My Lords, why does my Motion state, “measured consideration”? If we go back to Second Reading on 21 July, the noble Lord, Lord Deighton, the Commercial Secretary, stated that,
“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:
“This Second Reading is being conducted largely in the dark”.”.—[Official Report, 27/7/13; col. 1343.]
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”.
He adds:
“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 18 November. I quote from the Times last Thursday, in which the chairman of the commission said,
“a government move this week to ram the Bill through the House of Lords would not leave peers necessary time to consider amendments”.
He continued:
“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”.
He adds:
“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”. — [Official Report, 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.
9.30 pm
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 Monday 18 November, the most reverend Primate will be at a General Synod of the Church of England. Not only is that decision discourteous to the most reverend Primate and the Parliamentary Commission on Banking Standards; it does not do service to the contribution which he has made and will make to the debates on the Floor of the House.
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 Monday 18 November and commence it after the Christmas Recess, when we have all had time to study it. That would ensure that we get a better Bill and carry out the remit with which we were charged: to change banking in this country for good.