to work and those who game the system to be held to account. A poll
commissioned in the summer undertaken by Populus found that 86% of people think that the financial regulator needs to enforce the recommendations because banks cannot be trusted to do it themselves.
One question I asked throughout the Parliamentary Banking Standards Commission to executives coming before the commission was, “Can you effect change on your own in this industry?”. Almost universally they said, “No, we cannot. We need outside help”. While we pass this banking reform Bill, if we walk away from this issue then we walk away from the solution.
We have to have mechanisms to assist and to have oversight over the industry to ensure that that cultural change is undertaken. It is important that mechanisms are put in place that will hold the regulators to account and ensure that those who mis-sell or act in an unprofessional manner are held to account, regardless of their position or the size of financial institution to which they belong. I beg to move.
Lord Newby: My Lords, I start by saying that we strongly agree with the last point made by the noble Lord; people who fall below the standards of conduct required of them should be held effectively to account. We have been discussing a number of ways in which the Bill will help to bring this about. I also appreciate the concerns of the noble Lord that we should take stock at some point and review whether the new system of rules of conduct has delivered an improvement in behaviour among bank staff—the kind of improvement that we are all agreed we want to see.I am not sure, however, that we need legislation to provide for that.
In the first place, the regulators themselves will keep their rules under review in the normal way. There will be no difference in that respect between rules of conduct for bank staff and any other rules that they make. They will similarly review their policy statements about taking action for misconduct under Section 66, and keep their policies and practices under review too. I expect also that the Treasury Committee in the other place, and possibly also the Economic Affairs Committee in your Lordships’ House, will want to keep such matters under review. Nothing, of course, stops the Treasury from commissioning reviews of these and other matters, if it thinks it appropriate. All these reviews can range as widely or as narrowly as is appropriate. They can cover the full range of matters in FiSMA or other relevant legislation—and any other matter as well.
I comment briefly on the point that the noble Lord made about the work of Sir Richard Lambert. We are putting great faith in Sir Richard Lambert to produce worthwhile movement. Having worked with him on other things in the past, I have considerable confidence in him to do that. However, we will have to see how that unfolds. It requires the banking industry to accept the need to take measures that it has not in the past. Sometimes that has been difficult for it. On the amendment, we do not need a mandate for such a specific review in the Bill itself.
Lord McFall of Alcluith: My Lords, given the form of the regulators in the past, the Minister’s words that
the regulators will keep the review under review in the normal way are not inspiring. However, I beg leave to withdraw the amendment.
73: Clause 24, page 38, line 44, leave out from “Part” to end of line 46 and insert ““relevant authorised person” means a UK institution which—
(a) meets condition A or B, and
(b) is not an insurer.
(2) Condition A is that the institution has permission under Part 4A to carry on the regulated activity of accepting deposits.
(a) the institution is an investment firm,
(b) it has permission under Part 4A to carry on the regulated activity of dealing in investments as principal, and
(c) when carried on by it, that activity is a PRA-regulated activity.”
75: Clause 24, page 39, line 7, leave out “section 22, taken with Schedule 2 and” and insert “Schedule 2, taken with”
Clause 25: Recording information about senior managers
76: Clause 25, page 39, line 14, leave out “relevant authorised person is a bank” and insert “authorised person concerned is a relevant authorised person”
77: Clause 25, page 39, line 19, leave out “an authorised person that is a bank” and insert “a relevant authorised person”
78: Clause 25, page 39, line 28, leave out “an authorised person that is a bank” and insert “a relevant authorised person”
“(9) “The authorised person concerned”, in relation to an approved person, means the person on whose application approval was given.””
Schedule 3: Consequential amendments relating to Part 4
82: Schedule 3, page 131, line 18, leave out from “etc.),” to end of line 21 and insert “in subsection (2)(g), in sub-paragraphs (ii) and (iii), for “relevant authorised person” substitute “authorised person concerned”.”
Clause 27: Offence relating to decision that results in bank failure
Lord Newby: My Lords, we now move to a group of government amendments which pertain to the scope of the offence relating to a decision that results in bank failure. This offence was introduced through amendments to the Bill in response to a recommendation by the PCBS. As tabled in advance of the debates in Committee, and building on the FiSMA definition of “bank”, the offence would have applied to retail banks and building societies. This meant that all deposit takers except credit unions were covered.
As discussed in earlier debates on the scope of the senior managers regime, the Committee debate on 15 October has prompted the Government to reconsider this position. In the light of the persuasive arguments put forward in that debate, we are amending these clauses so that the offence may be committed not only by senior managers of a bank, but by senior managers of relevant authorised persons. “Relevant authorised person” is defined by government Amendment 106 to include banks and those investment firms that are regulated by the PRA as well as the FCA. These are known as systemic investment firms, because their large size means they have a significant impact on the wider financial sector. Smaller investment firms will continue not to be covered by the offence. This is because, like credit unions, they do not represent a significant risk to taxpayer funds, or to financial stability, and their failure is very unlikely to lead to serious harm to customers.
The Government shared this definition with the members of the former PCBS and are hopeful that the scope now captures those firms that the PCBS had in mind. I hope that these amendments fully meet the House’s concerns on the matter.
The other amendments in this group make consequential amendments to Clauses 27 to 28 which are necessary to give effect to this change, and improve the drafting of the existing provisions. There was also some debate in Committee over whether the cross-heading as tabled properly represented the offence. In the light of this, I have asked the House printers to amend the heading so it now reads, “Offence relating to a decision causing a financial institution to fail”. I trust that this addresses the concerns raised. I beg to move.
Lord Lawson of Blaby: I make one point of clarification on what my noble friend said. I apologise for my cold. It is absolutely necessary that the definition of “bank” should be extended in the way that the noble Lord has said. I am very pleased with that. He gave us a reason that these investment banks, or these investment institutions, might be a potential liability for the taxpayer. I hope he will withdraw that. It is very important that there is no taxpayer liability there. The reason we wanted it expanded is that we were concerned about banking standards, which was what this commission was all about: banking standards and culture. That is why it is necessary that there should be this regime for these banks, not because there might be a taxpayer risk or bailout.
Lord Newby: I can give the noble Lord that assurance.
Consideration on Report adjourned.
NHS: Accident and Emergency Units
Question for Short Debate
7.29 pm
To ask Her Majesty’s Government what plans they have for the future of NHS accident and emergency units.
Baroness McDonagh (Lab): It might help the House if I explain why I have asked for this debate. I live near St Helier and St George’s Hospitals. The A&E at St Helier Hospital, which had 80,000 visits last year, may be closed. It is a regular district hospital. St George’s is not a regular hospital, but a regional and national trauma centre, specialising in strokes and coronary care, with very high unit costs. If St Helier were to shut, we all know locally that the people of that area would go to the A&E in St George’s—costing more, blocking beds and destabilising the hospital. That is because hospitals make money on their elective procedures and tend to lose money on emergency care. If you change that ratio, you soon put the hospital into the red. The London Borough of Merton commissioned some independent research and found the same thing. The researchers said, “We questioned CCG board members quite closely regarding their understanding of the baseline financial activity and quality position in Merton. We did not find a good understanding of the current resource position, nor how these resources
were being used, and how such use would be compared to other parts of London and England as a whole”. I do not blame them for that, as they probably cannot get hold of the information in the rest of London or England. They go on to say, “Without a thorough assessment of these issues, there is a high risk of taking the wrong or even counterproductive action. For example, if financial problems are caused by high unit costs at St George’s, it makes no sense to close St Helier”.
I took my local knowledge, together with my understanding of what is happening to the NHS nationally, particularly around A&E, and put two Questions down. One Question asked how many A&E departments had been closed by the Government since they came into office in 2010. The answer came back, “We don’t know”. I asked how many A&E closures were currently under consultation. The answer came back, “We don’t know”.
Perhaps I could explain tonight to the noble Earl, Lord Howe, and to the Government, why it is important that they know how many A&Es they have, where those units are and how many are closing. The clue is in the title: National Health Service. The Government are responsible for the oversight, costs, management and planning of the health service. To do that, you need to know where your A&Es are. When A&Es close, maternity units normally follow. The Government are responsible for seeing that there are enough beds for mums to have their babies. They also tell us, because they have the figures, that the population is due to increase to 70 million—so shutting maternity units is probably not a good idea. You also need to know where the A&Es are because, when you shut an A&E, other clinical services close with them. If you shut St Helier A&E, you will also shut the regional renal unit. According to the evidence, you also reduce ITU beds and medical beds; hospitals cannot then meet their elective targets.
The Government also need to know, because—I do not know if this is shocking—they are responsible for disaster and emergency recovery planning, and generally it is a good idea to know where the A&Es are. They are also responsible for sending out the latest advice and, again, you cannot do that if you do not know where the A&Es are. Lastly, the closures of the four A&Es that have already happened have led to unintended consequences, and you need that information for forward public policy-making. We are getting worse results, it is costing more and the care is worse. All in all, it is a lose-lose situation. Closures are not working, largely because they have been built on six terrible government reforms, which are resulting in systemic failure in the NHS. No money announced today or two-tier A&Es will make a difference to that.
The first of the reforms that have led to the problems that we now face is the Government collapsing all targets. Then there is the terrible reform of giving GPs the NHS budget, which took from front-line services, and cost the Government, £3 billion. The Government have also overseen the closure of one-quarter of all walk-in centres, and Monitor says the future for the rest is dicey. They have also overseen cuts in the adult social care bill of £1.8 billion and cuts to aids and
adaptations, so that we are seeing record numbers of elderly people go into hospitals through A&Es, who cannot then get out because the aids and adaptations have not been made. The fifth and sixth reforms were shutting NHS Direct and introducing the terrible 111 service. Doctors and nurses are leaving in their droves, and the Government have spent an extra £120 million on emergency medical locums compared to before. All these reforms have led to a threefold increase in attendance at A&Es, and now more than one in four people who go to A&Es are being admitted. If the ministerial health team were doctors, they would be struck off.
When I look into this, I cannot decide whether it is incompetence or ideology that is driving these changes. I fear that it is a dangerous cocktail of both. For me, it is perfectly legitimate in a democracy to be against a national health service, but you need to be honest about that, and it is important to have a debate. I will start that debate by answering my own questions. Four A&Es have been closed since 2010 and a further 15 face closure, which means one-third of all A&Es in the M25 area will close. Last week, NHS England announced that a further 60 A&Es out of 197 will close. Tomorrow, the A&E is closing at Trafford General Hospital, where Aneurin Bevan announced the birth of the NHS.
What am I asking the Minister for Health? I am asking him to call a moratorium on all A&E closures, to listen to the public, to commission independent research on what is happening and, above all, to find out where these A&Es are and to visit them.
7.38 pm
Lord Patel (CB): My Lords, in my three minutes, I will make some brief comments that will lead up to some questions for the Minister. In my view, the pressures on A&E departments are but one component of wider pressures in the NHS. There is a disconnect between A&E and other departments in hospitals, such as diagnostic and in-patient services, which, in contrast to A&E, are both geared to a five-day, nine-to-five working schedule. Added to that of course is the fragmented nature of patient services in the community, which leads to bedblocking and further pressures on A&E. We will have to address the problems of A&E, and the Keogh report goes some way to doing that, but the problems in A&E will not be solved by focusing on just one aspect of the service. The whole system needs to be co-ordinated and to work seamlessly.
Figures show that the main pressures on A&E come from people with long-term conditions. This in turn leads to pressures on in-patient services. This is due in part to poor access to primary and community care. What is needed, as has been discussed on many occasions, is better management of patients with long-term conditions so that they do not end up needing emergency care.
There are other issues. The issue of workforce problems in A&E further compounds the problem. I understand that there is a serious problem with recruitment of trainees, particularly specialist trainees, in A&E. There are also, of course, the vagaries of the tariff, which is set more in favour of elective work than emergency
work. I note that the Keogh report tries to address that, or at least intends to explore it. I know that recently the Government have allowed more funds to help with A&E pressures but I am not sure what these funds are to be used for. I hope that the Minister will comment on that. It would be helpful if he could comment on whether the Government have a long-term strategy to cope with the increasing number of patients with long-term conditions, and on what plans the Government have for Health Education England to address the issue of workforce planning, which would help with A&E.
7.41 pm
Lord Selsdon (Con): My Lords, I thank the noble Baroness for introducing this debate. I declare an interest as a director of the construction company that built St George’s. We had quite a lot of trouble with it.
I will use as my text the wonderful brief produced by the Library. I declare an interest as having been on the Information Committee. I want to draw attention to the need to separate the main A&E centres from the patient. I take the point of the noble Lord, Lord Patel, that we should look to people who have a long-term condition, and generally are aware that they have a long-term condition. We should also look at the intermediate situation of what can be done at the place of an incident.
I have used 111 three times. When I first used it, I was quite surprised that I was dealing with foreign doctors who had relatively little knowledge but terribly pleased with the enthusiasm of these people who had only been in the business for a short period of time. There was a tendency to refer someone to A&E immediately rather than to look at what care might be given closer to the place of the incident or to a person’s home. In my day we looked to the district nurse, who seems to have disappeared from real life, or the retired doctor whom we knew down the road or the pharmacist. Our pharmacists in the United Kingdom are among the best in the world. They are extremely well trained and a very good point of contact.
When calling 111, you usually receive an answer to a telephone call quite quickly, and you receive a bit of guidance and advice, but the irrevocable next step is to be taken to A&E. One or perhaps two ambulances may then arrive.
I have often worked abroad and have been privileged to benefit from A&Es in other places. I once suffered from an extremely bad upset stomach in Cairo, which ended in rebuilding the sewers, where the A&E man arrived on a moped with only one working cylinder and a flat tyre and cured me within a couple of hours. He was the doctor to the Egyptian swimming team. Egyptian doctors are really quite good and he explained to me that every one of them was trained to deal with situations on the spot.
When I was in Italy, not so long ago, there was no doctor available when someone was ill so a hotel rang the transport department. The transport department has doctors on motorbikes on call for car accidents. They turned up and sorted everything out. This seems to happen in many places. I live in France part of the time, and there we do not call the health service when there is a problem, we call the fire brigade. They like
exercises and they send a small fire engine—if the patient is a woman, there will be a woman with them—and they get patients to hospitals more quickly than ambulances.
There must be further thought on this. I ask your Lordships to read the Library’s report, as that is what I would have said if I were competent to do so.
7.44 pm
Lord McKenzie of Luton (Lab): My Lords, I am grateful to my noble friend Lady McDonagh for initiating this, albeit brief, debate. I plan to use my three minutes to focus on one point. Before I do so, I will say that it is hard to look aside from the mounting problems of A&E departments, spoken to powerfully by my noble friend and evidenced by the number of patients waiting longer than four hours, the numbers waiting on trolleys, the increase of bed days lost because of delayed discharges and staffing problems. A&E departments undoubtedly are struggling to cope. All of this is exacerbated, as identified by the Health Select Committee, by the inadequacy of information about the nature of the demand placed on the service.
There has been hardly any focus in the wider debate on accident prevention in the first place. Prevention would be investing to save: to save on pain and suffering, even death; to prevent days lost at school or work; and to save costs to the NHS, A&E and the welfare system. The current chaos compels us to be radical. At least one-third of the nation’s A&E attendances are the result of accidental injuries. There are millions of injuries every year that are 100% preventable, according to the Office for National Statistics. These injuries are rising as a significant proportion of the overall pressure on A&E because we have stopped investing in the tried and tested antidote. We should not be negligent about the safety of our citizens, our duty to our health professionals and the very future of our National Health Service.
The country’s longest-standing safety charity, the Royal Society for the Prevention of Accidents, of which I am delighted to say that I am now president and in respect of which I declare my interest, has already shown what can be done. In Liverpool, for example, it ran a home safety scheme, working with disadvantaged families with children under five. Equipment such as stair gates, fireguards and blind-cord shorteners were fitted in the homes of those most at risk. Parents were given practical advice to help them keep their children safe. This is not rocket science. The result was that A&E admissions for zero to five year-olds plummeted by about 50% over two years—against the trend, as home accidents have been rising steadily over recent decades.
There is no doubt that increased funding for accident prevention initiatives and a task force to co-ordinate national action could lead to a major reduction in the number of deaths and injuries and the call on A&E departments. The answer is not just more resources or different approaches to treatment, but an alternative that is staring us full in the face. Accidents are the main cause of preventable early death for most of our lives, costing the state £20 billion to £30 billion each year. Given all this, is it not time that we rediscovered that prevention is always better than cure?
7.48 pm
Baroness Manzoor (LD): My Lords, the first choice of most people who think that they need urgent medical attention is to go to their local hospital’s accident and emergency department. I understand that, as A&E departments are trusted by the public as a place of expertise and knowledge. However, as we know, our hospitals and A&E departments are under significant pressure to treat all those who come through their doors. On top of this, the Royal College of Surgeons states that A&E departments are understaffed by around 10% and that in some trusts, such as Barking, Havering and Redbridge University Hospitals NHS Trust, the figure is as much as 43%. The understaffing of A&E departments is a serious issue.
Following the disgraceful events at Mid-Staffordshire hospitals, the Government have given their total commitment to putting patient care first and ensuring that patient safety should always be paramount. However, it is clear that running A&E departments that are under-resourced and poorly staffed poses a high risk to patient care and patient safety. This issue needs urgent attention by the Government and the NHS health board and I look forward to the Minister’s response on the plans that the Government have to rectify this and the timescales involved.
I too have read Sir Bruce Keogh’s review of urgent and emergency care services in England and I agree with the report’s proposals that there must be a “fundamental shift” in the provision of urgent care. I agree with much of the report, which is reasonable. But what we need now is strong leadership to deliver.
I have also read the July 2013 survey findings from the NHS Confederation, which found that its members thought three main solutions could lead to fewer pressures on A&E departments. The first was more money for primary and community care. To this, I would add more extended primary care out-of-hours services provided by GPs. These could be sited in hospitals or perhaps close to A&E departments. This would enable GPs to work in much greater collaboration with hospital A&E staff and could provide the patient with much needed seamless care.
Secondly, winter pressure money for hospitals should be allocated sooner. I would further argue that this money should be part of hospitals’ general allocation so that they can plan service delivery for all their services in a more effective, planned and co-ordinated way. Thirdly, there should be a public-facing campaign about all the alternatives to emergency departments, but these alternatives must provide a good quality of care and service if they are to have the trust of the public.
The Government are moving in the right direction by allocating specific funds, but it is not just about turning the tanker, it is about making our hospitals and GP services fit for the 21st century.
7.51 pm
Baroness Masham of Ilton (CB): My Lords, there is confusion at the moment about where people go when they need treatment at weekends and at night. There is considerable difference between urban and rural health. I thank the noble Baroness, Lady McDonagh, for initiating this very topical debate.
Rural health has changed so much from the days of the family doctor, when he or she knew their patients. Now the doctor is dependent on the computer. My surgery in rural North Yorkshire opens at 9 am, is closed each day from 12.30 pm to 2 pm, has a historical half-day on a Thursday, shuts each day at 6 pm and is shut over the weekend. The out-of-hours service at Ripon is 10 miles away and does not have anyone to operate the X-ray so it has to be the hospitals, which are 26 and 16 miles away. There are no alternatives to the A&E departments. This is not good for elderly, frail people who need attention.
In rural areas there are serious farming injuries and all the usual conditions, but also such conditions as leptospirosis—Weil’s disease—which can be a killer. I agree that serious conditions should go to the correct hospital, however far away, and I must say that the air ambulance is invaluable and supported by the rural communities. Will having two types of emergency department—one an emergency centre and the other a major emergency centre—not cause more confusion? To which centre should a parent take a child with suspected meningitis B, which can kill within 24 hours?
More integrated care in the community is essential. With all the long-term rare conditions and conditions such as diabetes and liver disease, a specialist nurse is vital and can be a lifeline. One of the problems in the community is not being able to have a drip for antibiotics, and not being able to get antibiotics without a doctor means that ill people have to go to hospital. I am sure that if everyone learnt first aid and it was taught in schools, colleges, prisons and the community, lives would be saved.
Up-to-date information about what is available and where to go for treatment in rural areas would be helpful and would reduce confusion. I end by asking the Minister: with the shortage of emergency doctors working in A&E departments, what is being done to recruit and retain them? They need support so they do not get overburdened and disillusioned. They are essential.
7.54 pm
Lord Dubs (Lab): My Lords, I congratulate my noble friend Lady McDonagh on having initiated a debate that enables us to draw attention to the serious crisis in A&E, which is evidenced by people waiting long hours on trolleys or in ambulances, the consequence of social care cuts, the fact that walk-in centres are being reduced and that NHS Direct has been closed down, all of which aggravate the problem.
I will focus my remarks on north-west London, which has been hit harder than most parts of the country. It is going to lose four of its nine A&E services and two of its major hospitals; for example, at Charing Cross Hospital 500 acute beds are going to disappear and will be replaced by up to 50 rehab beds. It means that the service at Charing Cross will be manned by GPs. There will not be a proper A&E service. There will not be a blue-light service at Charing Cross Hospital and people will have to travel much further. We are losing an excellent hospital for the sake of these cuts.
Above all, it means that the intensive care unit at Charing Cross will be closed; the stroke clinic, which I understand is probably the best in the UK, will go;
and there will be no emergency surgery. It means that all the current beds and most of the site will go, mostly likely to be sold for development, and we shall lose an excellent hospital. It means that Charing Cross will become a second-tier site and there will be a knock-on effect at Hammersmith Hospital, which is also going to be hit very hard.
Services in north-west London will be decimated and patients will have to travel much further to go to A&E. In the heavy traffic in London, that is not a small thing. It is not a matter of an extra two or three minutes; it could be an extra long period before an emergency can be dealt with. What we will have locally is some very limited services indeed and we shall lose some of the skills and expertise that we have had.
At Charing Cross there will be GP cover; they will be able to treat simple fractures and will have some beds on site that can admit patients, mainly the frail elderly, for short periods of rehab or assessment. But there will be no emergency service at Charing Cross and nearby Hammersmith will have only an urgent care centre, which will not guarantee to walk-in patients that they will be seen by a GP, and there will certainly be no blue-light service.
We are losing a lot of our services in north-west London and I fear that the standards of the National Health Service will deteriorate. It is not necessary to do this and I very much regret that it is happening.
7.57 pm
Lord Kakkar (CB): My Lords, I join noble Lords in thanking the noble Baroness, Lady McDonagh, for having secured this important debate. I declare my interest as professor of surgery at University College London and chairman-elect of UCLPartners Academic Health Science Partnership.
No consideration of the future plans for accident and emergency departments can take place without recognising the important factors that are driving demand in A&E. The most important of these is the growing number of frail elderly patients with multiple comorbidities, as my noble friend Lord Patel has already mentioned. The population aged over 85 has grown at more than three and a half times the rate of the rest of the population in the past 10 years. It is striking that 9% of those aged over 75 have experienced an emergency admission through accident and emergency in the past year. This demonstrates that there is considerable demand and that this considerable demand will grow.
We know that the way that we plan and deliver services for those who are frail, elderly and have multiple comorbidities is not providing the kind of service, the degree of confidence and the relief of anxiety that these patients require. We also recognise that those who are cared for in nursing homes and care homes, who find themselves in an acute situation, will be attended to by excellent paramedics and the ambulance service, but the default position will always be to take these individuals to hospital and very frequently for these individuals to be admitted and then to spend long periods of time in hospital. This is wrong.
With regard to the plans of NHS England, can the Minister tell us what advice is now being provided to local commissioning groups in terms of the commissioning
of more holistic and integrated services that recognise the needs of the frail elderly in the community and can better understand how those needs are met, and how the services are delivered in an integrated fashion with local hospitals, while avoiding admission through accident and emergency?
What discussion has taken place about addressing the important problems of workforce development, to help us ensure that we have a medical and paramedical workforce developed for the needs of these large numbers of frail elderly patients with multiple comorbidities? What position has Health Education England taken, and how is this central advice being delivered to local education and training boards to ensure that an appropriate workforce is delivered, able to deliver multidisciplinary care to reduce the demand on accident and emergency services and manage patients rather better in the community?
Finally, may I ask the Minister how much progress has been made on the development of locally sensitive information technology projects that allow a connection between information held on frail elderly patients with multiple comorbidities in different care environments, be it in social care, in primary clinical care in the community or in hospital care? Such information could be shared effectively to reduce the burden on accident and emergency departments.
8.01 pm
Lord Kennedy of Southwark (Lab): My Lords, I am most grateful to my noble friend Lady McDonagh for securing this debate on the future of NHS accident and emergency units. At the start I declare an interest: I chair, on an entirely voluntary basis, a small committee at Lewisham hospital. It is impossible in just three minutes to get across the scale of the problems and the anxiety and concern of local communities about the A&E crisis that is unfolding before us as the winter sets in.
What did the Government do as soon as they came into office? They had a top-down reorganisation of the NHS, after pledging not to do that, which only made matters worse. What is clear is that this is the Government’s problem. It has happened on their watch, with poor implementation of their already flawed policies, and the cuts they have made to the NHS, to social services and other budgets. There has also been the running down of NHS Direct and the ramshackle way in which the NHS 111 service has been introduced.
I hope the Minister will be able to tell the House how the Department of Health and the NHS are going to respond to the challenges they face, and how they propose to do that with thousands and thousands fewer staff than we had only a few years ago. I fear that things could be even worse than last winter, and we will be back with rising numbers of patients waiting on trolleys at A&E.
We have already had an A&E summer crisis, with more than 1 million people waiting more than four hours to be seen, all on the Minister’s watch. The problem is all of this Government’s own making, and they are not going to get away with trying to wriggle out of it. The Minister and the rest of his team would have us believe that it is everyone else’s problem—it is
the doctors’ fault, and the fault of the nurses, the GPs, the porters, the radiographers, the support staff, the patients, or even the weather. It is too cold, or it is too warm, or it is the wrong time of the year. But it is this Government’s problem; it is down to mismanagement by this Conservative and Lib Dem coalition.
If the Minister is going to tell us the problem is caused by too many people going to A&E when they should go somewhere else, can he tell the House why the Government cut Labour’s extended opening hours for doctors’ surgeries and why they are closing NHS walk-in centres up and down the country? Can he confirm how many walk-in centres have closed since the Government came into office? Why did they close NHS Direct, and why did they introduce NHS 111?
My noble friend Lady McDonagh has got it right. We have a dangerous mix of incompetence and ideology. They want to get rid of the NHS, but they realise how unpopular that would be, so instead they pare down to the bone, to the minimum that they can get away with.
8.03 pm
Baroness Finlay of Llandaff (CB): My Lords, I should declare, in this important debate, that my daughter is an A&E consultant in London. The current crisis is multi-factorial, at the one place in the system that is open 24 hours—open all hours, in fact. As the National Audit Office report, Emergency Admissions to Hospital, says:
“A&E departments are facing increasing pressure and there is evidence that at times of increased pressure there is a greater tendency to admit patients. Urgent access to primary care is variable and has been linked to higher A&E attendances … the severity of patients in major A&E departments is worsening, with higher proportions of patients arriving via ambulance and a sharp increase in the percentage of patients attending A&E … who are then admitted".
The College of Emergency Medicine also highlights insufficient workforce capacity, with 383 of 699 specialist registrar posts in emergency medicine unfilled. That equates to a capacity of 1 million patient contacts a year. There is also an exit block from A&E departments through delayed hospital discharges, estimated at 830,000 last year, which reduce bed capacity. This is compounded by inadequate ongoing community social support for those sent home. The £500 million in extra funding over two years has been targeted on those with the worst A&E performance last winter, and an extra £150 million was announced. Can the Minister confirm that this money will go directly to provide A&E services and its distribution will not inadvertently penalise departments that radically changed practices in their struggle to perform?
The staffing crisis jeopardises care. Consultant numbers need to rise from the current average of seven to a minimum of 10 per A&E to allow consultant cover 365 days a year from 8 am to midnight, with higher numbers of consultants in larger trauma centres. Today’s registrars are tomorrow's consultants, and this has to be a consultant-led service, because rapid diagnosis is absolutely essential for the complex trauma and urgent cases that are in the high-risk categories. These are not simple cases coming through the door; they present completely unselected problems.
The relentless pressure of work has driven more than 50 A&E consultants to emigrate this year—a tenfold rise. The College of Emergency Medicine survey of more than 1,000 consultants found that overall, 62% report that their current job plans are unsustainable, while 94% of respondents regularly work in excess of their planned activities.
The Keogh review is a longer-term attempt to solve the crisis. But it is silent on the workforce issues. Can the Minister assure me that these are being urgently considered? What is planned to develop primary care and better co-ordinated community care for a seven-day service? How quickly will the needed IT support be introduced, and how will the system of two-tier A&Es be implemented—over what timescale—to ensure that geographically remote regions are serviced without greatly increasing journey times to hospital and so risking higher patient mortality? This is not a simple problem.
8.07 pm
Lord Hunt of Kings Heath (Lab): My Lords, I first declare an interest as chair of a foundation trust, president of GS1 and consultant and trainer with Cumberlege Connections.
I too am grateful to my noble friend for raising such an important issue. The case she put for her local hospital, St Helier, was put with great force. The issues she raises are symptomatic of a whole range of issues around emergency care. They are well known, and they are symptomatic of a near collapse of the system in many parts of the country. My noble friends have already referred to the inexplicable closure of walk-in centres, and I ask the Minister why NHS England has pressurised clinical commissioning groups to close those centres. That has exacerbated poor access in primary care, and people are often left with no choice but to turn to A&E, with hospitals becoming very full as a result.
As my noble friend Lord Dubs said, the discharge of patients is becoming ever harder because the severe cutbacks in social services have impacted on councils’ ability to provide community support. The result of this cumulative failure is that more and more old people are left without the care and support needed to let them stay at home.
I want to reinforce a question asked by the noble Lord, Lord Kakkar. What are clinical commissioning groups doing about this? They are, as it were, the treasure of the Government—the people who are supposed to be able to sort the situation out. I see no sign whatever of their getting to grips with the issues. I echo the noble Baroness, Lady Manzoor, in asking; why on earth were they given the money to spend in relation to A&E? Why not give it to the hospitals to spend where it would have an impact on the system?
At a time when the NHS should be focusing all its energies on getting the system to work properly, as my noble friend Lord Kennedy says, the Government have forced it to spend the past three years implementing a costly and completely unnecessary structural change. Remarkably, during that time, rather than increasing staff we have seen a loss of more than 6,600 nurses.
There is a pressing need to integrate health and social care, provide whole person care and prevent avoidable admissions to hospital. That would also
embrace the comments of my noble friend Lord McKenzie about accident prevention. Urgent emergency care has a similar need of change. Of course, the recent review by Sir Bruce Keogh argues for a “fundamental shift” in the provision of urgent care and for introducing two types of hospital emergency department with current working titles of emergency centres and major emergency centres. I am not opposed to reform of emergency care, but it is essential, before there is a stampede of closures of current A&E departments, that decisions are based on robust clinical evidence. Any signs of closure for financial reasons must be resisted. I agree with my noble friends Lord Dubs and Lady McDonagh about the domino effect of A&E closures on the services in those hospitals.
I finish by reminding the Minister that what happened in the case of Lewisham hospital was quite disgraceful. A good hospital suddenly found itself having its A&E proposed for closure to shore up problems in neighbouring hospitals. It is shameful that the Government forced through an amendment in the Care Bill to make this kind of thing much easier to force through in future. The Government’s disastrous reforms and failure to manage the system are putting the NHS under ever more pressure. It is time that they got a grip.
8.11 pm
The Parliamentary Under-Secretary of State, Department of Health (Earl Howe) (Con): My Lords, I join other noble Lords in thanking the noble Baroness, Lady McDonagh, for raising this important issue, in which I know that she has a significant interest. I thank other noble Lords who have contributed to this very interesting debate.
I would like to respond initially by explaining the Government’s policy with regard to service change in general, before moving on to the provision of care in A&E specifically. I find it difficult to say much about the noble Baroness’s speech beyond observing that there is such a gulf separating us in our respective understanding of the facts and what is actually happening in the NHS that I shall have to write to her—and I shall do so.