Financial Services Bill

The hon. Gentleman does not understand that the buck does not stop with the Governor of the Bank of England, but with the Chancellor of the Exchequer, who, in the end, is the guarantor of the public purse and taxpayers' money, and of the wider stability of the system. If the Governor comes to the Chancellor and says, ““In my view, and based on the views of my deputies, our collective view is to intervene,”” the Chancellor has the power to do so. Rightly, the Chancellor has given himself the power in the Bill to override the Governor if the latter says we should not act. The concerning situation, which I am trying to explain—the hon. Gentleman does not quite get it—is that there will be different views within the overarching Bank of England, because it will be huge, with different, overlapping and sometimes contradictory statutory responsibilities for systemic stability, prudential regulation of individual firms and managing risks to consumers, let alone monetary policies. In those circumstances, my strong advice to the Chancellor, with whom the buck stops, is that he should not allow the decision to be made in the Bank of England. He should not allow the Governor to say, ““I know you want to act and that you want to us to act. Thanks very much, but I'm the Governor, and I don't think we should.”” We should not allow the Governor to tell the Chancellor, ““The Bank does not propose action.”” I would not put myself in that position. The idea that such a situation is okay because the Chancellor will have heard before the meeting—from Treasury officials or on the grapevine—what those other office holders want is unbelievably naive. We are talking about the Bank of England's legislative responsibilities and the statutory power of the office holder. In that key meeting of only the Chancellor and the Governor, the Chancellor cannot say, ““I'm sorry, Governor, but other people take a different view from you.”” That is not how it works. Shall I move on, Madam Deputy Speaker? [Hon. Members: ““Hear, hear!””] That is a very important argument to which we will return in Committee. On Europe, that problem of complexity is mentioned in the Treasury Committee report, which states that there is"““a risk that the single UK regulatory voice in some cases is weakened by the fact that two or more organisations will share the representational role in the various international regulatory committees.””" The Chancellor has proposed a new committee, which is welcome, but I urge him to look harder at that arrangement. The Opposition will table amendments on that in Committee. Let me move on quickly, because it is important to get other things on the record on Second Reading. As I have said, on consumers, the Opposition welcome the recognition of the need for a single regulator for all retail financial services, but we will highlight a number of concerns in Committee. In particular, we want to ensure that the FCA has the powers it needs to require providers of financial services to understand its fiduciary duties. On disciplinary action, the Joint Committee has recommended a requirement to consult before disclosing the fact that a warning notice has been issued. We think the Government are wrong to reject that recommendation. That transparency should be in the Bill. The Joint Committee has also recommended that the FCA should be given concurrent powers alongside the Office of Fair Trading to make market investigation references to the Competition Commission. We do not understand why the Treasury has rejected that. We are also disappointed that the Government have not used the Bill to bring forward the Vickers recommendation for a review of progress on competition. We propose having one in 2013, rather than in 2015, as Vickers proposed, not least because the Lloyds divestiture has so far not produced the strong, effective challenger that we sought. The Chancellor says that he is in favour of financial education in schools and the Prime Minister says he is reviewing it, but they vetoed that proposal when a Bill was before the House. There is cross-party support on financial education. The all-party parliamentary group on financial education for young people is the largest such group and will propose an amendment for statutory financial education in schools for all young people. The Opposition are worried that the Government are allowing the banks to go backwards on financial exclusion, with charges for basic bank accounts being increased in the case of Barclays, and with new charges on basic bank account holders using automated teller machines in RBS and Lloyds. We want to strengthen the obligation on the banks to produce a universal service for all retail banks. My hon. Friend the Member for Walthamstow (Stella Creasy) will no doubt push us to ensure that the Government agree to our amendments to give new powers to the FCA to restrain the ability of firms to charge ultra-high interest rates for prolonged periods. On growth and employment, the CBI was right to say in its submission that"““the Bill should ensure that the new regulatory authorities have a specific objective to focus on—and support—economic growth.””" As it points out, the macro-economic tools used by the FPC could by their nature have a significant impact. The CBI says that the FPC should be required in statute to act"““in a way that is consistent with promoting the medium and long-term growth of the economy””." The Joint Committee also proposed a strengthening of the growth obligation for the FPC, and we will propose amendments to that effect. I hope that the Government will look at this issue again, because it is important, not least for the supply of credit to small and growing businesses. Even the British Bankers Association says:"““We would suggest that the legislation underpinning the FPC should specify that its objective is to maintain a sustainable supply of credit to the economy””." Bank of England figures show a £10 billion fall in lending to small businesses, and in November the Chancellor said that his new credit easing scheme would relieve constraints in the supply of bank lending in the short term. The short term is becoming the long term, because there is still no sign of that credit easing scheme. No wonder, with small business lending down and bonuses high, the Merlin deal is looking rather tawdry. At least the Chancellor has recognised that executive pay needs to be covered in the Bill, but as the Institute of Chartered Accountants said in its briefing,"““at the moment the Bill is drafted too broadly to be effective in encouraging proportional executive pay.””" We will look at amendments in Committee and tomorrow the House will have the chance to debate the Opposition's call for a repeat of the bank bonus tax to provide 100,000 jobs for young people. This is a badly drafted Bill. On stability, there are gaping holes in decision making and accountability. On protecting taxpayers, there are flaws in the advice the Chancellor will receive. For consumers, there are flaws in the powers for referral to the Competition Commission and a worrying lack of action on financial education and exclusion. On growth and employment, there is a gaping gap that must be filled. We will not oppose Second Reading, but we want big changes in Committee. Otherwise, to protect stability, taxpayers, consumers, growth and jobs, we will have to vote against the Bill on Third Reading.