“the Bill is a central part of the Government’s response to the financial crisis of 2007-09”.
In responding for the Opposition, the noble Lord, Lord Eatwell, said that this is the most significant reform of the finance ever, but he added:
The President of the Supreme Court, the noble and learned Lord, Lord Neuberger, in a speech last month entitled Justice in an Age of Austerity said:
“Partly because there are so many perceived problems in society, there is a welter of ill-conceived legislation—poor in quality and voluminous in quantity. The result is little more than the illusion of action without much in the way of the reality of achievement, coupled with uncertainty and confusion about the law … it brings the legislature, even the rule of law, into disrepute”.
He could have been talking about this financial services Bill. I have news for the House; indeed he was.
When introduced to the House of Commons in February 2013, the Bill was 20 pages and 25 clauses long. When introduced to the House of Lords in July 2013, it was 35 pages and 21 clauses long. Now, before us, we have 170 pages and 127 clauses.
The noble and learned Lord, Lord Neuberger, continues:
“I mean no criticism of parliamentary drafters or of MPs or Peers. The pressure on them is such that they cannot do their jobs properly, as they themselves have made clear. Let me take a very recent example. Exactly a week ago, the House of Lords considered the Financial Services (Banking Reform) Bill, in what was optimistically described on the Parliamentary website as ‘the first chance for line by line scrutiny, in the Lords’. Lord Turnbull, a cross-bencher, pointed out that the ‘total amendments [run to] 116 pages and government amendments accounting for 95 pages of that: more than three times the length of the original Bill. That tells us something about the process of legislation. We are dealing with amendments to amendments to amendments which are in turn amending statutes that have already been amended more than once’.
‘Lord Higgins, a Conservative, said that ‘the way that the Bill is drafted … makes it extremely difficult for the House to work out what is happening from moment to moment on an unbelievably complex matter’. Lord Phillips of Sudbury, a Liberal Democrat, described ‘the complexity of both the Bill and the amendments’ as ‘quite barbaric’, and Lord Barnett, for Labour, said that he had ‘enormous sympathy’ with the view of Lord Turnbull ‘that he has never seen such a shambles presented to any House’. He immediately went on to say:
‘As Chief Secretary to the Treasury, I had the misfortune for five years … to take two Finance Bills a year through, mainly because the first Bill had to be amended because it had not been properly scrutinised; it had been guillotined by all successive Governments. Yet I have never seen anything remotely like this Bill’”.
As the noble and learned Lord, who is the President of the Supreme Court, said:
“So here we have a Parliamentary debate on a Bill whose importance could scarcely be greater, a debate and a Bill which are condemned from all sides of the political divide as plainly unsatisfactory, and where a former Minister indicates that the problem is not new. Examples abound”.
“I appreciate that life gets ever-more complex, but that reinforces, rather than undermines, the need for simplicity in legislation”.
The Government may say that they have put these amendments down in order to respond to the recommendations of the Parliamentary Commission on Banking Standards. However, there is universal dismay among the members of that commission at the haste with which the Government are pushing the Report stage to
“a government move this week to ram the Bill through the House of Lords would not leave peers necessary time to consider amendments”.
“This legislation is being rushed. It’s hugely complex: amendments piled on amendments piled on amendments. We must get this bill right, and the Lords need more time to do it”.
“The bill would be a botched job, were we not to take the time to get it right”.
We have a number of substantial differences with the Government regarding the direction in which they are going. For example, we want a statutory basis for the remuneration code, to better align risk and reward. Leverage ratios have been at the core of all financial crises since the time of the Ark. Mervyn King, the former Governor of the Bank of England, was very clear when he said:
“Leverage is the one issue that matters above all others”.
It is not for politicians to decide, and that is what the Government are doing at this very moment. There are also the issues of electrification of the ring-fence, and of general powers. The chairman of the commission, Andrew Tyrie, said,
“the Government’s amendments would render the specific power of electrification virtually useless”.—[ Official Report , Commons, 8/7/13; col. 75.]
The noble Lord, Lord Lawson, and I have been interested in the issue of the auditors’ code. We need a basis of communication between auditors and the regulator if we are to ensure that we can make sense of banks’ business models, now and in the future. The noble Lord has been very keen on the issue of prop trading, which the Government have dismissed.
The commissioners accept in principle much which needs to be in secondary legislation. If that could be provided—even in draft—so that we know exactly what the Government have in mind, and we can form our opinion accordingly, it would be a step forward. However, that needs time so that everyone can understand it.
The commission was established in June 2012 to examine both culture and standards in the financial services industry, particularly the banking industry. What did we find? We found a culture which was rotten, and we found standards which were abysmally low. Financial services will not change overnight as a result of even the finest legislation passed here, because fostering a culture of caution, prudence and service to clients is a generational task. That has not been done. However, if we pass legislation without adequate scrutiny, it will be imbued with complexity and will therefore lack both clarity and coherence. The noble Lord, Lord Brennan, a seasoned commercial lawyer, was very clear in Committee when he said:
“Everybody will look at what they are required to do and what the consequences are if they do not do it… The Bill should say what it means and mean what it says”. — [Hansard, 24/7/13; col. 1375.]
If the Bill does not do that with sufficient clarity then there will be no individual accountability of bankers, which was at the core of the rottenness of the system. They did not see, they did not tell and they did not hear, so that clarity is really important.
On the second issue of coherence, we have a Bill, statutory orders and a regulatory authority. As a result, we will have ensuing codes of conduct, memoranda of understanding and banking standards, all of which have to gel. The absence of interrelation is what the bankers, and particularly the lawyers, will look for. If we pass this legislation with its present level of complexity and absence of clarity and coherence, this reform will be next to useless. It will be the lawyers who will win on this; the Minister has heard that from all sides of the House. That is because we have to superimpose the present Bill on at least two other statutes and extract as best we can from that superimposition of a notional, generic Bill for banking reform. So difficult will that be that it will keep the lawyers and accountants in business from here to eternity, while reform of financial services goes by the board.
The Parliamentary Commission on Banking Standards was charged with, “Changing banking for good”. That was very clear and it is on the front of our document, but we will have fallen down on our job and our effort on culture and standards if we rush this. There will be little change in that culture and those standards. In June 2012, 10 of us from across parties in both the House of Lords and the House of Commons came together to use our best collective efforts to deliver a unanimous report. We all had to put a lot of effort into ensuring that that report was unanimous, but those 12 months were worthwhile. If I might quote the noble and learned Lord, Lord Neuberger, again, he said in his lecture:
“We need legislation which is more critically and expertly considered and which is significantly less in quantity … Less and better legislation will not only mean better justice, as the law will be clearer and simpler”.
One of our members, the most reverend Primate the Archbishop of Canterbury, played a crucial role in the work of the Parliamentary Commission on Banking Standards, not least in the area of culture and ethics. His colleague, the right reverend Prelate the Bishop of Birmingham, indicated on Second Reading in July that the most reverend Primate was not,
“in his place but fully intends to be so … in the autumn”,—[ Official Report , 24/7/13; col. 1350-51]
when the commission’s work would be further discussed. Sadly, that cannot be the case because of the Government’s decision to rush this legislation since, on
Criticism of the complexity and opaqueness of these legislative proposals is widespread throughout the House, and profound. The chairman of the committee, Andrew Tyrie, has been hugely conscientious in his deliberations over a year, notwithstanding his efforts as chairman of the Treasury Committee in the House of Commons. He informed me only a few hours ago that we need until the new year if we are to have an Act worthy of our effort and intellectual rigour, as applied over the past 12 months.
I understand the problems that Whips have when they organise business. I have been a Whip in the House of Commons, both in opposition and in government. However, I say to this Chamber that if we are to do justice to the objectives of this House—that is, in being a rigorous, revising Chamber—we really need to abandon this rush to have Report on
I support my noble friend Lord McFall of Alcluith and the Motion that he has moved. The vast number of amendments to the Financial Services (Banking Reform) Bill are extremely complex. Clearly, more time is needed to consider the amendments before Report. As my noble friend has pointed out, the banking commission, which includes the most reverend Primate the Archbishop of Canterbury, is joined by the President of the Supreme Court, the noble and learned Lord, Lord Neuberger, and the former Governor of the Bank of England in suggesting that that is the best way forward to delay the Report stage of this Bill until after the Christmas Recess.
The noble Baroness, Lady Anelay, the Chief Whip, said in our exchange of views on Wednesday that the increased length of the Bill was due to the Government responding positively to the recommendations made by the banking commission. Undoubtedly that played a part, but in a Bill of such importance for the future well-being for our financial system, it is critical that noble Lords have a longer opportunity to look at the Bill as a whole to see how the many amendments to the amendments to the amendments, as my noble friend pointed out, work together to provide a clear, cohesive and coherent system. My noble friend is right to point out that good legislation is critical, and the critique of the noble and learned Lord, Lord Neuberger, is salutary in this respect. Bad legislation is often complex legislation. In such situations, it is always the lawyers and accountants who win, and our country’s citizens who lose.
The Deputy Chief Whip is aware that my strong preference for business next Monday is to have debates on non-legislative reports. That seems to be a simple solution to the problem that was not, as I acknowledge, of the Government’s making, but the result of the will of the House in relation to the lobbying Bill. As I have explained to noble Lords and others inside and outside this Chamber, it is not possible to have the Second Reading of the Pensions Bill on
As my noble friend said, we do have a duty to ensure the necessary transformation of our banking system. This requires longer consideration before the Report stage of the banking Bill. However, I recognise that the House is anxious not only to try to ensure that Report is put off until after Christmas, but also to ensure that all Members of your Lordships’ House who are members of the banking commission can participate at Report, including, of course, the most reverend Primate the Archbishop of Canterbury.
I suggest therefore that, even if it were not possible to delay the commencement of Report until after Christmas, there may be other legislative options that could be discussed in relation to business on Monday. I know that my noble friend Lord Bassam is happy to discuss other suggestions with the Deputy Chief Whip. I trust that this can be taken forward outside this Chamber. I am sure that most noble Lords, although clearly they are not in their place this evening, would be anxious to ensure that all members of the banking commission can participate in the Report stage and that proper consideration can be given by all Members of this House with an interest in this most important issue.
My Lords, on the substance of the Motion of the noble Lord, Lord McFall, as the House knows I am one of the Government’s spokespeople on the Bill, as well as being Deputy Chief Whip.
The Government tabled 155 amendments at Committee stage. By my reckoning, 116 of them were to respond to the report of the Parliamentary Commission on Banking Standards and were welcomed by members of the commission. The remainder set up the payments systems regulator, and were equally welcomed across the House. All but one of the amendments were tabled more than a week ahead of the Committee stage debate, and with an open letter of explanation addressed to the participants. I believe that this was a classic example of good practice.
Off the Floor, my noble friend Lord Deighton and I and other Treasury Ministers have had highly constructive and productive discussions with those interested in the Bill, and we continue to do so. Committee stage finished on
That is the substance of the matter. I will address two further issues. The first is that of the Chief Whip adjusting our future business in response to events. The Chief Whip had to rearrange our provisional forward business but, as she made clear last week at the Dispatch Box, she did so only because of the pressure in the House to delay Part 2 of the lobbying Bill—a position not initiated by the Government. In order to have a proper pipeline of parliamentary debate and proper progress of government business, it is necessary to have legislative business next week. The Financial Services (Banking Reform) Bill was waiting for Report. It was well beyond the necessary minimum interval between stages, and the Opposition Chief Whip made no alternative proposal. I think the Chief Whip not only did the best she could in the circumstances but acted entirely properly and reasonably.
I cannot but regret that the Motion we find ourselves debating was tabled by the noble Lord, Lord McFall, not only minutes before House up on Friday afternoon, but without first agreeing a slot for the debate with the Chief Whip, or even consulting her. I realise that in theory every Lord has equal access to the Order Paper. Of course they do in theory, but that is not how we work in practice.
Let me correct the Deputy Chief Whip. As a member of the Parliamentary Commission on Banking Standards, I was left in the dark regarding the Chief Whip’s negotiations with the usual channels. I was informed on Friday of the situation. I got on to the Table Office at about 1.30 pm and one of the first things I said was, “Contact the Government Whips so that they know this is going on on Monday”. I would have not needed to have done that if there had been proper channels of procedure between the Whips’ department and our department, and also the Parliamentary Commission on Banking Standards under the chairmanship of Andrew Tyrie, who has expressed deep regret at this situation. This Bill is different from all other Bills. The Government set up the Parliamentary Commission on Banking Standards. This is not government legislation; this is legislation that the Government are implementing as a result of a year-long inquiry that they set up. It is unique and different from all other aspects.
My Lords, my understanding—and I have not been a Whip as long as a number of noble Lords in their places at the moment—is that if a noble Lord wishes to bring a Motion of this sort, the normal practice is to discuss it with the usual channels before laying it. That did not happen in this case, and I greatly regret it. It is for the good order of the House that that is how we do our business. That is not the substance of our debate this evening, although we have to look to at how we do our procedure.
There are a number of outstanding issues between the Government and the Parliamentary Commission on Banking Standards. It is proposed that the relevant
Treasury Ministers should meet representatives of the commission within the next 24 hours. That offer has been made. Having looked at the outstanding issues, I believe that it will be possible to make progress on most of them, but not necessarily on every last one. That can be done within the next 48 hours. The number of issues between the Government and the Parliamentary Commission on Banking Standards is relatively small because we have dealt with so many of them already. I strongly urge members of the commission to go ahead with that process in the confident expectation that we will be able to reach an agreement on many of the outstanding issues in the very near future.
My Lords, I should like to respond to two or three points raised by the Deputy Chief Whip. On consultation, I note what he said, but I suggest that it is not the case that there is consultation beforehand every time a Member of this House lays the sort of Motion that my noble friend has. My noble friend Lady Hayter was told of the dates when the Committee stage of the transparency of lobbying Bill would recommence in December. She was not asked when it would be done; she was told. There is room for further consultation on many issues in this House.
In the brief exchange we had on this issue last Wednesday, I concluded my remarks by saying that my door was always open, but nobody has crossed the threshold of my office to try to find alternative legislation that could be taken on Monday. While I note what the Minister is saying—it is his view and that of the Government that we do not need to wait until the new year for the Report stage of the banking Bill—it would be to the benefit of all Members of this House if all members of the banking commission were present for the first day of Report. I hope, therefore, that the noble Lord will be able to take up my suggestion that he have a conversation with my noble friend Lord Bassam following this exchange, to try to find some other legislation that could be taken in this House on Monday so that the banking Bill could start a few days later.
As my noble friend the Chief Whip said last week, she was willing to hear alternative proposals from the Opposition Chief Whip about legislation for next Monday. As far as I understand, no proposals came forth. If the Opposition Chief Whip has some new proposals that he wants to make, obviously my noble friend’s door is always open. However, it is now very late and potentially unfair to people whose legislation might be coming next week to suggest changing the business for next Monday now.
Would the noble Lord be prepared to consider some changes at this late stage, because I am sure we could have some further discussion on this?
My Lords, the usual channels are always open.
My Lords, the Parliamentary Commission on Banking Standards has been very open with the Government in everything we have done, and courteous in all our exchanges with them. In light of the heavyweight presence on that commission, in light of the reception it has received in the country and in the knowledge that if anything will change cultural standards in the UK’s financial services, it will be the recommendations of this commission, I should like the Government to reflect on the situation. The Minister should take it back to the Chief Whip and come back and say, “This commission has the best interests of Parliament and the country at heart. It wants time to look at it in a measured way and it is as simple a request as that”. It would be done courteously, and if it needs me to go to the Chief Whip and supplicate, I will be quite happy.