My Lords, I beg to move my Amendment 123 and speak also to Amendment 124. They are quite large amendments, and I would say significant proposals, and I have cut down what I shall say given the time. This is based in large part on the work of the Sheffield Political Economy Research Institute, known as SPERI, and particularly Professor Andrew Baker there, and the Tax Justice Network, particularly Nicholas Shaxson.
I begin with Amendment 123, as it flows on from an earlier exchange between the noble Earl and me, which he kindly continued by letter, confirming my assumption that the source of his claim for the annual tax revenue for the financial sector of £76 billion came
from a PricewaterhouseCoopers report. That is, of course, a gross figure, one that reflects income but not costs. It is in no way an impact assessment. It is a pity that the noble Baroness, Lady Noakes, is not with us now.
This amendment proposes that within 12 months of the passing of this Bill and every subsequent five years the responsible bodies must separately provide reports to the relevant committee of the Commons and Lords and consult the financial scrutiny and oversight network, which I shall get to shortly. Behind this is the fact that there is now a large body of academic literature, known as the “too much finance” literature, which supports the idea that some countries, including most certainly the United Kingdom, suffer from the finance curse: too much finance makes us poorer. It seems that the City of London passed the point of optimal finance sometime in the 1980s and has grown massively since then, harming the UK economy. The only study of which I am aware that has attempted to quantify the damage, from SPERI, estimated in 2019 that excess finance reduced economic growth by a cumulative £4.5 trillion from 1995 to 2015. That is the finance curse.
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One of the easiest ways in which to think about this is in terms of its consumption of human resources. The example I will use demonstrates the reasons for the inclusion of many elements of the suggested report. A bright young woman from Newcastle finishes a PhD in mathematics. She might go into academic research, advancing human knowledge; she might go into manufacturing, refining or advancing practices and approaches to improve productivity and create new products—or there is the lure of the City, of huge salaries and bonuses and glossy excitement. She may well go on to invent the next fancy financial instrument that brings down a bank or two, after it has made a lot of money for a few people along the way. She will be based in London of course, where all that money is sucked to, including money from privatised local services, care homes, PFI schools, hospitals and roads and outsourced contracts for security and social care, from up and down the country—for the concentration of money in a small part of the country is another part of the finance curse, a major contributor to the UK’s world-leading levels of regional inequality.
In contemplating how to approach the finance curse in legislation, I might have taken a Goldilocks approach, calling for the Government to work out what is a “just right” size of financial sector for the UK, and to develop policies to deliver it. But we have referred much to another impact of the financial sector—its lobbying power, and not just with the Conservative Party that forms our current Government. So the amendment takes a softer approach. All that it asks for is accurate, independent information and transparency, something which, as the noble Earl’s reliance on figures from PricewaterhouseCoopers demonstrates, is clearly lacking.
I referred to the financial scrutiny and oversight network—the acronym FSON perhaps needs some work. In essence, it is a UK equivalent to the EU’s Finance Watch. I am sure that expert noble Lords will be aware of Finance Watch, how it came into being and subsequently acted. With the mandate of making
finance serve society, it was established in 2010 by a group of MEPs including Greens, with a grant, tasked with providing advice and counter-submissions to parliamentarians on financial regulatory legislation. In particular, it was given the job of identifying, amending and removing clauses that placed excessive costs and risks on the wider public. I have shared with many noble Lords an account of its successes.
I commented earlier on the sparseness of much of the debate on this Bill and, indeed, the speed at which we are operating now. The contrast with the Domestic Abuse Bill, on which the noble Baroness, Lady McIntosh of Pickering, and I are operating, is clear. We are struggling to manage to deal with this Bill. We have a tiny, sparse crew—and that is no insult to anyone here, particularly when contrasting it with the Domestic Abuse Bill. Everyone here is working very hard but, with the best will in the world, we cannot match the kind of scrutiny and outcomes that Finance Watch has regularly delivered for the EU and that we urgently need in the UK.
We have talked a lot about regulatory and policy capture; it has been well documented. Lawyers talk about the need for equality of arms in court cases. In oversight of the financial sector and its regulation, there is extreme inequality of arms. FSON would not be a magic wand, but it would be a start. I beg to move.