My Lords, I compliment the noble Lords, Lord Rooker and Lord Bhattacharyya, on their advocacy of the importance of engineering and technology to our economy. I strongly endorse what they said. Our economy will not recover without engineering and technology.
It is extraordinarily difficult to find a silver lining in the economic storm clouds that cover the sky today, but I think that I have found one, even if it is small. In August 2007, this House's Science and Technology Select Committee—I declare an interest as I was chairman of the committee at that time—published a report on personal internet security that contained a number of recommendations that we felt should have been accepted and acted upon rapidly. One was that the aspects of the voluntary Banking Code that relate to the way in which banks deal with fraud, especially with electronic fraud, should be made statutory. It was amazing to us that the Banking Code as a whole was voluntary, not statutory. The Government responded in October last year by rejecting that recommendation along with most of our other recommendations.
Since the Government response was so unacceptably complacent and dismissive, the committee conducted a follow-up report, which we debated in this Chamber a few weeks ago. In that debate, I again raised the issue of making the Banking Code statutory, as there were no signs of action by the Government. I was gratified a couple of weeks later by a letter written following the debate by the noble Lord, Lord Brett, to those who had spoken in it. He said that the Government intend to make the Banking Code statutory. Eureka! That is my faint silver lining. It is a little tarnished through being so overdue, but at last the Government have woken up to the need for statutory rather than voluntary regulation of the banking sector, if only in the face of an economic hurricane of unrecorded violence created as much by the lack of effective regulation as by the lack of appropriate indicators. I shall return to them in a minute.
The committee also asked that the Government rescind their recommendation that those who have been victims of credit card fraud should report it to their bank rather than to the police. The banks are not law-enforcement agents and are conflicted in issues of fraud. It is very often not in their interest to ask the police to investigate such crimes, and such evidence as exists suggests that they pass very few cases to the police. I discussed the question of evidence here on
Regulation and fraud prevention are matters that we are going to have to tackle in a much broader and more comprehensive manner. Technology is going to be central and important, but clever technology can be used by criminals and, almost worse, by those who may have honest intentions but lack understanding of what they are doing, as well as by those who have the task, to quote the second paragraph of the gracious Speech,
"to ensure fairer and more secure protection for bank depositors and to improve the resilience of the financial sector".
It is going to be a race between the forces of intelligence and good and the forces of incompetence and evil. The very finest data-processing engineers will be needed to create the technologies of our regulatory systems and to work with economists to come up with appropriate metrics so that we do not find ourselves again in this incredible situation where the so-called experts totally fail to forecast the hurricane. These new systems will involve people with knowledge of advanced mathematics and, more essentially, intimate knowledge of the intricacies of large computing and communications systems. Major shifts in regulatory and law-enforcement resources will have to be made, and extensive training and research programmes will have to be put in place.
The electronic revolution has changed the world of finance completely, and many of the leaders of financial institutions have been found to lack even an elementary understanding of what those lower in their organisation were doing. Will the Minister reassure us that the Government have completely discarded their complacency about the security of our banking systems, which they maintained until a few months ago, and that they will find, for government at least, people better qualified to manage and police our financial systems?