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Lord McIntosh of Haringey: My Lords, I am grateful to the noble Lord, Lord Hunt, for taking the trouble to table the amendments and for taking the time to come to see me, with his colleagues from the ABI and the BBA, to discuss his concerns.

As he said, he is concerned that the definition of "consumers" in Clause 135 is too broad because it extends to people who have rights or interests which may be adversely affected by the use of services by other people. In particular, he is concerned that this will mean that the FSA is trying to make wide and

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detailed rules to protect consumers who stand at some considerable distance from the use of financial services. I have considered this point carefully in the light of the points raised in Committee and in my discussions with him. I hope that I can offer him some reassurance.

As he recognised, one cannot analyse Clause 135 in isolation. It is not only a matter of the Long Title but of looking at the interests and protection of consumers within the overall context of the Bill. In particular, first, the scope of the definition of "consumer" has to be seen in the context of the Bill's Long Title. The FSA's functions relate to the provision of regulated financial services and not to the general behaviour of customers where that is unconnected to the provision of such services.

Secondly, the FSA must exercise its functions in the light of the regulatory principles set out in Clause 2. These include the need to use its resources in the most economic and efficient way, and the desirability of facilitating competition. Both of these principles apply important balances to the scope of FSA regulation, but the key principle, also set out in Clause 2, is that regulation must be proportionate to the benefits.

Thirdly, Clause 5 makes it clear that the FSA should seek to secure the appropriate degree of protection. So it has to exercise its powers and seek to meet its objectives in a balanced, proportionate and appropriate way.

The reference to people who have rights or interests which may be "adversely affected" by the use of services by other people makes sure that rules can be made to protect those people for whom someone else--let us call him the middleman--uses financial services provided by an authorised person. Subsection (7)(b)(i) will cover persons whose rights or interests are derived from or are otherwise attributable to the middleman. An example might be a spouse or other person who is intended to benefit from a life insurance policy.

But where the middleman is acting in a fiduciary or representative capacity, these rights or interests may be derived from something other than the use of the service itself. For example, trust beneficiaries may have rights or interests deriving from the trust itself, or from decisions made by the trustee in exercising his discretion under the trust. If we are going to protect these people, we have to have the reference to people being "adversely affected" by the use of services in subsection (7)(b)(ii).

The amendments of the noble Lord, Lord Hunt, seek to replace the reference to "adversely affected" with a reference to people whose rights or interests are "dependent" on the use of services by other persons. It is a refinement on the amendment moved in Committee. I am grateful for the care that the noble Lord has given to the matter, but the concept of a right or interest being "dependent" on the use of services would not apply in all the circumstances in which a person can act on another's behalf and where we believe that it is appropriate that the FSA should be able to make rules with a view to protecting that other person's interest.

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I am sure that the noble Lord, Lord Hunt, will appreciate that it is a difficult, technical matter to try to capture the people that we are seeking to protect. But it is important that they should be protected. They include, for example, members of pensions schemes. They should not be left outside the definition of "consumer".

We feel that the concerns that have been raised about the effect of the definition of "consumer" on the scope of the FSA's regulatory activities are exaggerated. I have mentioned the safeguards that are built into the Bill--the principles under Clause 2; the consumer-protection objective as defined by Clause 5; and the Long Title of the Bill.

But we have considered--I am willing to consider it further before Third Reading--whether it is possible to formulate a definition of "consumer" that offers a more explicit reassurance about the scope of the rule-making power without creating holes in the FSA's ability to protect consumers. As I mentioned, these amendments may exclude particular groups of persons who should be treated as consumers. I hope that the noble Lord will not press them.

I turn now to Amendment No. 151ZA, which deals with the provisions about trustees in Clause 135(8). The trustees with whom subsection (8) is concerned are those who themselves perform a regulated activity in their capacity as trustees. This is distinct from the example of a trustee using the services of a third party, which I gave earlier. The purpose of subsection (8) is to make clear that the beneficiaries of the trust in these circumstances fall within the definition of "consumers".

The core definition of "consumers" is indeed in subsection (7). It refers to people,

    "who use, have used, or are or may be contemplating using ... services".

Strictly speaking, a trust beneficiary may not necessarily "use" the services provided by a trustee acting in his capacity as a trustee, and so he could fall outside the scope of the definition in subsection (7). So subsection (8) makes it clear that those trust beneficiaries are to be treated as "using services". In achieving this, it ties itself directly to the wording in subsection (7), saying that trust beneficiaries are to be treated as people,

    "who use, have used, or are or may be contemplating using ... the services".

The two provisions are entirely interlinked. There can be no doubt that subsection (8) amplifies subsection (7), and that it does nothing more. I hope that the noble Lord will not press that amendment.

Lord Hunt of Wirral: My Lords, I thank the Minister for the generous way in which he has approached this subject and for his willingness to listen and to continue the search for clarity. We are all seeking to make the Bill more certain, particularly so far as concerns definitions. The way in which the Minister laid out how he believes the definition of "consumer" has been circumscribed by the context in which it is to be found was helpful. In those

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circumstances, I should like to reflect on what he said and join him in seeing whether there is a better way to achieve our combined objective. I therefore beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 151 and 151ZA not moved.]

Lord McIntosh of Haringey: My Lords, I beg to move that further consideration on Report be now adjourned.

Moved accordingly, and, on Question, Motion agreed to.


4.10 p.m.

Lord McIntosh of Haringey: My Lords, with the leave of the House, and on behalf of my noble friend Lord Sainsbury of Turville, who is at this moment giving evidence before the Trade and Industry Select Committee in another place and therefore sends his apologies for his unavoidable absence, I should like to repeat a Statement which has been made by my right honourable friend the Secretary of State for Trade and Industry. The Statement is as follows:

    "I should like to make a Statement concerning the latest developments at Rover. Earlier today BMW announced that they have agreed to sell Rover cars to the Phoenix consortium. Negotiations have been concluded and contracts signed.

    "This is clearly welcome news--for the workers at Longbridge and the wider community in the West Midlands. I am sure it is news that all Members will welcome, especially my honourable friend for Birmingham Northfield, who is at Longbridge this afternoon and has worked hard to support the workforce during this difficult period. It will preserve volume car manufacture at Longbridge and will safeguard the majority of jobs there, and minimise the knock-on effects in the supply chain.

    "I should like to add my personal congratulations to John Towers on the way in which he pulled the consortium together and brought what I know must have been difficult negotiations to a successful conclusion. He has been determined and dogged in the face of hostility and criticism. His personal strengths will be invaluable to the Phoenix consortium.

    "Since BMW announced its decision to sell Rover, the Government's main concern has been with the workers at Longbridge, Rover suppliers, their families and communities. They have faced a considerable period of uncertainty over the past six weeks. It has been something of a rollercoaster for them--swinging between dismay and hope, as their future was decided in various negotiations with BMW. Today's news finally provides some welcome certainty for the Longbridge site.

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    "However, there will still be some redundancies. Our priority is to do everything we can to help those affected, to provide training and to attract new jobs to the area. That is the role of government: to manage change; to equip people for change; not to leave them to be the innocent victims of change.

    "We have always been clear that the role of government is not to run the commercial negotiations between the interested parties. The Phoenix consortium has not sought government finance for its proposals. John Towers has always maintained that the Phoenix bid is viable on its own and would get funding from commercial sources. The Government have not played the old role of throwing money at a problem in the hope that it will go away. Nor have we adopted the laissez-faire attitude of the previous government--just standing to one side and doing nothing.

    "Instead, we have taken an active role to facilitate the commercial negotiations over the future of Rover and to provide support for those workers and companies adversely affected by commercial decisions. Our role has been to bring people together to look at how to move forward. It was the Government who brought John Towers and BMW together for their first face-to-face meeting on 10th April. And we have remained in contact with both parties throughout. We must now turn our attention to those who will be adversely affected by today's announcement.

    "I am pleased that most of the workforce will be offered a future at Rover. But today our thoughts must be with those who will lose their jobs. The Government will be doing all they can to help with this situation. I can announce that the task force will remain in place, and I expect its continuing work will take account of all developments, including the consequences of Phoenix's plans for suppliers. It will produce its final report to me in June. My right honourable friend the Secretary of State for Education and Employment and I have already put in place measures to assist any workers made redundant, to help affected supplier companies, and to help attract new investment and employment.

    "I am also able to confirm that the £129 million promised to the task force will remain available for good quality projects in the region which provide long-term economic regeneration and job creation.

    "We must not underestimate the remaining difficulties ahead. The new owners of Rover will have to sell cars in a highly competitive market. The car industry is a fast moving global market going through major structural change. These are difficult times for vehicle manufacturers throughout the world. But there have been a number of recent announcements which show the strength of vehicle manufacture in the United Kingdom.

    "Only last week, Vauxhall announced £189 million of new investment, which will create 500 new jobs at its Luton factory. Honda has announced £130 million of investment in Swindon to allow the production of a new model. Peugeot doubled its

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    production in the UK in the past year. Jaguar achieved record sales and record production in 1999. And last month's sales figures showed that British built cars increased their sales, against the general trend.

    "There will be many lessons to be learnt from Longbridge upon which we will need to reflect. However, it is clear that there can be no return to outdated interventionism. The corporate state has been tried and it simply did not work. But nor did a naive reliance on laissez-faire, which led to a crippling obsession with what Government should not do. The role for Government is to create an environment which encourages enterprise and creates wealth and jobs.

    "But today belongs to John Towers, the Phoenix consortium, the workers at Longbridge and the people of the West Midlands. Through adversity they have demonstrated great strengths and we look forward to working with them to meet the challenges that lie ahead".

My Lords, that concludes the Statement.

4.16 p.m.

Lord Mackay of Ardbrecknish: My Lords, perhaps I should first say how pleased I am that the noble Lord, Lord McIntosh of Haringey, has made the Statement. Given the fact that he does so much work, it seems only fair that he is allowed to give the good news as well as sometimes deal with some of the more difficult issues.

I am sure that everyone shares the Government's relief at this outcome. But, equally, I am sure that it is nothing to the relief which is being felt in the West Midlands. The whole House will wish John Towers and his consortium well in what will not be an easy task. I noticed that the Minister did not make light of the difficulties that will be facing the consortium. As the Secretary of State has received an accolade from no less a person than the Prime Minister for brokering this deal, will he be keeping a close eye on the progress of the deal and trying to solve some of the difficulties that will come through as the months pass?

That is particularly important when it comes to the number of people who will be made redundant. Various numbers have been speculated about--1,000 or 1,500. Can the Government help in that regard and give an indication of how many may be made redundant, not just in the car company itself but how that might produce a knock-on effect in some of the component companies?

Even though the task force may not have the uphill struggle it sometimes looked as if it might have to face, it will still have a difficult task in order to find jobs for those who are made redundant. I very much welcome the fact that the £120 million which has been pledged to the task force is to remain available. Has that been cleared by the European Commission?

On the subject of the European Commission, Ministers will recall that the Government had promised £150 million to BMW, although clearance had not been received from the Commission by the time BMW decided that enough was enough. I heard

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the Minister say that John Towers and his consortium had not asked for that £150 million. But perhaps I may ask whether it would still be available to them if they did ask for it.

BMW had planned to spend £1 billion on retooling the plant in order to produce a new generation of models. Is the Minister satisfied that the consortium can get access to that amount of money? It is hugely more than the £200 million mentioned in the Statement and already coming from an American bank. If it cannot get access to that kind of money, will it be looking for some kind of joint venture to provide the investment which Longbridge undoubtedly needs? I read on what we must now call the "Web" rather than the tapes that a production worker in Birmingham, Mr Roger Voice, is quoted as saying,

    "It's magic news"--

none of us would disagree with that--

    "but I would have to say what is the long-term plan?".

Will the Minister give some indication of the long-term plan?

BMW also owns a body plant at Swindon, which I gather employs some 3,500 men. I wonder what the position of that plant is. Phoenix has said that it has "an option on the plant". What exactly does that mean? Are there plans for its continuation?

I turn to the £500 million which the consortium will receive from BMW. What exactly is that money for? Some of it, but it is to be hoped not the whole amount, will clearly be used to fund redundancy. Do I detect that what is not required for redundancy payments may well be needed for pension fund provision, to make sure that the pension fund as it is handed over to Phoenix is in a proper state of health? I should be grateful if the Minister would clarify the position. Although it is important to have money available to fund redundancy, it is important also for the workers to know that their pension funds are secure.

While Rover sales have recently been very encouraging, do the Government accept that the rate of the euro against the pound does not help British car companies to export into Europe? Perhaps the Minister can help John Towers by having a brief word with the Chancellor of the Exchequer about this difficult problem.

Finally, perhaps I may repeat my welcome for this news and give my best wishes and those of this side of the House, and I am sure the whole House, to John Towers and his Phoenix consortium for the success of what I believe is a brave venture.

4.21 p.m.

Lord Razzall: My Lords, I should like to join in the congratulations given by the noble Lord, Lord Mackay, and I am sure Members on all sides of the House, not only to the Government on bringing forward the Statement but also to the Towers consortium. Clearly, they have pulled off a remarkable effort, contrary to every expectation in the financial world and the financial press and to the questions about whether it was capable of being done.

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Many of us have not yet seen the detail, if we ever shall, of the "boiler plate" of the transaction, but there are obviously third party organisations which are to be congratulated on their participation in the consortium. Presumably, the much vilified BMW deserves just a slight paean of praise for its participation in the financial transaction that has resulted in the Statement; as do the American banks or financial institutions which have been induced, as we are led to believe from reports in the press, to put up the £200 million of overdraft finance that the UK clearers were not prepared to put up.

I share the feelings of other noble Lords about the Statement. Its tone is absolutely right so far as the Government are concerned. This is not a self-congratulatory Statement or one in which they blow their own trumpet. All noble Lords will be grateful for that. The Government will recognise, notwithstanding the criticism that the Secretary of State has had piled upon him in the past month or two, that it would indeed be tempting for him to make the proverbial gesture with two fingers towards his critics at this moment. I am glad that he has not chosen this opportunity to do so. I listened to him making the Statement in another place. A Labour Member behind him said that there should be drinks and dancing in the streets. The Secretary of State is wise enough to realise that this is not necessarily a moment for dancing in the streets. Perhaps a modest sherry might be appropriate rather than a vintage cru. He will be the first to recognise, as will the House, that there are significant difficulties ahead for this operation. As we all know, and as many Members on the other side of the Chamber demonstrated the last time we debated the matter, there is significant surplus capacity for mass market vehicles in Europe at present. That problem has not been waved away by this transaction.

There are suggestions that, particularly at Longbridge, productivity is not what it might be. That is certainly the case in comparison with a large number of competitive mass-market plants in Europe. Dare I say that the Rover mark is not necessarily the hottest mark if you want to buy a modern mass-market car? As the noble Lord, Lord Mackay, has indicated, a massive investment programme is still necessary as regards Longbridge and to turn Rover cars into the mass-market vehicles which the consortium clearly wants them to be. There must be a question mark over where that funding will come from.

That said, I do not want to carp. This is clearly a very good day for Britain and for the motor car industry. Noble Lords would not expect me to sit down without saying--I anticipate the groans that will come from my left, or should I say my Right?--that not only is this an opportunity for the Government to think longer term about the problems of the West Midlands; it is the moment for them to take time to reflect on the damage that the exchange rate is doing to manufacturing industry and the damage that Britain's failure to join the euro is doing to manufacturing industry and to come up with a policy to get us in there as soon as possible.

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4.25 p.m.

Lord McIntosh of Haringey: My Lords, I am grateful to both noble Lords for the way in which they have responded to the Statement and for the unequivocal support they have given to the result of very difficult negotiations over the past month. I am particularly grateful to the noble Lord, Lord Razzall, for his remarks about the tone of the Statement. Certainly, although we rule out the policy options both of interventionism and of laissez-faire, nevertheless, it would be easy to be triumphalist about this. Although my right honourable friend the Secretary of State deserves a great deal of credit for having brought the two parties together for the first time on 10th April, he has shown great restraint in the way he has phrased his Statement.

To respond to the noble Lord, Lord Mackay, the Secretary of State will certainly be keeping a close eye on progress in so far as it is proper for him to do so; in other words, in so far as he is not interfering with the commercial relationships of the two companies.

The noble Lord asked me whether I had any further information about the numbers of likely redundancies and likely knock-on redundancies in the West Midlands other than at Longbridge. I am afraid that I do not have any further figures. I heard the figures quoted by the noble Lord, but no doubt these issues will become clearer in the next few days.

The noble Lord, Lord Mackay, asked also whether the task force money, which will continue, has been cleared with the European Commission. Perhaps I should make it clear that the £158 million that was originally proposed in assistance included the £129 million of task force money for the West Midlands. That money was never intended to go to Rover, whether under Phoenix or any other arrangement. It is money that is largely regional assistance to the West Midlands for retraining, skills training and so on, and is therefore not subject to any European Commission regulation.

The noble Lord asked also whether there are likely to be any further joint ventures. I am afraid that it is too early for me to give any response to that question. The noble Lord is right in saying, as did the noble Lord, Lord Razzall, that there will have to be longer-term plans for the future of the Longbridge site and they must include not only the production and sale of existing models but the development of new models. In the motor car industry, firms cannot simply stand still.

The noble Lord asked what the future of the Swindon plant will be. Swindon will stay with BMW, which will no doubt make announcements about the Swindon plant in due course. I am not aware of any threat to employment at the Swindon plant.

The noble Lord asked me, quite properly, where the £500 million sweetener--I do not believe that he used that term--from BMW to Phoenix would go. My answer is that as little as possible should go in redundancy and pension payments because there should be as few redundancies as possible. As much as possible of that sum should be devoted to continuing

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the production, marketing and sales of vehicles produced at Longbridge. I am sure that that is the intention of the Phoenix consortium.

The noble Lord, Lord Razzall, made some welcome and helpful remarks about the role of the banks. Critical comments have been made in the past few days about the unwillingness of banks to support ventures of this kind. I do not have any further details about the banks which have contributed. However, they have made a valuable contribution, and the Government are grateful to everybody who has taken part in this matter. The noble Lord, Lord Razzall, is right to say that there is surplus capacity in the car market in Europe as a whole and large parts of the world. The fact that in this country in the past month Rover sales have gone up while those of BMW have reduced substantially is very welcome. That may simply be an emotional reaction, and perhaps Rover-Phoenix should not bank on that market share continuing in future months. I believe that it would be the first to say that Rover must deserve the continued increase in market share.

In expressing my gratitude to noble Lords for their appreciation of the significance of this Statement, clearly this matter is of importance not only to the Longbridge plant and the West Midlands but the country as a whole. If the noble Lord, Lord Razzall, wants to extend it to cover the exchange rate I suggest that he reads the Chancellor of the Exchequer's Meade Lecture at the London School of Economics last night.

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