Select Committee on Treasury Minutes of Evidence

Examination of Witness (Questions 140 - 159)



  140. Tell us one.  (Sir Andrew Large) Going back to my earlier days at the SIB, you will be familiar with the mis-selling that there was then in the pensions arena.

  141. Could I read out a comment from one of the newspapers at the beginning of September talking about your period of office in the Securities Investment Board "being blighted by the emergence of the pensions mis-selling scandals". This is a newspaper of course saying that you are said by former colleagues to have been slow to appreciate the scale of the problem.  (Sir Andrew Large) I must say I find that a very odd comment, Chairman, and of course I take the views of other people. It is absolutely clear that my time in office at the SIB with the emergence of the pension problem was a very, very major headache. We discovered it and having discovered it, we had to ask ourselves what powers did we have to put it right, and we then put it right, and we did so rapidly. You may know that we obviously had to act, and did act, within the law. We were, nonetheless, subject to certain judicial reviews because there were those who thought that we had gone beyond the law in trying to put it right. I do not think that the statement that I was slow to appreciate the issue is a fair one.

  142. But it was a mess and people still see it as a mess, so what advice do you have for individuals in the situation? From our perspective as a Committee, we have many people writing to us about the financial products.  (Sir Andrew Large) I understand that.

  143. Split capital trusts is just one example, but there are many issues about it and they feel that they have not had a good deal, that the procedures are opaque and they feel perhaps that they could be getting ripped off, so we do not see the consumer getting a good deal and I would not like to think that you are getting away with comments made to us that everything is okay.  (Sir Andrew Large) I do not think everything is okay, Chairman. I was merely trying to give the answer to your question and I was saying that I do think you also do need to consider the choice available, et cetera.

  144. What better can the financial services do to help the consumer?  (Sir Andrew Large) Well, I think that in the arena of all kinds of financial products there have been very significant improvements, as a matter of fact, in transparency in particular as to exactly what the product consists of, what it is going to cost and what charges are being taken out at different stages in the process. One of the biggest worries, I think, that consumers had in the pensions arena and in the life insurance arena in the past was that they actually could not see what was going on or it was difficult to see what was going on. I think that has been widely recognised and it was something which, when I was at the SIB, we recognised and we started to make changes which have very much been followed through under the new arrangements. Now, can I say, it is not perfect and, as such, it is bound to be the case that there will be people who feel that they still have not been given enough information or the right sort of information about what they are doing, but there are other sides to it as well. For many people these products can be quite confusing and I think that the efforts that are being made to try to get better understanding generally of these products is very important.

  145. We will take the split capital trusts. We had a hearing on that earlier in the year and we have had a lot of people writing to us. I had a letter written to me from an individual saying that they had put £7,000 into an ISA and it is now worth, at that time, £80. Now, if you are writing back to an individual like that, what are you going to say to them?  (Sir Andrew Large) Well, I am sure the person concerned will have told you the circumstances under which it happened, but clearly that is—

  146. The fact is that they invested £7,000 and have got £80 back. Sir Andrew, what we are looking for here is your view because you are a non-executive member of the FSA.  (Sir Andrew Large) I understand that.

  147. You must have a feel for how people feel, so what are you going to say to them?  (Sir Andrew Large) You obviously sympathise.

  148. Of course you do.  (Sir Andrew Large) And you go beyond sympathy depending on what they had been told when they purchased it. If they understood what they were doing and they knew they were taking risks that could give rise to that loss, then you might sympathise, but say, "But you were aware of what the risks were".

  149. Do you know of many examples where people are told to invest this money, the products are safe, they can put the baby to bed at night and sleep until the next morning, they make this investment and then they get £80 in return? Is that happening a lot?  (Sir Andrew Large) I would absolutely hope not. I think that is a pretty extreme case.

  150. But in replying to an individual like that, you would be saying that this is unacceptable?  (Sir Andrew Large) I would certainly be saying it is unacceptable if the individual who had made the purchase had no means of realising that that is what could happen, yes.

  151. So you will be dealing with these things as a non-executive director of the Financial Services Agency?  (Sir Andrew Large) I certainly will indeed.

  152. So an MP with individuals who feel they did not get a good deal because that situation at the moment exists maybe more than you think with consumers and indeed I was meeting with a very senior person from the organisation with which you were involved before and he said to me, "The consumers don't get a good deal", so that is the reason I asked that question.  (Sir Andrew Large) I understand and, Chairman, I am very aware of the fact that not all is as it should be in that field and there are people who have been sold and probably still are sold products that they do not fully understand the risks of and it leads to those sorts of things happening and clearly that is not acceptable.

  153. The same newspaper report said that some of your colleagues in the City were criticising you for your low profile and apparent lack of in-depth economic expertise. How do you answer that?

  (Sir Andrew Large) Well, as to the low profile, I am not quite sure what they meant. It did not feel like a very low profile when I was at the SIB. Since I have been at Barclays, when you are a non-executive deputy chairman in an organisation, I do not think you expect to have a very high profile. As to the economic situation, I think we have discussed it. I am not a professional economist and I have not been an academic theoretician in economics. I am more somebody who has observed markets' behaviour and the impact of economic realities on the business, indeed on the regulation world.

  154. Mr Laws was asking you about the euro and the European Central Bank and others. It is perceived that the Governor is concerned about the one-size-fits-all interest rates if we go into Europe. What is your view on that?  (Sir Andrew Large) Well, I guess what might be in his mind is a little bit similar to a problem which I know concerns people also within this country which is that you have a one-size interest rate environment in a country where regionally there are differing performances, et cetera. I suppose, therefore, that probably what is on his mind there is that if you then go into an even bigger arena where there are also other differences, it makes it more complex than it does if you have just got one country

  155. That is in your mind as well?  (Sir Andrew Large) Well, it certainly is a factor that one needs to consider, absolutely.

  156. Will it weigh heavily with you?  (Sir Andrew Large) It will weigh with all the various other factors. I do not know whether it will weigh more heavily or not.

Mr Fallon

  157. The whole point about the monetary policy framework will be redundant if we do decide to join the euro and the Government has set out quite reasonably a whole series of tests, but what is the important test for you?  (Sir Andrew Large) Are you referring to the five tests?

  158. Yes, what is the important test for you? Do you have another one or which of the five is the important one for you?  (Sir Andrew Large) The five have not been set by me. The five tests are obviously, I think everybody would agree, all relevant. I dare say you could come up with others, but—

  Mr Fallon: But what is yours? What is the important one for you before we dispense with the arrangement to which you have just joined?


  159. As an interested observer, what—  (Sir Andrew Large) I am not being obtuse. I am just trying to understand what you are wanting me to say or what you are getting at.

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