Enterprise Act 2002 (Specification of Additional Section 58 Consideration) Order 2008

Part of the debate – in the House of Lords at 1:29 pm on 16th October 2008.

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Photo of Lord Hunt of Wirral Lord Hunt of Wirral Shadow Minister (Business, Innovation and Skills) 1:29 pm, 16th October 2008

My Lords, on behalf of us all, I welcome the noble Lord to the House of Lords and congratulate him not only on his appointment as Secretary of State for Business, Enterprise and Regulatory Reform but on his very accomplished maiden speech.

He led us on a fascinating and absorbing journey through history. There are many lessons to be learnt from the events that he described. We also share his pride in his family's contribution in the past. We also thank him for the way in which he praised the width and depth of the experience of this place. We all value the contribution that he is going to make, given his impressive career to date. His tributes to colleagues, in particular to the staff, will be much appreciated and are reciprocated by us all.

As I was reminded by one of my more senior colleagues, the Minister, now that he is a life Peer, can be introduced only once in the House of Lords. Under the present system, we will all work together until death do us part. He has now indeed joined the aristocracy. Revisiting my well thumbed copy of his book, The Blair Revolution, which was published in 1996, I came across his reference to Joseph Chamberlain's biblical allusion and comment on the aristocracy:

"they toil not, neither do they spin".

Although the Minister may find it necessary to toil in his new post, I am sure that he will already have reflected deeply on the second part of that formulation, and so we look forward to hearing from him on many future occasions as we toil together in the public interest. We in this House assure colleagues in the other place that we intend to hold the noble Lord and his fellow Ministers fully to account in this place.

This is not the first experience that the noble Lord and I have of working together. I have many memories of our partnership 30 years ago when together we ran the British Youth Council. Here I declare my interests as set out in the Register of Members' Interests. In the spirit of transparency, perhaps I should also declare a generous gift that he gave to me when I completed my term as president of the council. He arranged for me to receive a Toby jug, and I admire him for his forethought. This object now beams at me from my mantelpiece with the well known face of Neville Chamberlain. I do not think that I have ever thanked him enough. Although I greatly appreciated that gesture three decades ago, with all its nuances and subtexts, I assure him that, although we on this Front Bench will approach each issue on its merits and will not oppose for the sake of opposing, we shall not adopt a policy of appeasement.

There has been broad cross-party consensus, both here and in another place, on the Government's response to the banking crisis. Although we on these Benches have repeatedly made it clear that we will not stand in the way of the Government's efforts to deal with the crisis—this also applies to the order—a number of points and questions need to be raised. Although no one seriously queries the need for significant intervention in the banking sector at this juncture, we should pause for a moment before making our next foray into this minefield of moral hazard.

The Bank of England is the long-established lender of last resort and the provider of liquidity of last resort. By establishing Her Majesty's Government as the owner of last resort, we have entered almost entirely uncharted waters. Implicit in everything that we are discussing today is a recognition that the levers that we had in place before this crisis have proved to be inadequate. This is probably the most fundamental point of all. The biggest and most pressing question today, therefore, is what convincing assurances, if any, the Government can give for the future. How can we now feel confident that the merged superbank that we are helping to create today will not abuse its dominant position in the market? It is implicit in the order that competition issues are being raised. What do we need to do in addition to what we are doing today? What will the management of this new entity be required to do to allay the legitimate concerns of Which? and a number of other bodies about market power?

In the Northern Rock case, we on these Benches, strongly supported by the Liberal Democrats, said that the Government should lay annually before Parliament a report on the impact on the competitiveness of the market in the UK of any merger that might proceed by virtue of that emergency legislation. We said further that it should report to Parliament as soon as it identified a significant adverse effect on the competitiveness of the market in the UK as a result of that merger. Our concerns are, if anything, greater in this case. The Minister referred to those concerns in his opening speech, but we need more detail.

The Explanatory Memorandum makes it clear that the order is intended specifically to address the HBOS/Lloyds-TSB case. However, the investments announced this week in several of our biggest banking names serve only to underline our wider concerns. It would be helpful if the Minister explained how the Government have addressed competition issues across the board. The Explanatory Memorandum further indicates that the new public interest consideration will not be available in the case of a merger or a takeover with a European Union dimension. Is it correct to assume that the specific ground on which the HBOS/Lloyds-TSB merger avoids breaching the regulation is the two-thirds rule? If so, will the Minister confirm for the record under which threshold the Alliance and Leicester/Santander transaction avoids such a breach?

The Government claim to have adopted the five principles of good regulation set out by the Better Regulation Task Force. I remind your Lordships that these are proportionality, accountability, consistency, transparency and targeting. Will the Minister describe the procedure that he has been through to ensure that the order complies with these principles? I emphasise accountability in particular. Accountability does not imply a one-off debate here or in another place; it must be ongoing. The departmental impact assessment of the order fails to provide concrete figures for one-off or annual costs either to UK plc or the public purse. We appreciate that time is of the essence, and I fully understand that the order has necessarily been drafted with considerable urgency, but will the Minister confirm that such costs are genuinely anticipated to be zero over the medium to long term, or at least negligible? It is by no means a negligible action to amend an Act of Parliament as the order does.

We all hope that this period of crisis management is coming to an end and the Government can establish themselves as the master of events, not the victim. Only then will we start to see confidence return to the market. If the most violent part of this economic squall is indeed over, we must all turn our attention to the well-being of the real economy, for which we hold the Government responsible. Against that background, the Minister now holds probably just about the most important departmental brief in government. The resilience of every firm in this country will be sorely tested in the months, and possibly years, ahead. In business, as in life, survival is all. A healthy banking sector is an essential foundation stone for our economy, but it is not the be-all and end-all. By buttressing the banks, we make it possible for British firms of every shape and size to survive now and flourish later, but we cannot make that inevitable. Most of the real hard work remains to be done, and our thoughts are with every individual and business, particularly our small businesses, at the present time.

As we seek to get the economy back on its feet, the order is not the end. To paraphrase a wise old statesman in another place, it is not even the beginning of the end, although it is perhaps the end of the beginning.