My Lords, this is a short speech about customers. It is about how we might be able to give people the opportunity to speak for themselves and not always be spoken for by experts and people who sometimes seem to know better. I declare an interest as a non-executive director of Britannia Building Society, although I obviously do not speak on its behalf, or on behalf of any other organisation. I was pleased that the Chancellor recognised in his pre-Budget speech that mutuals provide a valuable alternative to banks across a range of financial services, and that the Government are committed to growth and efficiency in this sector. Sadly, the growth and efficiency could be jeopardised by the application of the financial services' consumer credit scheme, which places unfair and disproportionate burdens on mutuals in requiring them to provide punitive levels of compensation for banks which have adopted imprudent—and often reckless— business models. I seriously and earnestly ask my noble friends on the Front Bench to look again at the figures in order to give mutuals the opportunity to benefit, as they quite rightly should, from their own careful and prudent behaviour.
I will comment briefly on two further issues, both relating to banks and their retail customers. Despite the best efforts of the FSA, I do not believe that banks treat their customers fairly. There is a substantial body of evidence to support that contention, from a long history of poor product provision to an equally long history of overcharging and of failing to pass on cuts in interest rates to customers. This is not a simple matter, but nor is it recent. Most interestingly, I draw the House's attention to a 2007 survey by the Building Societies' Association, comparing customer confidence in mutuals and other providers. This shows a much higher level of satisfaction with mutuals than with all other financial providers. This deficit in customer confidence, coupled with the failure of the business models adopted by most banks, has led, quite rightly and unavoidably, to a degree of state intervention on behalf of customers. I welcome this, and the way in which my noble friends on the Front Bench and in another place have handled this extremely difficult situation on behalf of customers.
It must also lead to a completely new way of thinking about how banks are governed and managed and about their relationship with customers—and I really do mean a new way of thinking about it. We need to think about a situation in which customers are seen as people not only to be treated fairly but to be respected, listened to and empowered to have a real and direct say in how their banks are governed. I am talking not about fairness but engagement—about customer empowerment on a scale and in a depth that banks have not yet considered. I am looking for our Government to listen to that argument and be champions of customers in that respect. That will mean much more than marketing, branding or focus groups; it will mean the real adoption and adherence to values and systems that give customer direct access to and engagement with directors and managers of their banks.
I know that can be done because, in many parts of the mutuals sector, those values and that respect are standard practices. When customers are owners, they are given a very different model of customer engagement. For example, in the Britannia Building Society, there is a council of members with 24 customers who meet for a whole day at least four times a year and engage with the chief executive and his team on any matter that concerns them. The agenda is determined by the customers. There is nothing off limits—so much so that the council of members entered into a dialogue last year with the remuneration committee of the board of directors to discuss face to face for several hours the executive remuneration package. In fact, it approved the package, including the introduction of a long-term incentive plan. That was an outstanding and worthwhile level of engagement, which was applauded and welcomed by leaders of business—and it was also a massively important degree of engagement for the customers. That is the sort of practice that we should talk to the banks about. There are other examples in the mutuals sector, which I could talk about, but I shall leave it there.
The second thing that I want to touch on briefly is corporate governance, which has been mentioned in the debate already. We need more diversity on the boards of banks. Directors of banks are mostly financial experts, bankers and accountants. All those people are extremely important—why would I say otherwise?—but there is an argument for including people who do not come from that sector and who would bring a different point of view, common sense and clear judgment learnt in other places.
I am pleased to see my noble friend the Minister in his place, because I can tell a tale of when he, as Secretary of State for Industry, made the bold and imaginative decision to appoint a non-executive director to the Royal Mail board who was to have a special interest in representing employees. That was not exactly looked on with great favour by all the traditional members of the board, but that appointment, which is now held by my noble friend Lady Prosser, has turned out to be an outstanding decision. The contribution of those members to the board is universally acclaimed by all the business leaders, from Allan Leighton downwards. The noble Baroness brings diversity and a way of thinking that is different from that of all the traditional board members. I ask my noble friend the Minister to consider that great success and whether there may be opportunities in the banking world for people to look at and digest that experience and how it might relate to them.
Finally, given the enormous challenges and responsibilities faced by the FSA in relation to its role as a regulator, I wonder whether there might be some sense—and others would know better than me about this—in looking at the separation of its role as a financial educator and customer champion, which is very important, and its role as a regulator. Regulation and customer protection are two very different things and probably require a set of very different skills. As this is going to be a growth sector and there will be a lot more of this in future, would some degree of separation not be worth considering?