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House of Lords

Wednesday, 5 December 2012.

3 pm

Prayers—read by the Lord Bishop of Guildford.



3.07 pm

Asked By Lord Touhig

To ask Her Majesty’s Government what will be the scope of the review of the national adult autism strategy, due to take place in 2013.

The Parliamentary Under-Secretary of State, Department of Health (Earl Howe): My Lords, we are currently considering how to deliver the 2013 review of the adult autism strategy and, in particular, a range of options about how best to secure the views of service users and carers. The review, which will take place from April to October next year, is an opportunity for the Government to take stock and consider where future action is required to realise the vision of fulfilled and rewarding lives for people with autism.

Lord Touhig: My Lords, the National Audit Office report on the adult autism strategy said that the health service needed to improve the training of key professionals who make decisions about a person’s eligibility for benefits and services. Can the Minister confirm that the review will ensure that all government departments will implement the strategy in full, so that autistic adults around the country can access the support services that they need?

Earl Howe: My Lords, this matter runs across government departments. While central government can set the framework, and while it can work to remove barriers and increase awareness, which is very important, the real work—the delivery of lasting change—is for professionals, providers, voluntary organisations and, indeed, service users working together in collaboration. That effort needs to take place at a local level, which is why there is statutory guidance to prompt that action.

Lord Wigley: My Lords, I declare an interest as patron of Autism Wales. Will the Minister confirm that he is aware of the national strategy on autism that was introduced in Wales in 2008, which is being looked at in Scotland as a model to be followed? Of course, Northern Ireland has its Autism Act 2011. Will the Minister undertake to look at the experiences of the Celtic countries in developing the policy for England?

Earl Howe: My Lords, I am grateful to the noble Lord and I am quite sure that we in England can learn from what is going on in both Wales and Scotland in this area. However, we can take some encouragement

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from the National Audit Office memorandum earlier this year, which stated that considerable progress had been made in the two years since the strategy in England was published. Twenty-four of the 56 commitments had been implemented, and action was under way in response to the remainder.

Baroness Browning: My Lords, does my noble friend agree that if we are really going to achieve equality for the autistic community, we need to start looking now at the sort of services that they require when they become much older and frailer? It would be a tragedy if we improved services for children and adults but, when they become old and frail and are no longer able to maintain independent living, even with support, they are then segregated from the rest of society.

Earl Howe: My noble friend is right, which is why the existing statutory guidance extends not only to local authorities but to the NHS; it is unique in that regard. The strategy is about integrating care across the NHS, social care and all other local authority services, and its focus must be on putting people with autism at the centre of any plans to improve their own lives.

Lord Maginnis of Drumglass: My Lords, I declare an interest as I chaired the independent review of autism services in Northern Ireland. Would it be inappropriate if I asked the Minister if he was aware that it does not matter how good one’s intentions are or whether you have an Act of Parliament; if you do not have the geographical structure that enables you to implement the measures that are required for early assessment and diagnosis, there is nothing that will naturally follow? Will he consider consulting the Northern Ireland authorities and those in Wales and Scotland, where possibly we have made more progress?

Earl Howe: My Lords, I shall gladly take that idea away with me. The noble Lord is right about the structures for delivery. Local authorities in England are responsible for the delivery of services and support for people with autism, and the NHS is the body that we are relying upon to identify those with autism and diagnose their needs. The two must work together.

Lord Addington: My Lords, will the Minister tell us a little more about the problems of being the lead department and trying to relate to other sections of government? How good, for instance, are the links with various stages of education in order to allow not only for people with the most acute forms of autism but for those at the higher-functioning end of the spectrum, such as those with Asperger’s? How is that developing and have we done any work in that field?

Earl Howe: Yes, my Lords, the autism strategy is a cross-government strategy and is already having an impact in areas such as employment and education. It includes activity to help adults with autism into work. The mandate to the NHS Commissioning Board particularly mentions those with learning disabilities and autism and their need to receive safe, appropriate

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and high-quality care. From 2014, when necessary, young people up to the age of 25 with special educational needs, which would include autism, will have an education, health and care plan. I assure my noble friend that work is going on across government in this area.

Baroness Pitkeathley: My Lords, last week on Carers Rights Day I spoke to a great many parents who raised the same matter as the noble Baroness, Lady Browning—the transition period for young people with autism. Does the Minister consider that it is a problem that parent carers are not yet referred to in the draft Care and Support Bill, which we are about to start scrutinising? What role does he think local Healthwatch and local well-being boards can have in this regard?

Earl Howe: My Lords, local health and well-being boards and local Healthwatch will be instrumental in ensuring the improvement of the quality of services for people with autism. As regards the transition from childhood to adulthood, the Department for Education is working with my own department to make the transition recommendations in the strategy the success that we all want them to be. A project funded by both departments and led by the University of York will report before the end of the year and will inform good practice in service at the point of transition.

Employment: Rural Employment


3.15 pm

Asked By Lord Knight of Weymouth

To ask Her Majesty’s Government what measures they have introduced to boost rural employment in the United Kingdom.

The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord De Mauley): My Lords, employment will be boosted in all areas by national initiatives to promote economic growth. Support for apprenticeships will provide the skills that employers need, while welfare reforms will help people into work. In England, a £165 million package to stimulate rural growth includes five pilot rural growth networks and funding to transform rural business performers. Investment and action to improve rural broadband and network services will support rural economic growth and employment opportunities. I declare an interest as the owner of a farm, and therefore involved in rural businesses.

Lord Knight of Weymouth: My Lords, I am grateful to the Minister for that response, as far as it goes. There was no mention of rural employment in today’s Autumn Statement. The Chancellor referred to the interesting report of the noble Lord, Lord Heseltine, on growth, yet the only mention of rural issues was a passing reference to European funds and to the paltry £15 million being spent on the five rural growth network pilots that the Minister mentioned. However, my question to the Minister is on those five networks. The first job

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created by Labour’s Future Jobs Fund was for a young farm worker in Wiltshire. Will the Minister tell me how many rural jobs the rural growth network has generated to date?

Lord De Mauley: My Lords, I cannot give the noble Lord a specific answer on that, but I will try to give him an answer that is of interest to the south-west of England. The South-West Skills Programme offers vocational and technical training opportunities for farmers, foresters and agrifeed businesses. The programme has provided training for a total of 9,497 trainees.

Lord Vinson: My Lords, for many years I was lucky enough to be chairman of the Rural Development Commission. One key policy that we recognised was the cost of getting to work. Today the Chancellor, by reducing, or rather holding, fuel duty, has enabled many more rural people to be able to afford to run a car. That is a key component of rural employment, and I congratulate him.

Lord De Mauley: Yes, my Lords. I will give more examples of how the Autumn Statement will benefit rural growth. We will extend small business rates relief for a further 12 months from 1 April 2013, benefiting more than 500,000 small businesses. We will devolve a greater proportion of growth-related spending to local areas from April 2015. We will provide further support to businesses and motorists, which my noble friend referred to, by cancelling the fuel duty increase that was planned for 1 January 2013, and we will defer the 2013-14 increase to 1 September 2013. We will ensure that businesses—particularly small businesses—can access finance and support.

Lord Harrison: Given that 98% of rural employment is not related to farming, will the Minister outline the strategy for encouraging small businesses in our towns, villages and hamlets by increasing broadband coverage and better transport links? In addition, has he thought of the idea of business advocates for the countryside to encourage the formation of small businesses?

Lord De Mauley: The noble Lord raises a very good point about broadband. I absolutely agree with him on that. The rollout of superfast broadband infrastructure is vital to boosting sustainable economic growth and creating jobs in rural areas. Online business, whether rural or urban, grow four to eight times faster than their offline counterparts. Broadband is a key government priority. We are working to deliver the best superfast broadband in Europe by 2015, backed by a £530 million government investment to support rural areas.

Lord Palmer: My Lords, what estimates does the Minister have in his department for the exploration of shale gas in the countryside of the United Kingdom?

Lord De Mauley: My Lords, I think that that is a bit wide of the Question, but more will become clear shortly.

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Lord Lee of Trafford: My Lords, tourism turnover in the rural economy is nearly three times that of agriculture. Yesterday at Westminster, the Cut Tourism VAT campaign was launched, supported by the whole of the industry. Compared with our 20% rate, accommodation VAT is 10% in Italy, 8% in Spain and 7% in France and Germany. As a former Treasury Minister, does my noble friend appreciate that independent reports indicate that a cut in VAT on accommodation would boost Exchequer revenues, boost tourism and thus boost employment in the rural economy?

Lord De Mauley: My noble friend has rather overpromoted me. However, in answer to his question, the Government recognise the importance of tourism to rural employment. I do not think that we can go as far as he asked, but the Rural Economy Growth Review showed that tourism is a significant contributor to the rural economy, with potential for significant further growth. Before the Autumn Statement, the Government announced a £25 million initiative to promote rural tourism and to support rural tourism businesses.

Baroness Liddell of Coatdyke: My Lords, further to that response, which is very important for the tourism industry, does the Minister agree that in view of that importance of tourism to the rural economy, his department should join with other departments in putting pressure on the Home Office to address the issue of visas to Chinese visitors, who are a vital component of inbound trade? Does he agree that that action needs to be taken urgently?

Lord De Mauley: That is an interesting question from the noble Baroness. I think that it goes a bit beyond the original Question. The departments co-operate closely, particularly on rural tourism.

Lord Mayhew of Twysden: My Lords, is it not the case that in rural areas village shops provide a valuable social good for many people, especially those without motor cars? Perhaps we may hope for recognition that the supermarkets, more distant but very powerful as they are, simply cannot hope to provide that sort of service. May we hope that the Government’s policies for rural areas will reflect the special value of village shops?

Lord De Mauley: Yes, I agree wholeheartedly with my noble and learned friend. We recognise the importance of rural service outlets such as village shops, post offices and pubs in sustaining strong and thriving rural communities. New community rights are being introduced that will allow local assets such as village shops to be put on the local asset register, giving communities first option to bid for them if they are under threat. In rural settlements with a population of less than 3,000 where there is only one retail outlet, it will receive rural rate relief. Consumer Focus is identifying rural issues as part of its help with the Post Office Local model. In 2012, Defra supported a number of community shops through the RDPE programme.

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Banking: National Savings & Investments


3.23 pm

Asked By Baroness Ford

To ask Her Majesty’s Government whether there are any plans to extend or improve the range of retail savings products offered by National Savings & Investments.

Baroness Ford: My Lords, I beg leave to ask the Question standing in my name on the Order Paper and declare an interest as a customer of National Savings.

The Commercial Secretary to the Treasury (Lord Sassoon): My Lords, National Savings & Investments reviews its product range on a regular basis in light of its role to provide cost-effective retail debt finance to government. In doing so, it follows a policy of balancing the interests of its savers, the taxpayer and the wider stability of the financial services market.

Baroness Ford: I thank the Minister for that—albeit disappointing—reply. National Savings is probably one of the most trusted financial services brands left in the United Kingdom. The Minister knows well that all its recent issues have been massively and very quickly oversubscribed. Are the Government not missing a huge opportunity to extend the reach of National Savings to help savers and pensioners whose incomes have been absolutely hammered in the past five years due to the combination of record low interest rates and the disastrous effects of quantitative easing on annuity levels?

Lord Sassoon: My Lords, the Government are very well aware of the needs of savers. Those who have done the right thing in the good times should not be penalised in these difficult times and the Government understand that. Specifically on National Savings & Investments, as I said, it keeps its product range under regular review so, of course, it looks to see when it is appropriate to bring products back in. However, it has to balance the need to deliver finance to the Government at rates that represent value for money for the taxpayer and the need not to compete unfairly in the savings market by offering products that compete with other providers in the market. The noble Baroness may look askance at that but I assure her that I get constant complaints from the retail savings market if it thinks that NS&I is using its power unfairly in the market.

Lord Forsyth of Drumlean: My Lords, will my noble friend accept my warmest congratulations on the announcement by the Chancellor today that he will consult on allowing AIM shares to be included in ISAs, following the persistent representations of my noble friend Lord Lee of Trafford?

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Lord Sassoon: I am very happy to accept what my noble friend has said. I have probably answered more questions on AIM shares and ISAs than on practically any other topic. It is also worth saying that it has been announced in today’s Statement that the ISA limit will go up in line with inflation in April 2013—so, by another £240, to £11,520—enabling 24 million people to continue to benefit.

Lord May of Oxford: My Lords, why is NS&I no longer issuing tax-free, index-linked savings certificates? They are an extraordinarily effective instrument for some who wish just to preserve the real value of their savings, free of greed. Thus, it seems to me a particularly meritorious and efficacious instrument. Why is it no longer issuing new issues?

Lord Sassoon: My Lords, NS&I takes index-linked and fixed-interest savings certificates on and off sale. When they were last on offer, during 2011, demand reached completely unprecedented levels. It meant that the sales volumes far exceeded what was anticipated and what represented value for money in terms of the target that the Treasury set for NS&I.

Lord Peston: My Lords—

Baroness Kramer: My Lords—

Noble Lords: This side!

Lord Peston: My Lords, I nearly forgot my question. The Minister referred to looking askance at his answer. I must say that I associate myself with my noble friend. Is he not aware that a more positive response would have been to say, “Yes, it is an extremely good idea to improve the range of savings products out of fairness to small savers. It will raise the propensity to save and increase the flow of funds to the Treasury”. In the light of the most ludicrous Autumn Statement in living memory, I would have thought that the Treasury would like to have all the help that it can possibly get.

Lord Sassoon: My Lords, there are 26 million savers with NS&I. We take their interests very seriously. They have over £100 billion invested. It is one of the largest savings organisations in the country, and that will continue.

Baroness Kramer: My Lords, I would like to challenge the Minister’s comments on NS&I. Funding for Lending is a taxpayer-driven programme which has created the collateral damage of allowing banks to cut the interest rate that they offer on savings products, and NS&I has had to follow by cutting its interest rates on savings products. At this time, when savers are under such pressure, could the Minister consider lifting the best-buy restriction so that NS&I could start leading the industry back into paying decent savings returns rather than following the industry on a downward spiral?

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Lord Sassoon: My Lords, this raises many complex issues. I would simply say that a critical part of NS&I’s remit is to raise money for the Government on value-for-money terms. Secondly, I can assure the House that the Government are certainly not going to get into, in any way, unfairly competing in the savings market, which needs to be a vibrant, fair and free competitive market.

Lord Davies of Oldham: My Lords, the Minister has now indicated the conflict through two answers. He has just said that the role of NS&I is to raise money for the Government, and we all know its excellent reputation—but he also said earlier that it is there to look after the interests of savers, who are consistently getting a rate of return below the rate of inflation. How can that be fair?

Lord Sassoon: My Lords, what is fair is that the Government have very considerable concern about savers. I have mentioned the ISA annual limit going up by inflation in April; consulting on whether AIM shares should be eligible to be in ISAs; introducing simple financial products; setting up the Money Advice Service; having a generous new single-tier pension; and raising the cap today on pension draw-downs from 100% to 120%. The Government take the interests of savers very seriously.

National Planning Policy Statement


3.30 pm

Asked By Lord Greaves

To ask Her Majesty’s Government whether it is their policy that the proportion of England that is built upon should rise from 9% to 12%; and whether that aim is in line with the National Planning Policy Statement.

Lord Greaves: My Lords, in asking the Question standing in my name on the Order Paper, I remind the House of my active membership of my local planning authority.

The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham): My Lords, the Government’s policy, as set out in the National Planning Policy Framework, is that councils should have plans in place that meet their housing and development needs. These will vary across the country, depending on local circumstances and demands.

Lord Greaves: My Lords, I congratulate the Minister on not answering my Question at all. The first half of my Question is to ask the Government whether the statement by the Planning Minister, Mr Boles, in recent days that the amount of countryside that will need to be built on is such as to increase the amount of built-up area in England by one-third. Was he giving his own opinion or was he speaking as a Minister and giving government policy?

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Baroness Hanham: My Lords, my honourable friend the Minister for Planning was drawing attention to the fact that this country is going to require an enormous amount of new building of houses if it is to meet anything like the demand that exists. I think that he would be the first to say that he does not know whether that will require 2% or 3% more land, but he was saying that more land will be needed to build the houses that we require.

Lord McKenzie of Luton: My Lords, a couple of weeks ago the Telegraph newspaper claimed that it had established that more than 9,000 acres of land—an area the size of the city of Gloucester—is to be removed from the green belt by local authorities following the coalition’s planning reforms, and that at least 40% of councils with green belt land in their areas have already redrawn or planned to alter the boundaries of the protected areas in an attempt to meet demand for housing and development. Is that correct, and does it have the Government’s support?

Baroness Hanham: My Lords, we have made it clear all along and all through the discussions on the National Planning Policy Framework that we support the retention of the green belt, which lies between and separates out major conurbations so that there is not one continuous string of developments. It will be up to local authorities to decide whether they need and have support to develop into any of their green belt, but by and large the Government’s policy is to retain the green belt, as it is a very important aspect.

Lord Cormack: My Lords, a few weeks ago Mr John Hayes earned great praise by saying that although he could not build Jerusalem he wanted to defend England’s green and pleasant land. Would it not be a good idea if Mr Boles studied that remark and its implications and realised that that is the policy that we support, which ties in with the Government’s policy announced last year, and which would not result in east and west bank settlements all over our land?

Baroness Hanham: My Lords, that is a little bit unfair, if I may say so. We all recognise that we need more housing and that there are different parts of the country where housing will be needed. We all recognise that there are different sorts of land that will be required to meet the housing needs in any particular area. But we still maintain that the green belt should be retained; it is a very important part of ensuring that our countryside remains open. My honourable friend was drawing our attention not only to the amount of land that is needed but to the need to ensure that we have decently designed houses with a little bit more space than at the moment.

Baroness Ford: To avoid building on greenfield land, do the Government now regret their initial decisions to abandon the sequential test for brownfield land and all the targets for building on brownfield land that were rejected in 2010?

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Baroness Hanham: My Lords, the first priority in the National Planning Policy Framework is for brownfield land to be developed. Not all brownfield land is appropriate for housing; not all brownfield land is cheap for development and housing. Nevertheless, it remains a priority for local authorities to look at what brownfield land they have and develop it. However, brownfield land is primarily in city centres and, as noble Lords have often pointed out in this House, there are requirements for housing in rural areas as well.

Lord Tope: My Lords, does the Minister agree that, even when land is available and planning consent has been given, the houses still need to be built? Does she agree that lifting the cap on local authorities’ ability to borrow against their housing stock would go a very significant way towards enabling such houses to be built? Is she aware that London Councils has calculated that if that cap was lifted, 54,000 new homes could be provided in London alone? Are the Government going to act on this?

Baroness Hanham: My Lords, it is a matter for the Chancellor whether the cap is lifted on local authority borrowing. It is not something that I can enter into at the moment. Local authorities know their limitations as far as prudential borrowing is concerned at present.

Lord Best: My Lords, does the Minister agree that a very good way of minimising the take of land, while maximising the number of people who are housed, is by building retirement apartments? The people who move into those retirement apartments—which are much better for them—often vacate three-bedroom or four-bedroom houses. Did she note the statistic in the report by the All-Party Parliamentary Group on Housing and Care for Older People last week that 85,000 homes for older people would actually lead to 400,000 people being housed because of the homes that they vacate?

Baroness Hanham: My Lords, first, I congratulate the noble Lord, Lord Best, on the HAPPI 2 report, which introduced these figures. Yes, of course, it would be ideal for older people to have housing that is absolutely suitable to their needs and built especially for them. It would remove the possibility that they are living in family housing that is too big for them and hard to cope with. It is right that those statistics mean that there would be more housing for families under those circumstances.

Public Service Pensions Bill

First Reading

3.37 pm

The Bill was brought from the Commons, read a first time and ordered to be printed.

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Financial Restrictions (Iran) Order 2012

Motion to Refer to Grand Committee

3.38 pm

Moved By Lord Newby

That the order be referred to a Grand Committee.

Motion agreed.

Financial Services Bill

Third Reading

3.38 pm

Clause 3 : Oversight Committee

Amendment 1

Moved by Lord Sassoon

1: Clause 3, page 2, line 40, after first “The” insert “court of directors of the”

The Commercial Secretary to the Treasury (Lord Sassoon): My Lords, in most cases the legislation places duties, powers and obligations on the Bank as an institution. The Court of Directors is responsible for managing the Bank’s affairs. In practice, the Court of Directors, in a similar way to other governing bodies, delegates the vast majority of the Bank’s day-to-day decisions to the executive, with the court itself taking only the most important strategic decisions. There are, however, some instances in the legislation where the duties, powers and obligations are placed directly on the court. For example, the court is responsible for determining the Bank’s strategy, including its financial stability strategy, and it also has the power to delegate additional functions to the FPC.

On Report, the noble Lord, Lord Eatwell, and I discussed whether the court would take the decision whether or not to withhold from publication a report of the oversight committee. I stated clearly that I would expect a decision of this importance to be taken by the court rather than to be delegated to the executive. However, in the light of that debate, I asked my officials to look right through the Bill again to see whether there were other key decisions for which responsibility should lie unequivocally with the court. This group of amendments is the result.

Amendments 4, 5, 6 and 7 confirm that the court will decide whether oversight committee reviews should be withheld from publication in order to protect the public interest.

Amendments 1, 12 and 26 to 31 make the same change to confer a number of other responsibilities directly on the court. These are the power to delegate additional functions to the oversight committee, responsibility for being consulted on the PRA’s strategy, and the power to appoint non-executive members to the PRA board.

Amendment 25 puts beyond all doubt that the court may not delegate any functions that are explicitly given to it in legislation. I should make it clear that

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this does not mean that all functions that the legislation confers on the Bank will automatically be undertaken by the executive. The court will of course retain discretion either to delegate these roles to the executive or to reserve those decisions for itself. However, I believe that these amendments provide important clarity by identifying those roles within the legislation that will be the responsibility of the court in all cases. I beg to move.

Lord Eatwell: My Lords, I am very grateful to the noble Lord for having clarified some obscurities in the Bill that arose from the use of the generic term “the Bank” to refer sometimes to the court and sometimes to the executive. However, the noble Lord has just said something which has disturbed me. He said that, for clarification, when the term “Bank” is used, this does not necessarily mean the executive; it may mean the court. It seemed to me that he was acknowledging that an uncertainty remained. Perhaps I misheard. I should be very happy if I did, because the sort of clarification that he has set out is very welcome.

Lord Flight: My Lords, there is one area in this territory on which I would appreciate some clarity. The principle of returning the oversight of banks to the central Bank, which I think has been widely supported, has, to my mind, always been about the concept that the central Bank ought to be in regular contact with banks, that it ought to know what is going on and that it ought to be able to head off practices that are clearly potentially damaging to the banking system. However, I am not clear how the staff of the Bank and the staff of the PRA will interact. One would have thought that quite often it would be the staff of the Bank who were having regular dialogue with banks and learning what was going on and what might be going wrong, but it is the PRA—to some extent a sort of cuckoo plopped into the middle of the Bank of England—that essentially has the legal tasks. Therefore, we have clarification of the definitions of “Bank” and “court” but below what I call the executive level I am still not entirely clear where the staff of the Bank or the staff of the PRA will be carrying out supervisory activities.

Lord Sassoon: My Lords, in response to the question raised by the noble Lord, Lord Eatwell, as I said at the beginning of my remarks, the Court of Directors is the governing body of the Bank, so ultimately it is for the court to decide who takes what decisions and which decisions should be for the Bank. In the legislation, “the Bank” certainly does not mean the Bank executive; it means the Bank of England. Therefore, it is always for the Court of Directors, just as it is for the governing body of any corporate institution, to decide who takes what decisions and, if the governing body does not delegate them, it takes them itself. We are making clear through these amendments that there is a certain small category of decisions—one of which was identified by the noble Lord, Lord Eatwell—that is of such importance that it is appropriate to put down for the avoidance of doubt in the legislation that it is the court not the executive that takes those decisions. That is what those amendments do.

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3.45 pm

Lord Eatwell: Just for clarity, the noble Lord said that it is the responsibility of the directors—that is, the court—to decide who takes the various decisions. I presume what he has said does not apply to the Monetary Policy Committee?

Lord Sassoon: Indeed. I should say that it is subject to what is laid down in statute about the Monetary Policy Committee and the Financial Policy Committee and so on. If they are decisions of the Monetary Policy Committee, then they are the decisions of the Monetary Policy Committee. If they are the decisions of the Bank, the court will decide how they are taken. As for the question from my noble friend Lord Flight, of course it will be the PRA staff who will supervise and lead on the direct relationships with the banks or insurance companies, for example, that are being supervised. Technically, the PRA staff will be seconded from the Bank. There will be a close working relationship, which is part of the benefit of bringing it all together under the one umbrella.

Lord Barnett: I hope I did not misunderstand, but the Minister seemed to say that all decisions of the Bank are made by the court. Does that mean that when the Governor of the Bank of England makes a policy decision, it is not his decision, but a decision of the court?

Lord Sassoon: No, my Lords, that is not what I said. I said that the court is the governing body of the Bank. So unless specified in some other way, it is ultimately the decision of the court as to whether it takes a decision or delegates it. When it comes to policy decisions of the sort that the noble Lord is describing, they are of course delegated ones. All we are trying to do in this amendment is make it clear what decisions should be taken by the court and only by the court.

Amendment 1 agreed.

Amendment 2

Moved by Lord Newby

2: Clause 3, page 3, line 11, leave out “9B(1)(e)” and insert “9B(1)(d) or (e)”

Lord Newby: My Lords, this is a group of minor technical amendments which simply remedy some drafting glitches in a number of cross-references in the Bill and address minor drafting inconsistencies. I do not propose to go through each amendment, but will answer any questions that noble Lords might have on them.

Amendment 2 agreed.

Amendments 3 to 7

Moved by Lord Sassoon

3: Clause 3, page 3, line 16, leave out “13(2)(c)” and insert “13(2)(b) or (c)”

4: Clause 3, page 4, line 23, after first “the” insert “court of directors of the”

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5: Clause 3, page 4, line 24, leave out “Bank” and insert “court of directors”

6: Clause 3, page 4, line 29, leave out “Bank” and insert “court of directors”

7: Clause 3, page 4, line 30, leave out “it” and insert “the Bank”

Amendments 3 to 7 agreed.

Amendment 8

Moved by Lord Newby

8: Clause 4, page 6, line 26, leave out “2 members” and insert “one member”

Lord Newby: My Lords, in response to an amendment at Report put forward by my noble friends Lady Noakes, Lady Wheatcroft and Lady Kramer, we committed to come back with amendments to rebalance the FPC’s membership. These amendments are intended to do just that. They will remove the executive director responsible for market analysis from the FPC. This will shift the FPC’s balance so that it includes five Bank executives and five non-Bank executives, including four independent members. Crucially, this will retain the Bank’s majority on the FPC, as the committee’s chair will have a casting vote. As we have said previously, we believe that it is vital that the Bank remains in the majority on the FPC if we are to hold the Bank accountable for its performance. Amendments 23 and 24 reduce the FPC’s quorum from seven to six, to compensate for the smaller membership. Noble Lords will note, however, that we have retained the requirement that at least one of the external members be present in order for the committee to be quorate. These amendments again demonstrate that the Government have listened to the House and responded accordingly. When this change was discussed at Report, it was widely welcomed and in that spirit, I hope the House will support these amendments. I beg to move.

Amendment 8 agreed.

Amendment 9

Moved by Lord Sassoon

9: Clause 4, page 6, leave out lines 30 to 34 and insert—

“(2) The member appointed under subsection (1)(d) is to be a person who has executive responsibility within the Bank for the analysis of threats to financial stability.”

Amendment 9 agreed.

Amendment 10

Moved by Lord Barnett

10: Clause 4, page 7, line 7, leave out “subject to that” and insert “with equal weight”

Lord Barnett: My Lords, the amendment relates to something originally in the Bank of England Act 1998 which should not have been there in the first place. My noble friend Lord Peston and I tried very hard for it not to be put in but failed at the time. I hope that we will be more successful today.

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The words “subject to that” should never have been there in the first place. All they mean is that the Governor of the Bank of England—and we will have a new one next July—will have his hands tied fast. He must first get stability—that is, control inflation—and only then can he look at the Government’s economic policy. Frankly, I would prefer that he looked at someone else’s economic policy than that of the present Government because I am not very happy with it. However, that is how it should be: the governor should look at the Government’s economic policy—and given what we heard in the Autumn Statement, someone else certainly needs to look at the situation and at this Government’s economic policy.

The new governor may be as good as everyone says—I hope he is—but I think what he can do with the economy has been massively overstated because that is primarily the responsibility of the Chancellor of the Exchequer. Sadly, the present Chancellor—whose first line in the Autumn Statement should have been an apology—has said everything is marvellous. It is hard to believe that anyone could do that, but the Chancellor did it.

It would help if the new governor had at least a responsibility to look at the economy to see whether he can help the Chancellor. It would be helpful to the Government to have the words deleted and that is all I am seeking to do. I shall not take up any more of the House’s time. I beg to move.

Lord Peston: My Lords, I wish to add two or three remarks to what my noble friend Lord Barnett has said.

On any logical grounds, “equal weight” is precisely what the Government would want to see in this part of the Bill. One feels that somehow the computer got jammed and “subject to that” got stuck in all over the place for no good reason. I would be surprised if the Minister is not sympathetic to the amendment.

I wish to make two remarks in regard to the prospective governor. First, I know that he felt it was right for him to appear before the Treasury Select Committee in the other place in order that its members should know who he was. Bearing in mind the vast amount of work that noble Lords have put in to this Bill, which is devoted overwhelmingly to the Bank of England, and given that, with much regret, we will be dealing some day with a Bill about the Bank of England without the Minister being the lead figure, I would like to go on record as saying that it would be a good idea if the prospective Governor of the Bank of England appeared before your Lordships’ Economic Affairs Committee so that he could become known to us as well as to the other place.

My second remark is in favour of the prospective governor. Eyebrows have been raised that he is being paid approximately £600,000 for this job, which is a lot of money—certainly to an impoverished ex-professor. None the less, given that the prospective governor could earn between £10 million and £15 million per annum—most of which, I would guess, would end up being tax-free—someone ought to reassure him that, if anything, we are getting a bargain and he is doing us a favour rather than us doing him a favour by appointing him.

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Lord Sharkey: My Lords, I support some of the sentiments, but not the amendment, of the noble Lords, Lord Barnett and Lord Peston. Like them, I believe it would be a good thing if Mr Carney were to appear before the Lords Economic Affairs Committee as well as the Commons Treasury Committee. Mr Carney is entirely used to dealing with bicameral legislatures with separate committees. On 30 October this year, he appeared before the Canadian House of Commons Standing Committee on Finance to discuss the October monetary policy report. The following day, he appeared before the Canadian Senate Standing Committee on Banking, Trade, and Commerce to discuss the same report.

However, since this is a suggestion from the noble Lords, Lord Barnett and Lord Peston, I know they would prefer me to use the word “must” rather than “may”, but it may be better to suggest to the Minister not that Mr Carney must appear before our Economic Affairs Committee but that he may want to appear. The Minister may want to suggest this to him.

Lord Sassoon: My Lords, I will make sure that the suggestion to Mr Carney is passed on, but of course it is breaking radical new ground that a prospective governor should appear before the Treasury Select Committee, and I do not know whether we want to be too radical at this juncture, but the point is taken.

Turning to the matter in hand, first, I have to admire the persistence, consistency and eternal optimism of the noble Lords, Lord Barnett and Lord Peston, on this matter. I am sorry to disappoint the noble Lord, Lord Peston, but on this occasion the Treasury’s word processor did not slip a few words. There is a very important issue here, which is why the two noble Lords raise this matter on a regular basis. We debated very similar amendments to this one in Committee and on Report, although I recall that on Report the amendment was moved by the noble Lord, Lord Eatwell, on behalf of the noble Lords, with, let us say, a degree of enthusiasm.

The House will be unsurprised to learn that my position on this point is unchanged on the back of what I have heard this afternoon. The FPC’s primary objective must be financial stability. Financial stability is the FPC’s reason for being, its primary purpose. The aim of the committee will be to secure a safe and stable financial system, which will help create the conditions necessary for stable and sustainable economic growth. I should not rise to every bit of bait but I have to say that my right honourable friend the Chancellor of the Exchequer has done an outstanding job in extremely difficult economic circumstances, as we will discuss later this afternoon. While he is always grateful for any additional advice, we should have the FPC stick to its main task as its primary objective.

The legislation makes clear that, subject to achieving its primary objective for financial stability, the FPC should act to support the Government’s economic objectives. This structure strikes the right balance, by giving the FPC a clear and positive mandate to support economic growth, but without prejudicing its primary responsibility to protect and enhance financial stability. It is clear already, from the way that the shadow FPC is operating, that it has this mandate well on board.

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The primary flaw with the structure proposed in Amendment 10—namely, to give the FPC dual, equally weighted objectives—is that this would allow the FPC to take action that would damage financial stability with the aim of encouraging growth. This would take the FPC outside its remit and expertise, and directly frustrate its primary purpose, which is financial stability. I simply do not believe that the model proposed by the noble Lords is appropriate or workable and I ask the noble Lord to withdraw his amendment.

4 pm

Lord Barnett: I am never surprised by the noble Lord and I am certainly not surprised today. I think I heard him say that the model produced by my noble friend Lord Peston and me—we do not normally produce models, but I am very happy to do so on this occasion—would prejudice the Government’s policy. I do not know what policy of the Government needs prejudicing. At the moment, everything is going well, according to the Chancellor, and instead of apologising, as he should have done, in the first line of his Statement he said that everything is healing. Now we are told that we should give the brilliant new governor an opportunity to comment to the Chancellor on the economy—he certainly needs someone to tell him something about his policy.

How can the Minister say that the FPC would prejudice financial stability because it might go for economic growth? I have heard some arguments against what my noble friend and I have suggested for a long time, but to suggest that that is the answer that the Treasury is using is quite incredible. I wish I had heard him differently. I am very sorry indeed that that was his reply, and I simply do not accept it.

Amendment 10 withdrawn.

Amendment 11

Moved by Lord Newby

11: Clause 4, page 15, line 3, at end insert—

“( ) The purpose of a review is—

(a) in the case of a direction, to consider whether the direction ought to be revoked, and

(b) in the case of a recommendation, to consider whether the recommendation ought to be withdrawn.”

Lord Newby: My Lords, Amendment 11 responds directly to a request made by the noble Lord, Lord Eatwell, on Report. On hearing my noble friend Lord Sassoon’s explanation of the underlying purpose of the FPC’s reviews of its live actions—namely, to consider whether they are still necessary and whether they should be removed or revoked—the noble Lord, Lord Eatwell, responded,

“if that is what the new section meant, why did it not say so?”.—[

Official Report

, 6/11/12; col. 978.]

I believe that the purpose of the reviews could have been derived implicitly from the clause as it was originally drafted. However, I accept that this could be made more explicit in the clause, and Amendment 11 seeks to do exactly that. This is a straightforward amendment,

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which responds directly to concerns raised in this House about the clarity of the drafting. I hope that noble Lords can support it. I beg to move.

Lord Eatwell: My Lords, I am grateful to the Government for having taken on board the fact that there was some infelicity in the drafting at this point. I am delighted to support the amendment.

Amendment 11 agreed.

Clause 6 : The new Regulators

Amendments 12 and 13

Moved by Lord Sassoon

12: Clause 6, page 30, line 42, at end insert “court of directors of the”

13: Clause 6, page 44, line 5, leave out “22(1A)” and insert “22(1A)(a)”

Amendments 12 and 13 agreed.

Clause 11 : Permission to carry on regulated activities

Amendments 14 to 16

Moved by Lord Sassoon

14: Clause 11, page 54, line 15, leave out “considers” and insert “appears to it”

15: Clause 11, page 58, line 5, at end insert—

“(5A) The FCA may refuse an application under subsection (5) if it appears to it that it is desirable to do so in order to advance any of its operational objectives.”

16: Clause 11, page 58, line 45, at end insert—

“(5A) The PRA may refuse an application under subsection (5) if it appears to it that it is desirable to do so in order to advance any of its objectives.”

Amendments 14 to 16 agreed.

Clause 24 : Rules and guidance

Amendment 17

Moved by Lord Sassoon

17: Clause 24, page 88, line 38, at end insert—

“137BA FCA general rules: cost of credit and duration of credit agreements

(1) The power of the FCA to make general rules includes power to make rules prohibiting authorised persons from—

(a) entering into a regulated credit agreement that provides for—

(i) the payment by the borrower of charges of a specified description, or

(ii) the payment by the borrower over the duration of the agreement of charges that, taken with the charges paid under one or more other agreements which are treated by the rules as being connected with it, exceed, or are capable of exceeding, a specified amount;

(b) imposing charges of a specified description or exceeding a specified amount on a person who is the borrower under a regulated credit agreement;

(c) entering into a regulated credit agreement that—

(i) is capable of remaining in force after the end of a specified period,

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(ii) when taken with one or more other regulated credit agreements which are treated by the rules as being connected with it, would be capable of remaining in force after the end of a specified period, or

(iii) is treated by the rules as being connected with a number of previous regulated credit agreements that exceeds a specified maximum;

(d) exercising the rights of the lender under a regulated credit agreement (as a person for the time being entitled to exercise them) in a way that enables the agreement to remain in force after the end of a specified period or enables the imposition on the borrower of charges within paragraph (a)(i) or (ii).

(2) “Charges” means charges payable, by way of interest or otherwise, in connection with the provision of credit under the regulated credit agreement, whether or not the agreement itself makes provision for them and whether or not the person to whom they are payable is a party to the regulated credit agreement or an authorised person.

(3) “The borrower” includes—

(a) any person providing a guarantee or indemnity under the regulated credit agreement, and

(b) a person to whom the rights and duties of the borrower under the regulated credit agreement or a person falling within paragraph (a) have passed by assignment or operation of law.

(4) In relation to an agreement entered into or obligation imposed in contravention of the rules, the rules may—

(a) provide for the agreement or obligation to be unenforceable against any person or specified person;

(b) provide for the recovery of any money or other property paid or transferred under the agreement or other obligation by any person or specified person;

(c) provide for the payment of compensation for any loss sustained by any person or specified person as a result of paying or transferring any money or other property under the agreement or obligation.

(5) The provision that may be made as a result of subsection (4) includes provision corresponding to that made by section 30 (enforceability of agreements resulting from unlawful communications).

(6) A credit agreement is a contract of the kind mentioned in paragraph 23 of Schedule 2, other than one under which the obligation of the borrower to repay is secured on land: and a credit agreement is a “regulated credit agreement” if any of the following is a regulated activity—

(a) entering into or administering the agreement;

(b) exercising or being able to exercise the rights of the lender under the agreement.

(7) In this section—

(a) “specified amount” means an amount specified in or determined in accordance with the rules;

(b) “specified period” means a period of a duration specified in or determined in accordance with the rules;

(c) “specified person” means a person of a description specified in the rules;

(d) subject to that, “specified” means specified in the rules.”

Lord Sassoon: My Lords, on Report I committed to bring forward a government amendment to give the FCA an effective power to make rules capping the cost and the duration of a regulated credit agreement. I am grateful to the noble Lord, Lord Mitchell, for raising this on Report and to noble Lords on all sides of the House who spoke in support of the need for action against sharp practices in the payday lending industry. The Government warmly welcome the cross-party consensus that emerged on this important issue.

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As I said on Report last week, the Government were fully in agreement with the intent behind the noble Lord’s amendment but felt that there were weaknesses in the way it was framed. We have made use of the time between Report and tabling this amendment at Third Reading to get this power right and ensure that it is watertight. Moreover, I also committed to going further than the noble Lord, Lord Mitchell, proposed, by making additional consumer protections integral to the power.

The Government’s amendment spells out in detail the kind of rules that the FCA may make to prevent lenders from imposing excessive interest rates or associated charges on borrowers, and clarifies that the FCA would be able to specify the level of the cap in rules and also to define which charges, in addition to interest, should be captured. The amendment also allows the FCA to impose limits on the duration of the agreement, and to specify the detail of the cap and other restrictions in its rules.

Those who have compared the Government’s amendment tabled yesterday with the amendment of the noble Lord, Lord Mitchell, will have noted that the Government’s version is significantly longer and more comprehensive in its detail. I said last week that we would take care to frame the power to prevent unscrupulous firms exploiting loopholes and to ensure that consumers were properly protected. The Government specifically ensured that this power covers associated charges to avoid unscrupulous firms “gaming” the restrictions by, for example, reducing the interest rate but introducing exorbitant fees for related services such as setting up the loan. It also specifically captures the practice of rollovers, which we have seen abused by some players in the payday loans industry. Under the amendment the FCA will have a specific power to impose a limit on the overall duration of the rolled-over agreement and a limit on the number of rollovers that are permitted.

The government amendment has also built in robust protections for consumers who fall victim to lenders’ excessive charges. First, the FCA can provide that the lender cannot enforce the agreement and the borrower is not obliged to repay the loan. Secondly, it can provide that any money or property transferred under the agreement—an item that has been pawned, say—must be returned. Thirdly, it can provide that compensation must be paid to the consumer.

Before moving on I will address briefly one provision in the amendment of the noble Lord, Lord Mitchell, that we omitted in tabling the Government’s version: namely, a specific reference to consumer detriment or consumer protection. That is because the FCA will already be prompted to respond when it detects consumer detriment. Under Section 137A of FiSMA the FCA may make general rules only for the purposes of advancing one or more of its operational objectives. These are: securing protection for consumers, protecting and enhancing the integrity of the financial system, and promoting effective competition. As such the consumer protection objective will provide the strong underpinning mandate for the FCA to make rules under the new power that we are discussing. It is not therefore necessary to spell it out further in the Bill.

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While I am confident that our amendment clarifies the FCA’s role in this important area, we must be careful not to regard this power as a silver bullet that will fix all the problems in the payday lending sector. As the OFT’s recent report into the high-cost credit market showed, it is clear that regulation of the payday lending market as a whole needs to improve. Compared to the current regulatory regime under the OFT, the FCA will have a broader and more effective toolkit to monitor and tackle developments in the market and supervise practice among firms.

Capping the cost of credit and the number of times that the loan can be rolled over is a major market intervention, and I expect the FCA to contemplate the use of this power in a responsible and measured way. I discussed the mixed picture from international evidence on Report. We must avoid at all costs any such cap resulting in catastrophically unintended consequences, such as driving vulnerable consumers to illegal loan sharks. However, as I said on Report, we need to ensure that the FCA grasps the nettle when it comes to payday lending. This amendment grants the FCA the powers to deliver effectively on its consumer-protection objective and tackle consumer detriment. It is a power that I hope all sides of the House will wish to support. I beg to move.

Lord Mitchell: My Lords, never in my wildest dreams did I ever expect that I would be standing here at the opposition Dispatch Box with my name on an amendment alongside a government Treasury Minister. It is some achievement and could occur only in your Lordships' House and not in the other place. I thank the noble Lords, Lord Sassoon and Lord Newby, for the very constructive way in which they responded to the amendment we put forward. They listened to what we had to say, took our comments away and came back with an amendment that is entirely acceptable to us. However, I would not like them to think that this is a complete love fest—normal service will resume at some other time.

It is worth recounting that the Government told us in Committee that the points which we wanted were already in the Bill. We tried hard to find the location of those points—and no doubt they are buried somewhere. However, with an issue like this one, which is so important, it is dangerous to have implied rules which have to be inferred. Many of these payday loan companies have very successful lawyers and access to some of the best brains in the country in this area. The provision would have been a complete dog's breakfast, to be honest.

We tried again at Report, and I admit that I came in here today ready for battle. However, I was astonished and delighted at the complete turnaround that the noble Lord, Lord Sassoon, has offered. He promised us a better amendment and that is what we have been given. The new amendment is stronger, tighter and more effective, and most of all, it offers complete clarity. I would not be human if I did not savour the moment just a jot. It probably will not happen again, but it is good that it has happened today.

I have been asked why the Government conceded and no doubt at some stage, over a gin and tonic, I will find out. However, I feel that it was due to two reasons

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—the political argument, and the moral argument. As for the political basis, the Government knew that they would be defeated last Wednesday on Report. It had been a bad couple of weeks for the Government and another defeat was something that they could do without. The moral argument, however, was more important. I was fortunate because the noble Baronesses, Lady Howe of Idlicote and Lady Grey-Thompson, and the right reverend Prelate the Bishop of Durham added a non-political independent gravitas to what we were trying to do. I thank them from the bottom of my heart. I also thank all noble Lords who contributed to the debate.

The media also took up this cause with a vengeance. Every article and television programme that I read or saw seemed to back our position. They were against the payday lending companies. Indeed, I am sure that the man in the street in this country was also in favour of regulation. Everybody seemed to be in favour of it except for the payday loan companies themselves—and I was nobbled in the most unlikely of locations by them or their representatives telling me how wrong we were. However, the Government conceded because the political and moral arguments were absolutely against them. They did concede and I am grateful to them for the positive way in which they have dealt with this issue.

I had two questions to ask about consumer detriment and time and duration but the Minister has addressed them in his speech. He said that there was no silver bullet for this and I absolutely agree. As we go forward perhaps we should look at what is happening in other countries. I spoke at Report about the experience in Florida, which has had an amazing result. I repeat that anyone who takes out a payday loan in that state has to register it as a charge. They have to pay for it and it goes on to a database. It is known that they have a payday loan. That absolutely prevents any individual having more than one payday loan on any one occasion. That is something that we should look at for the future.

This provision will go forward and become a new law but I believe that it will also become a statement of intent. This amendment is simple, symbolic and now stands alone. This industry is going to be controlled. For many people out there, the world is now a slightly better place.

4.15 pm

The Lord Bishop of Guildford: My Lords, those of you who were present for prayers earlier this afternoon will have perhaps noted the irony with which this Prelate quoted from Psalm 15, which speaks about taking money upon usury. In rabbinic and Jewish interpretation that is interpreted as “not unreasonable” usury.

I have to express my gratitude to the Government and the Minister for this excellent amendment. I do so on behalf of the Bench that I sit upon and especially on behalf of the right reverend Prelate the Bishop of Durham, who has had unfortunately to go home for urgent diocesan business, otherwise he would have been making some of the comments that I have been making. I will not go into the detail but I will make

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one final comment—on the way that your Lordships’ House conducts its business when we are at our best. This seems to me to be a very good example of that. We had an amendment and then rational discussion in debate at various levels—Cross-Bench, opposition, government—and then we had an excellent amendment. For that I thank the Government and all who have taken part in this important debate.

Lord Peston: My Lords, I start by congratulating my noble friend Lord Mitchell and the noble Lord, Lord Sassoon, on a very great achievement. However, as everybody seems to understand the amendment in every way except for me, I have three questions in case I have misunderstood what the noble Lord said.

I read the amendment as saying that it gives the FCA the power to do all the things that we want it to do. However, I was not very clear whether he was then saying that, under its consumer protection mandate, it follows immediately that it must exercise that power. This is our favourite “may” and “must” question. You can give someone power but they may not use it. However, am I right in understanding that this amendment, coupled with the whole of the rest of the remit for the FCA, essentially means that it will now have to go into this field and deal with it in the way suggested, or is it still up to it whether it bothers with it? I would like the answer to that question.

The second question we had—if we recall our little debate on this last week—was on the concept of transparency. The great reason why this is a racket is of course that the average consumer/borrower who is not an expert in this field does not know until he has signed up what he is signing up for. Am I right in assuming that this amendment will make sure that the one thing that would happen as a result of this—do not let us worry for the moment about bankruptcy and all that for these firms—is that consumers will definitely know what they are letting themselves in for? Certainly my attempt to look up at least one site on this showed that you do not get to what you are letting yourself in for until you are virtually locked in. Am I right that this amendment is both transparent in general and also transparent with regard to what you have let yourself in for?

I do not say this in a negative way in terms of saying we do not want this; this is a tremendous achievement. I am looking for a bit of enlightenment to make sure that I understand what it means.

Lord Barnett: My Lords, perhaps I may add to what my noble friend Lord Peston has said. I will not repeat the may/must argument; it has been well enough made, and I hope that we will get a reply from the noble Lord, Lord Sassoon. Incidentally, in congratulating my noble friend Lord Mitchell, perhaps it is right that I should also congratulate the noble Lord, Lord Sassoon. This may be our last exchange before he retires.

The noble Lord, Lord Sassoon, mentioned the assumption that the FCA will now have the powers to deal with these unscrupulous people regarding payday loan schemes. As my noble friend Lord Mitchell said, they will have lots of good lawyers because when people have many profits to defend, as they do, they

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tend to use lots of lawyers. While I am not a lawyer, I hope that the noble Lord’s lawyers have indeed drafted this correctly. I know that these things can never be done tightly enough and that once lawyers get involved it finishes up in the courts for somebody else to decide. That is bound to happen and I am not blaming the noble Lord, Lord Sassoon, or his legal advisers for it. In my experience, when court actions involve lawyers on two sides in major cases, both advise their clients that they are right and that they should go to court about it. That becomes very expensive and they eventually resolve it only in the court.

As the noble Lord, Lord Sassoon, said, although he is confident about this provision, it is nevertheless not a silver bullet. Does he think that the advice he has been given will result over the next few months or weeks in the lawyers worrying about it? At the end of the day, will we require secondary legislation to deal with this? I hope not—I hope that the lawyers have it absolutely right this time. However, as the noble Lord said, one of the worries is the law of unintended consequences.

This is such a complex area but I like the point that my noble friend Lord Mitchell made about what happens in, I think, Canada.

Lord Mitchell: It was Florida.

Lord Barnett: In Florida, they have to register this. If it was in Canada, the new Governor of the Bank of England would have a still better idea. It may be that he still does because he seems a very bright fellow and he will know what happens in Florida. Perhaps, some time in the not too distant future, we will have something like what my noble friend Lord Mitchell quoted because that seems to me, as a non-lawyer, to be a sensible way forward. I hope that we can move that way in future. For now, it only remains for me, too, to congratulate all concerned in this matter and wish the new amendment well in the future.

Lord McFall of Alcluith: My Lords, I congratulate the noble Lord, Lord Mitchell, the Government and others in the House on passing this Act because in terms of consumer protection in Acts, the wheels turn very slowly. The Consumer Credit Act 1974 was only superseded because of a lot of effort by quite a number of us in the other place in getting another Consumer Credit Act in 2006, 32 years later. At a time when we have the internet and technology has increased enormously, that means that the imbalance between the consumer and the industry gets even steeper, so I welcome this amendment today and the efforts that have been put into it.

In particular, I congratulate the Minister, the noble Lord, Lord Sassoon, as he departs the Front Bench. He deserves our hearty congratulations because for years we have listened to the plea, “Let the market work”. What happens when we let the market work, to be euphemistic, is that innovation takes over and innovation, as the Minister says, equates to sharp practices. Once we pass this in the House today, it will be going out into the cold light of day and I can tell everyone in the House that innovation will take place and we therefore have to be on our guard.

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This is but a first step but it is a huge first step. In line with the comments made by other Peers, I ask the Minister for clarification on these points. First, will the new clause cover all costs and charges levied by payday lenders or borrowers? Secondly, when will it come into force? A number of us are worried that we could be waiting for a long time before it is brought in and that, in the interim, the sharp practices will continue. Lastly, how do the Government envisage the cap being set and does the Minister have in mind at what level he expects that cap to be set? It is important to give some direction to the FCA in today’s debate. My last word to the Minister is to offer my congratulations as a new life beckons in front of him, which I hope is just as prosperous.

Baroness Howe of Idlicote: My Lords, I had not intended to say anything today, because I was pleased with the amendment. The more I listened to the explanation, however, the more enthusiastic I became about it. So I wanted to add my thanks to the noble Lord, Lord Mitchell, for all that he has done here, as well as to the noble Lord, Lord Sassoon, and everybody else who has been involved in the redrafting. I am sure it will not solve all the problems. I would also like to ask when it will come into force; I imagine that it will not be all that far ahead. Nevertheless, as has been said, it is an extremely important and valuable step in the right direction.

Lord Sassoon: My Lords, I am grateful for all those contributions. I will briefly respond to some of the specific questions. First, the noble Lord, Lord Peston, asked whether this means that the FCA has to go into this field. Absolutely it does; it would have to anyway. Putting all this in the Bill will concentrate the FCA’s mind wonderfully. However, as the noble Lord knows, it is an enabling power; the FCA may make these rules, but this does not say that it must make them.

On the noble Lord’s other questions about whether consumers know what they are letting themselves in for, this is one of the other areas that clearly needs attention, as I indicated in my opening remarks. Whether this is addressed under the consumer credit directive or the consumer protection regulations, it is another parallel area. I stress again that we are getting to the heart of the issue in this amendment, but this is not the sum total of it.

There were also questions about when the rules might come in. The rules will come in when the FCA gets round to making them. There is nothing to stop the OFT moving ahead. The next thing we are expecting is the academic report, which refers in some detail to the international evidence about the pros and cons of caps. That will be part of the evidence base that will be used, building up to any rules that may or may not be put in place. However, I can assure the noble Lord, Lord Barnett, that there is no question of secondary legislation here. We are giving the FCA a clear rule-making power; its rule-making procedures will then go for consultation, but this does not need to come back through the channel of secondary legislation.

Lastly, I turn to the questions from the noble Lord, Lord McFall of Alcluith. In parenthesis, I would argue that there have certainly been financial innovations

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that have been beneficial, but perhaps we will leave that debate for another day. The noble Lord asked whether all costs and charges would be covered. Yes, they will—all of them. He asked when this comes into force. This specific power comes into force in April 2014, when credit becomes a regulated activity under the FCA. Of course, that will not stop the Government and the OFT looking at what may need to be done before then, but we are talking about a Bill that relates in this instance to the powers of the FCA when they are transferred over. As far as what the cap should be, that will be a matter for the FCA. It is a very difficult question that will need careful thought. As I have already indicated, the Bristol study, which is coming out very soon, will be an important contribution to that thinking. We are putting an important building block in place today, but it is not the only building block in this area.

4.30 pm

Lord McFall of Alcluith: My Lords, I do not want to push my luck too much with the Minister, but he says that the rules will come in as and when the FCA decides, and that is 2014. We have a bit of time before then. Given that there is urgency regarding the adoption of this clause and all-party agreement about it, it would be good if he could elaborate on those comments so that he sends a message from here today to the industry and the regulators that this is a matter of urgency and that Parliament wishes to see early action on this matter. We do not want to wait until mid-2014. Just to add icing to the cake, will he please elaborate?

Lord Sassoon: My Lords, I am sure that the industry has got the message loud and clear from this House that more needs to be done. Of course, it need not wait until April 2014; there are plenty of other things that can be done in the mean time if appropriate.

Amendment 17 agreed.

Amendment 18

Moved by Lord Sassoon

18: Clause 24, page 102, line 6, after “to” insert—

“(a) rules made by the FCA under section 137BA, or”

Amendment 18 agreed.

Clause 31 : Additional power to direct UK clearing houses

Amendment 19

Moved by Lord Newby

19: Clause 31, page 125, line 26, leave out “desirable” and insert “necessary”

Lord Newby: My Lords, last week on Report my noble friend Lord Sassoon signalled that the Government were minded to bring forward amendments at Third Reading to address some of the concerns that have been raised by the industry regarding the proposal to

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confer on the Bank of England an additional power of direction over clearing houses. This group of amendments reflects those concerns.

First, the amendments will require the Bank to be satisfied that any direction made under the power is necessary, having regard to the specified public interest criteria, rather than simply desirable. Secondly, they will put it beyond doubt that this additional power of direction will not be available in instances where the desired direction could be given under the Bank’s existing power of direction under Section 296 of FiSMA. Thirdly, the Bank, in instances where it gives a direction under this power without giving the recipient prior notice, will be required to explain to the recipient after the direction has been given why the direction was given, and why no prior notice of it was given. I should also make it clear that any justification given pursuant to this requirement will be given to the clearing house directly, will not be published and will not divulge sensitive information that might harm the public interest. Fourthly, these amendments will give effect to the assurance that we have already given the House that the additional power of direction could not be used to compel a clearing house to accept the business of a competitor. The amendments will provide greater certainty to clearing houses regarding the circumstances in which the additional power of direction could be used.

To alleviate any remaining doubts from industry, I repeat the assurance that my noble friend has previously given the House: the power of direction relates only to the recognised clearing house itself. The Bank of England cannot use the power of direction to require shareholders, members or clients to recapitalise or otherwise fund a failing recognised clearing house, with one exception: where the UK clearing house already has recapitalisation arrangements and agreements in place with its shareholders. In this instance the Bank of England could use the power to direct the clearing house to enforce those arrangements, provided that the necessary conditions and safeguards were met. Furthermore, this power cannot be used retrospectively.

The Bank of England also expects to publish a supervisory approach document in the coming weeks. This will give further information on how powers of direction will fit within its wider supervisory powers over recognised clearing houses. I beg to move.

Baroness Cohen of Pimlico: I, too, am supporting a government amendment, though one that is not nearly as dramatic as that secured by my noble friend Lord Mitchell, whom I congratulate very much not only on doing it but on the thoroughness of his research. He actually took out a loan with one of these companies, an act of true heroism that I hope will not result in his being deluged with peculiar financial products for the rest of his life.

In welcoming this amendment, I remind the House once again that I am a non-executive director of the London Stock Exchange. I very much welcome the Government’s amendments to the powers of direction and the spirit of engagement that HM Treasury and the Bank have offered in dialogue on these matters, and which I know the industry will look to continue.

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The amendments provide useful further context for the use of the power. They put it mostly outside the scope of a day-to-day power, and reassure us that it will be used only when it is reasonably necessary to do so.

That said, it would be very helpful if the Minister were able to offer any further thinking on the circumstances in which it is envisaged that this power would be used, and took this opportunity to give us his vision for co-operation between HM Treasury, the FCA and the PRA in advising on the powers. All relevant authorities, particularly the Financial Conduct Authority as the market regulator, will need to consider the wider market impact of any proposed direction by the Bank.

Finally, the announcement that the Bank will be consulting on its supervisory approach before the end of the year is very good news. That will be an excellent opportunity for it to explain the intended circumstances under which the Section 296A power would be used, and more generally, I hope, to give an account of the Bank’s approach to capital requirements for clearing houses.

Baroness Kramer: My Lords, I rise with a question for clarification for the Minister. Is the net effect of this amendment to make it clear that the owners of the platform that is clearing derivatives—one of the central clearing platforms—are exposed only to the extent of the loss allocation that is defined in their membership agreement; and that, beyond that, the Government will not, in case of a failing platform, force other platforms to take on open, out-of-the-money contracts? If that is so, is the Minister in effect saying that the backstop for the collapse of an exchange is effectively the taxpayer? I ask that not in criticism, but for the sake of absolute clarity.

Lord Fraser of Carmyllie: My Lords, I declare an interest as a director of ICE Clear Europe, and I warmly welcome this extremely valuable amendment. It seems to go wider; noble Lords may think that it is a narrow amendment, but they have no idea what a sense of confidence it has given to the City at this time. I regard that as very important.

During the 1970s, we generally regarded the Foreign and Commonwealth Office as having the function of managing orderly retreat. Now we have absolute confidence that within the Treasury there is a very clear understanding that it will look after the best interests of the City of London and the pre-eminence of the City. It is a difficult task and I do not underestimate how important that is. The amendment is to be warmly welcomed. Noble Lords may think that it is minor, but it does a great deal more than simply to change the position of the clearing house and the direction.

I have one simple question, and I will not be worried in the least if the Minister slaps me down. Amendment 20 says,

“to accept a transfer of property, rights or liabilities of another clearing house”.

Does that refer only to a clearing house that still operates as a going concern? Frankly, I would regard that as unlikely. It is much more likely that the Bank of England would want to intervene at a point when it

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was in administration or in the process of liquidation. If I am told that that line encompasses all those particular circumstances, I will be more than happy to be told to shut up.

Lord Eatwell: My Lords, perhaps I may simply elaborate a little on the question posed by the noble Baroness, Lady Kramer. Given that there is not to be a transfer of obligations between platforms, and given that the collapse of a platform could impose significant systemic risk on the economy with a large number of unclear positions, are we to understand that the lender of last resort will be required to stand behind a collapsed platform?

Lord Myners: Perhaps I may also ask a question following that of the noble Baroness, Lady Kramer. The concept of interoperability is very important in the clearing of derivatives, so that corporates in particular can offset a position with one platform where they have a credit with another platform where they have a deficit. Will the Minister clarify that that involves a degree of mutualisation in the event of a failure of a platform because the failure of that platform will transfer to other platforms?

Lord Newby: My Lords, I am extremely grateful for the warm welcome that these amendments have received from across the House. I will deal with some of the specific questions that have been raised. The noble Baroness, Lady Cohen, asked about my vision for the way in which this provision would be used and how I saw the co-operation between the Bank, HM Treasury, the FCA and the PRA.

It may be marginally less than a vision but the situation would be that there is no requirement for the Bank to consult HMT or the other regulators before using the additional power of direction. This is because the additional power of direction is a supervisory tool and, as such, should not require the express permission of HMT before it is used. As I am sure noble Lords would agree, it is not necessary for regulators to consult with HMT before acting on day-to-day supervisory measures. It is also consistent with the similarly broad powers that the FSA currently has to vary permissions in the banking sector.

As for how the Bank intends to use its powers, as I said in my speech, it expects to publish a supervisory approach document in the coming week. Its purpose will be to give further information on how the powers of direction will fit within its wider supervisory powers over recognised clearing houses.

My noble friend Lady Kramer asked a number of questions about where the liabilities would lie and she set out her understanding of where they were. I can confirm that her view of where the powers lie is correct. As a final question, she asked about a backstop power and whether public funds were the backstop. That, of course, is the de facto position today. With this provision, we are seeking to put in place arrangements and resolution arrangements that would greatly reduce the likelihood of public funds being called upon by demonstrating in advance how these issues would be dealt with. I realise that that is a contentious statement because a number of noble Lords will no doubt think

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that it is extremely difficult to achieve that. Whether it is easy or difficult, that is what we are seeking to achieve by these powers and what the Bank will be trying to achieve.

The noble and learned Lord, Lord Fraser of Carmyllie, asked about going concerns or not-going concerns. The clause refers to a clearing house. It does not matter if the clearing house is no longer a regulated going concern, as I suspect he expected me to say.

The noble Lord, Lord Eatwell, followed up on what the noble Baroness, Lady Kramer, said. Perhaps the only additional comment I should make is that these powers now go beyond any resolution powers of which we are aware elsewhere in the EU, and they are part of our drive to ensure that London is the safest place—in the EU, at least, if not globally—to do financial services business.

The noble Lord, Lord Myners, asked me an extremely interesting question, which was also extremely technical. I hope he will not mind if I write to him about it. I beg to move.

Amendment 19 agreed.

4.45 pm

Amendment 20

Moved by Lord Sassoon

20: Clause 31, page 125, line 40, at end insert—

“(2A) The direction may not require the clearing house—

(a) to take any steps for the purpose of securing its compliance with—

(i) the recognition requirements, or

(ii) any obligation of a kind mentioned in section 296(1)(b) or (1A), or

(b) to accept a transfer of property, rights or liabilities of another clearing house.

(2B) If the direction is given in reliance on section 298(7) the Bank must, within a reasonable time of giving the direction, give the clearing house a statement of its reasons—

(a) for giving the direction, and

(b) for relying on section 298(7).”

Amendment 20 agreed.

Clause 107 : Power to make further provision about regulation of consumer credit

Amendment 21

Moved by Lord Sassoon

21: Clause 107, page 196, line 24, leave out “22(1A)” and insert “22(1A)(a)”

Amendment 21 agreed.

Schedule 1 : Bank of England Financial Policy Committee

Amendments 22 to 24

Moved by Lord Sassoon

22: Schedule 1, page 210, line 27, leave out from “stability” to end of line 28

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23: Schedule 1, page 211, line 10, leave out “7” and insert “6”

24: Schedule 1, page 211, line 11, leave out “7” and insert “6”

Amendments 22 to 24 agreed.

Schedule 2 : Further amendments relating to Bank of England

Amendment 25

Moved by Lord Sassoon

25: Schedule 2, page 214, line 11, leave out sub-paragraph (10) and insert—

“( ) In paragraph 11—

(a) the existing provision becomes sub-paragraph (1),

(b) in sub-paragraph (1)(b), for “servant” substitute “employee”,

(c) in sub-paragraph (1)(c)(ii), for “servants” substitute “employees”, and

(d) after sub-paragraph (1) insert—

“(2) The duties and powers that may be delegated under this paragraph do not include duties and powers that are by any enactment expressly imposed or conferred on the court of directors.””

Amendment 25 agreed.

Schedule 3 : Financial Conduct Authority and Prudential Regulation Authority: Schedules to be substituted as Schedules 1ZA and 1ZB to FSMA 2000

Amendments 26 to 31

Moved by Lord Sassoon

26: Schedule 3, page 228, line 2, after “by” insert “the court of directors of”

27: Schedule 3, page 228, line 4, after “by” insert “the court of directors of”

28: Schedule 3, page 228, line 6, leave out “Bank” and insert “court of directors”

29: Schedule 3, page 228, line 13, leave out “Bank” and insert “court of directors”

30: Schedule 3, page 228, line 15, leave out “Bank” and insert “court of directors”

31: Schedule 3, page 228, line 37, after first “The” insert “court of directors of the”

Amendments 26 to 31 agreed.

Schedule 5 : Performance of regulated activities

Amendment 32

Moved by Lord Sassoon

32: Schedule 5, page 248, line 31, at end insert—

“(b) after subsection (5) insert—

“(5A) “The appropriate regulator”—

(a) in relation to a controlled function which is of a description specified in rules made by the FCA, means the FCA, and

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(b) in relation to a controlled function which is of a description specified in rules made by the PRA, means the PRA.”, and

(c) in subsection (6), after “Any” insert “other”.”

Amendment 32 agreed.

Schedule 9 : Discipline and enforcement

Amendment 33

Moved by Lord Sassoon

33: Schedule 9, page 287, line 6, at end insert “, and

(d) a decision under section 391(1)(c) to publish information about the matter to which a warning notice relates.”

Lord Sassoon: My Lords, Amendments 33 and 34 concern the new power provided for by this Bill for the regulators to disclose the fact that a disciplinary warning notice has been issued. We have of course already discussed this new power and the safeguards to which it should be subject in quite some detail. I am speaking to these two amendments again only because, as a result of being erroneously assigned on the day’s Order Paper, they were not moved on Report on 26 November. I am grateful to the noble Baroness, Lady Hayter of Kentish Town, for being the first to spot this. So to be absolutely clear, these are simply Amendments 97ZA and 97ZB—as they were—retabled from the Report stage.

To remind your Lordships briefly, Amendment 33 brings the decision to disclose the fact that a disciplinary warning notice has been issued into the list of matters subject to the procedures set out in Section 395 of FiSMA. Amendment 34 sets out the criteria with which the process for deciding to disclose a warning notice must comply, noting that the decision must be taken either by a person other than the person by whom the decision was first proposed, or by two or more persons not including the person by whom the decision was first proposed.

The amendments secure the involvement of the Regulatory Decisions Committee, or an equivalent body for decisions, to disclose the fact that warning notices have been issued. It is a proposal that the House supported and endorsed when we debated it last week.

This group of amendments may be the penultimate time that I will speak on the Bill during its passage through this House. With this in mind, perhaps noble Lords will permit me to conclude this debate by reflecting a little on the past months since our lively Second Reading debate on 11 June. It was so long ago that the England football team was still in the European Championship and preparing to play France as we were kicking off our consideration of the Bill. Of one thing we can be certain: the performance of this House on this Bill was rather better, I regret to say, than the performance of the England football team.

I believe that the Bill that we are sending back to another place is greatly improved from the Bill that we debated at Second Reading in June. That is due to the very constructive contributions and engagement from noble Lords right across the House, not least from the

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Bishops’ Benches, and I pay tribute to all who have contributed to those debates. No other legislative house in the world could have brought to bear such expertise in financial services and their regulation as this House has on this Financial Services Bill.

As I need to keep my closing remarks brief, I can only apologise for not naming individually the many noble Lords who have made important contributions to our debates. However, I would like to thank the opposition Front Bench—too many of them to name—led so ably by the noble Lord, Lord Eatwell, and the noble Baroness, Lady Hayter of Kentish Town. They have shown real tenacity and skill in their contributions. We have not always agreed with the points that they have made, but I have always valued those points and would like to thank them for their constructive and thoughtful approach throughout.

I thank, too, my noble friends Lord Newby and Lord De Mauley for the support they have given me, not least in calming down the House when it seems to have got rather excited by some of my contributions. This has been a long Bill, and it would not have been possible to provide the level of response that the House has rightly demanded without the able assistance of my noble friends.

I should also mention and thank the Bill team, which has worked continuously to provide support to the House throughout the stages of this Bill. It has done an outstanding job, which has been widely and rightly acknowledged. The excellent work of the parliamentary counsel in drafting the Bill and the subsequent many amendments to it deserves special praise.

I believe that we have significantly improved this important Bill in key areas. We have enhanced the governance of the Bank of England; given economic growth a higher priority in the new regime, for the FPC, FCA and PRA; significantly improved the robustness of the UK financial system by bringing investment firms, recognised clearing houses and holding companies within the special resolution regime; responded to industry concerns, in particular over the new warning notice power; offered consumers better protection, particularly in relation to payday loans; and, in the LIBOR clauses, moved swiftly to tackle the shameful behaviour of some in the industry.

The Government have listened carefully to the views of noble Lords and the amended Bill reflects many of the concerns of this House. The Bill will be an important addition to the statute book, and one that has been greatly improved thanks to your Lordships’ expertise. I beg to move.

Lord Eatwell: My Lords, I rise not with respect to the amendment but to reflect on the latter comments of the noble Lord, Lord Sassoon. As he said, the Bill began its somewhat laborious journey with its First Reading back in May. The process has been extraordinarily laborious considering that it was a politically non-contentious Bill. We should perhaps learn some lessons from this. The main lesson is that, if there is pre-legislative scrutiny, a valuable process that we introduced, more notice should be taken of the conclusions of that scrutiny than is evident in the Bill before us. I refer particularly to the advice from the Treasury Select

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Committee that a new Bill be drafted rather than that we rely on the complex structure of amendments to prior legislation that we have had to wade through over the past several months.

Given the weighty nature of the work that we have had to deal with, it is appropriate to thank those who have been involved with the Bill. I add my thanks to those of the noble Lord, Lord Sassoon, to my noble friends Lady Hayter, Lord Davies, Lord Stevenson and Lord Tunnicliffe. I also thank Mr Whiting and the Bill team, who have been helpful and courteous throughout, and the noble Lord, Lord Sassoon, for dealing with often complex matters and, occasionally, defending the indefensible with his usual good humour. Finally, in thanking individuals, I must thank Miss Jessica Levy, our talented and all-knowing researcher.

Effective regulation at the macro and micro level of systemic risks and the risks associated with individual firms is in the interests of households and industry and is essential for the success of the UK financial services industry. Therefore, we on this side wish this Bill well. I hope that the measures over which we have laboured will prove a success.

Lord Barnett: My Lords, I cannot let the Bill pass without saying a few words. I described the Bill as “shambolic” and was told by an old friend—a normally good friend who happens to be a former Conservative Cabinet Minister—that he was surprised that I was so political in using that unusual expression. I apologise to the noble Lord, Lord Sassoon, and the House. I could not think of a better word to describe what was in the Bill and what had happened.

My main concern with the Bill is the very principle of giving such huge powers to the Bank of England—and they remain. It is the principle that worries me. We have given huge powers to the Bank of England. We have added to the Bank of England Act, as I mentioned earlier today. We have given the Bank powers over the OFT, FCA, FSA and PRA, and over changes in FiSMA—so many different initials that one forgets precisely what we did do. We amended a lot because there was a lot to amend, because unfortunately these days, under both Governments, the House of Commons guillotines so much that very little gets done properly. Legislation comes to this House for amendment and we amend it well, I am happy to say, as we did on this occasion.

My worry is that we started off with an unusually large Bill: two volumes of clauses and schedules. It was so big and it has become even bigger because we put in provisions dealing with the LIBOR scandal. This should have been a Bill on its own. We on this side of the House rightly agreed with the changes resulting from the Government’s acceptance of the Wheatley report. These provisions dealt with it properly and the Opposition accepted them, but they did not just come forward in a Bill; they came forward scattered in amendments throughout the Bill. I hope that it deals with the LIBOR scandal but it is difficult to tell if it really did, because on top of all this we are now told that there will be secondary legislation as well. I regret to say that we do not understand what we have passed here, because we still do not know what is going to happen.

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I hope that we have done the right thing and that everything is going to work out, but the plain fact is that, with the LIBOR scandal, there were some in the Bank of England, the FSA and many other bodies whose main concern was primarily with interest rates. They knew nothing whatever about what the noble Lord, Lord Sassoon—I nearly said “my noble friend Lord Sassoon”; I feel he is that—was talking about. He described this LIBOR scandal as a global one, affecting some $300 trillion. It affected all that, but nobody in the Bank of England or the FSA or anybody else knew the slightest thing that was going on in the LIBOR scandal. Therefore, I would like to finish by asking the noble Lord, Lord Sassoon, a question.

Noble Lords: He has sat down.

Lord Barnett: I understand that I must not do that, so I will mention the question that I would have asked him. There are going to be investigations into the LIBOR scandal. Will they include looking in detail at whether there is anybody else liable or culpable in this regard? It clearly is a scandal of its own to say that nobody knew anything about it. I will leave it at that. I hope that the Government will produce sensible secondary legislation in the way we hope when we pass this Bill.

Lord Peston: My Lords, I will make a brief personal remark to the noble Lord, Lord Sassoon, who I believe is about to retire as a Minister after the passage of the Bill. My words are those that David Ricardo wrote to Thomas Malthus in the very last letter he wrote to him:

“And now, my dear Malthus, I have done. Like other disputants, after much discussion we each retain our own opinions. These discussions, however, never influence our friendship; I should not like you more than I do if you agreed in opinion with me”.

I hope that he will accept that message.

Amendment 33 agreed.

Amendment 34

Moved by Lord Newby

34: Schedule 9, page 287, line 8, leave out from “from” to end of line 10 and insert ““, that the decision” to the end and insert “that—

(a) a decision falling within any of paragraphs (a) to (c) of subsection (1) is taken—

(i) by a person not directly involved in establishing the evidence on which the decision is based, or

(ii) by 2 or more persons who include a person not directly involved in establishing that evidence,

(b) a decision falling within paragraph (d) of subsection (1) is taken—

(i) by a person other than the person by whom the decision was first proposed, or

(ii) by 2 or more persons not including the person by whom the decision was first proposed, and

(c) a decision falling within paragraph (d) of subsection (1) is taken in accordance with a procedure which is, as far as possible, the same as that applicable to a decision which gives rise to an obligation to give a warning notice and which falls within paragraph (b) or (c) of subsection (1).””

Amendment 34 agreed.

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Schedule 12 : Amendments of Parts 11 and 23 of FSMA 2000

Amendment 35

Moved by Lord Newby

35: Schedule 12, page 302, line 21, leave out from “for” to end of line 22 and insert ““the Authority” substitute “a regulator”,”

Amendment 35 agreed.

Schedule 13 : Auditors and actuaries

Amendment 36

Moved by Lord Newby

36: Schedule 13, page 309, line 41, leave out “other than PRA-authorised persons”

Amendment 36 agreed.

Schedule 18 : Further minor and consequential amendments

Amendment 37

Moved by Lord Newby

37: Schedule 18, page 345, line 10, leave out from “for” to end of line 11 and insert “the words from “competent authority” to the end substitute ““Financial Conduct Authority to exercise its functions under Part 6 of the Financial Services and Markets Act 2000.””

Amendment 37 agreed.

Bill passed and returned to the Commons with amendments.

Autumn Statement


5 pm

The Commercial Secretary to the Treasury (Lord Sassoon): My Lords, your Lordships still have me here for a little longer; I am not retiring yet. I refer the House to the Autumn Statement made earlier in another place by my right honourable friend the Chancellor of the Exchequer, copies of which have been made available in the Printed Paper Office and the text of which will be printed in full in the Official Report. I commend my right honourable friend’s Statement to this House.

The following Statement was made earlier in the House of Commons.

“It is taking time, but the British economy is healing. After the biggest financial crash of our lifetimes, people know that we face deep-seated problems at home and abroad. At home, we live with the decade of debt and the failure to equip Britain to compete in the modern world, and we face a multitude of problems from abroad—the US fiscal cliff, the slowing growth in China, and above all the eurozone, now in recession.

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People know that there are no quick fixes to these problems but they want to know that we are making progress, and the message from today’s Autumn Statement is that we are making progress. It is a hard road, but we are getting there. Britain is on the right track and turning back now would be a disaster. We have much more to do. The deficit has fallen by a quarter in just two years, and today’s figures show that it is forecast to continue to fall. Exports of goods to the major emerging economies, which were pitifully low, have doubled since 2009. Since this coalition Government came to office, 1.2 million new jobs have been created in the private sector. In a world economy where bond investors are fleeing countries that they regard as risky, investment is flowing into UK gilts, instead of flying from them. We have to keep it that way.

Two years ago, Britain was in the danger zone. Now we are seen as one of the safe havens, able to borrow money at lower interest rates than at any time in our history.

Today’s forecast shows a £33 billion saving on the debt interest payments that it was predicted we would have to pay two years ago. That is as much as the entire defence budget. That is why in this Autumn Statement, we show that this coalition Government are confronting the country’s problems, instead of ducking them.

Today we reaffirm our commitment to reducing the deficit, setting out the details of our spending plans for 2015-16 and rolling forward an outline framework into 2017-18. We show our determination to do this fairly, with further savings from bureaucracy, the benefit bills and the better-off. We go on equipping Britain to succeed in the global race by switching from current spending to capital investment in science, roads and education. We offer new support for business and enterprise, so they can create the jobs we need. In everything we do, we will show today that we are on the side of those who want to work hard and get on.

The Office for Budget Responsibility has today produced its latest economic forecast and it is a measure of the constitutional achievement that it is taken for granted that our country’s forecast is now produced independently of the Treasury, free from the political interference of the past. I want to thank Robert Chote, his fellow members of the Budget Responsibility Committee, Steve Nickell and Graham Parker, and all their staff at the OBR for their rigorous approach.

One of the advantages of the creation of the OBR is that we get not only independent forecasts, but an independent explanation for why the forecasts are as they are. For example, if lower growth was the result of the Government’s fiscal policy, it would say so. But it does not. It says that the economy has “performed less strongly” than expected and forecasts growth this year of minus 0.1%, but in its view,

“the weaker than expected growth can be more than accounted for by over-optimism regarding net trade”.

The OBR had previously assumed that the eurozone would begin to recover in the second half of this year. Instead, of course, it has continued to contract, which has hit our exports to those markets and the net trade numbers. The eurozone crisis has also, it says, spilled over into “tighter credit conditions” and,

“elevated UK bank funding costs”.

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In its words, those problems will,

“constrain growth for several years to come”.

There are also domestic problems that the OBR refers to. In the report today the contraction in 2008-09 is now assessed to be deeper than previously thought, with GDP shrinking by a staggering 6.3%, the largest shock to our economy since the Second World War. In the OBR’s view, the aftermath of that shock continues to weigh on the productivity of the UK economy, with credit rationing and impaired financial markets potentially impeding the expansion of successful firms. It says:

“GDP growth is now expected to be lower in every year of the forecast period, as credit conditions take longer to normalise and global growth remains weaker than previously expected”.

As a result, the OBR forecasts that the economy will grow by 1.2% next year, 2% in 2014, 2.3% in 2015, 2.7% in 2016 and 2.8% in 2017.

So the economy is recovering, and it is recovering more quickly than many of our neighbours. The International Monetary Fund estimates that next year the UK will grow more strongly than either France or Germany. Our credible fiscal policy allows for supportive monetary policy and, with the Bank of England, we are directly addressing the problems of tight credit through the £70 billion funding for lending scheme. In the OBR’s view, that has reduced UK bank funding costs, lowered interest rates in the real economy and will add to the level of real GDP.

One area where the British economy has done much better than forecast is in creating jobs. Since early 2010, the private sector has created 1.2 million new jobs—600,000 more than predicted—and youth unemployment has been falling. The OBR now expects unemployment to peak at 8.3%, instead of 8.7%. That is at a time when the unemployment rate in Spain is 26%, in France it is 11% and across the whole eurozone it is almost 12%. Employment, which is already at a record high, is set to go on rising each year of the forecast. For every one job less in the public sector, two new jobs are expected to be created in the private sector. Britain now has a greater proportion of its people in work than either the eurozone or the United States of America. More jobs means that the impact of the weaker than forecast GDP on the public finances has been less than some might have expected.

There have been three developments that have each had a significant one-off impact on the public finances, and the report we are publishing today shows clearly and transparently the impact of all three. First, there is the transfer of the Royal Mail pension fund to the public sector as part of its privatisation. That produces a one-off reduction in the deficit of £28 billion this year, but it will add to the deficit in the years after.

Secondly, the previous Government had classified Bradford & Bingley and Northern Rock Asset Management as off balance sheet. Today, they are brought on balance sheet, in line with the judgment of the Office for National Statistics. That adds around £70 billion to our national debt and reminds us of the price the country is still paying for the failures of the past.

Thirdly, the Government have decided, with the agreement of the Bank of England, to transfer excess cash held in the asset purchase facility to the Exchequer.

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This is sensible cash management, and it is in line with the approach of the Bank of Japan and the US Federal Reserve. I welcome the OBR’s verdict that this is, in its words, “more transparent” than the previous approach. I want to make sure that its impact on the figures is also completely transparent, so we have today published the forecasts for the public finances with and without the impact of the APF decision.

When we came to office, the deficit stood at 11.2%—the highest in our peacetime history. It was forecast to be the largest of any major economy in the world. In the past two years, the deficit has fallen by a quarter. Today’s figures show that with or without the APF coupons, the deficit is forecast to fall this year as well, and cash borrowing is forecast to fall too. Last year, the deficit was 7.9%. This year, with the APF coupons, it is forecast to be 6.9%, but that excludes the impact of the Royal Mail pension assets. It is falling and it will continue to fall each and every year, to 6.1% next year, 5.2% the year after, 4.2% in 2015-16, then 2.6%, before reaching 1.6% in 2017-18.

In 2009-10, the country was borrowing £159 billion. This year, we are borrowing £108 billion. That is forecast to fall to £99 billion next year, £88 billion the year after, then £73 billion in 2015-16, and £49 billion and £31 billion in the two years after that. These are the central forecasts published by the OBR, with the asset purchase facility cash transfer included. When the transfer is excluded, as we show in the document, the deficit also falls, from 7.9% last year to 7.7% this year, then 6.9% next year, and it falls in every single year after that—and cash borrowing falls in every year as well.

There are those who have been saying that the deficit was going up this year—indeed, I think I heard it in Prime Minister’s questions—but any way you present these figures, this is not what the OBR forecasts show today. It says that the deficit is coming down—coming down this year and every year of this Parliament. Yes, the deficit is still far too high for comfort—we cannot relax our efforts to make our economy safe—but Britain is heading in the right direction. The road is hard but we are making progress.

Unlike the previous Government’s golden rule, the regime we have set up means that the Chancellor is no longer judge and jury of their own fiscal rules, and today the OBR has assessed us against those rules. First, the fiscal mandate: this is the commitment that we will balance the cyclically adjusted current budget over the coming five years. I can tell the House that the OBR has assessed that we are, in its words, “on course” to meet our fiscal mandate. In other words, we have a better than 50% chance of eliminating the structural current deficit in five years’ time—that part of our borrowing that does not recover automatically as the economy grows. This is true, again, with or without the transfer of the coupons, so we will meet our fiscal mandate. But the OBR assesses in its central forecast that we do not meet the supplementary objective that aims to have debt falling by 2015-16. The point at which debt starts to fall has been delayed by one year, to 2016-17, and the OBR’s central forecast is that net

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debt will be 74.7% this year, then 76.8% next year, 79% in 2014-15, and 79.9% in 2015-16, before falling to 79.2% in 2016-17 and 77.3% in 2017-18.

In short, the tougher economic conditions mean that while our deficit is forecast to go on falling, instead of taking three years to get our debt falling, it is going to take four. Confronted with this news, some say we should abandon our deficit plan and try to borrow more. They think that by borrowing more, we can borrow less. That would risk higher interest rates, more debt interest payments, and a complete loss of Britain’s fiscal credibility. We are not taking that road to ruin.

Then there are those who say that despite all that has happened in the world this year, we should cut even more now to hit the debt target. That would require £17 billion of extra cuts a year. Let me explain why I have decided not to take this course.

We have always argued that we should let the automatic stabilisers work. We have not argued that we should chase down a cyclical or temporary deterioration in the economy, particularly one that our own independent body says is largely driven by problems abroad. That is also the judgment of the International Monetary Fund, the OECD and the Governor of the Bank of England.

Our aim is to reduce the structural deficit—the permanent hole in our public finances that will not be repaired as the economy recovers. And we are—we have cut the structural deficit by 3 percentage points in the past two years, more than any other G7 country, and it is set to go on being cut at a similar rate in the years ahead. This lower deficit is delivered by our public spending plans and we are going to stick with those plans. Overall, we are not going faster or slower with those plans; the measures I will announce in this Autumn Statement are fiscally neutral across this Parliament. There is no net rise in taxes today—any taxes increased are offset by taxes cut.

In last year’s Autumn Statement, we committed the Government to maintain the same pace of consolidation for two further years beyond the end of the current spending review, into 2015 and 2016-17. In this year’s Autumn Statement, we extend the consolidation for one further year, into 2017-18. The OBR projects that, as a result, the share of national income spent by the state will fall from almost 48% of GDP in 2009-10 to 39.5% by 2017-18. The document shows that total managed expenditure will continue to fall, and will now be £4.6 billion lower in 2017-18 than if it had been held flat in real terms. No decision to cut spending is ever easy, but those who object must explain whether instead they would have higher taxes, higher borrowing or both.

I also provide further detail of the consolidation plans for 2015-16, the last year of this Parliament. I said two years ago that the correct balance for our fiscal consolidation between spending and tax should be 80:20. I can confirm that by the end of 2015-16, the decisions we announce today mean that we will almost exactly deliver on that 80:20 mix. Total spending will fall in the final year of this Parliament at the same rate as through the current spending review.

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I can confirm today that the overall envelope for total managed expenditure will be set at £745 billion. We start with the working assumption that departmental resource totals will continue on the same trajectory as over the current spending review. The detail of departmental spending plans for 2015-16 will be set at a spending review, which will be announced during the first half of next year. What we are doing today is taking steps now to help deliver those spending plans and to go on reducing the deficit in a way that is fair.

This Government have shown that it is possible to restore sanity to the public finances while improving the quality of our public services—crime has fallen, hospital waiting lists are down, school standards are up—and this is with a Civil Service that is today smaller than at any time since the Second World War.

We are today publishing the reports we commissioned from the pay review bodies on market-facing pay. We commit to implementing these reports. This means continuing with national pay arrangements in the NHS and Prison Service, and we will not make changes to the Civil Service arrangements, either; but the School Teachers Review Body recommends much greater freedom to individual schools to set pay in line with performance, and my right honourable friend the Education Secretary will set out how that will be implemented.

Through the efforts of individual government departments and the support of the Chief Secretary and my right honourable friend the Minister for the Cabinet Office, we have already generated £12 billion of efficiency savings in Whitehall, but we believe there is room to do even more. If all departments reduced their spending on administration in line with the best-performing departments, such as Education and Communities and Local Government, another £1 billion could be saved. If all departments made greater provision of digital services, rationalised their property estates, as some have done, a further £1 billion could be saved. Today, therefore, we are reducing departmental resource budgets by 1% next year and 2% in the year after.

We will continue to seek efficiency savings in the NHS and in our schools, but that money will be recycled to protect spending in these priority areas. Local government budgets are already being held down next year to deliver the freeze in council tax, so we will not seek the additional 1% savings next year, but we will look for the 2% saving the year after. Although the Ministry of Defence is included in these measures, it will be given flexibility on its multi-year budget to ensure that this will not lead to reductions in military manpower or the core defence equipment programme over the Parliament.

A mark of our values as a society is our commitment to the world’s poorest. We made a promise as a country that we would spend 0.7% of our gross national income on international development and I am proud to be part of the first British Government in history who will honour that commitment and honour it as promised next year. We will not, however, spend more than 0.7% so, as we did last year, we will adjust the Department for International Development’s budget to reflect the latest economic forecasts.

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In the medium term these savings across Whitehall will help departments maintain the right trajectory for the years that follow the spending review and help us to pay off the deficit in future. In the short term, I am switching these current savings into capital—all the money saved in the first two years will be reinvested as part of a £5 billion capital investment in the infrastructure of our country. Despite the fiscal challenges we face, public investment as a share of GDP will be higher on average in this Parliament than it was under the last Labour Government. It is exactly what a Government equipping Britain to compete in the modern global economy should be doing.

We are committing an extra £1 billion to roads, which includes four major new schemes: to upgrade key sections of the Al, bringing the route from London to Newcastle up to motorway standard; to link the A5 with the Ml; to dual the A30 in Cornwall; and to upgrade the M25, which will support the biggest port developments in Europe. I pay tribute to my honourable friend the Member for Thurrock for campaigning to achieve this.

We have already set out plans this autumn for a huge investment in rail, and my right honourable friend the Transport Secretary will set out in the new year plans to take High Speed 2 to the north-west and west Yorkshire. I can today confirm a £1 billion loan and a guarantee to extend the Northern line to Battersea power station and support a new development on a similar scale to the Olympic park.

We are confirming funding and reforms to assist construction of up to 120,000 new homes and delivering on flood defence schemes in more cities. On top of broadband expansion for our countryside and our larger cities, we are funding ultrafast broadband in 12 smaller cities: Brighton and Hove, Cambridge, Coventry, Derby, Oxford, Portsmouth, Salford, York, Newport, Aberdeen, Perth and Derry/Londonderry. In addition to the third of a billion announced this autumn for British science, we are today announcing £600 million more for the UK’s scientific research infrastructure.

Since improving our education system is the best investment in a competitive economy, I am today committing £270 million to fund improvements in further education colleges and £1 billion to expand good schools and build 100 new free schools and academies. Scotland, Wales and Northern Ireland will get their Barnett share of additional capital spending put at the disposal of their devolved Administrations.

On top of the £5 billion of new capital spending in infrastructure and support for business, we are ready to provide guarantees for up to £40 billion more. Today I can announce that projects worth £10 billion have already pre-qualified. We are offering £10 billion-worth of guarantees for housing, too. Our country’s pension funds will launch their new independent infrastructure investment platform next year as well, and we have today published full details of the replacement for the discredited private finance initiative. Since we can all see now that the public sector was sharing the risk, we will now ensure that we also share in the reward,

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and I commend my honourable friend the Member for Hereford and South Herefordshire for his work in this area.

Taken together, this is a revolution in the sources of finance for upgrading Britain’s infrastructure and equipping Britain to win in the global race. Annual average infrastructure investment, which was £29 billion under the last Labour Government, is now £33 billion.

Savings from Whitehall are not enough by themselves to tackle our debts. We need to find other savings, and we need to do so in a way that is fair. Those with the most should contribute the most, and they will, but fairness is also about being fair to the person who leaves home every morning to go out to work and sees that their neighbour is still asleep, living a life on benefits. As well as a tax system where the richest pay their fair share, we have to have a welfare system that is fair to the working people who pay for it.

Let me start with tax. The vast majority of people, rich or otherwise, pay their taxes and make their contribution. However, there are still too many who illegally evade their taxes or use aggressive tax avoidance in order not to pay their fair share. This Government have taken more action against those people than any before us. Prosecutions for tax evasion are up 80%. We will collect £7 billion more a year in tax that is due than the last Government. We are increasing by about 2,500 the number of tax inspectors going after evaders and avoiders. Next year, we will introduce the first ever general anti-abuse rule—something that never happened in the 13 years before we came into office.

Next year, for the first time in our history, money will be flowing from bank accounts in Switzerland to Britain, instead of the other way around. Because of the treaty that we have signed, we expect to receive £5 billion over the next six years from the undisclosed Swiss bank accounts of UK residents. That is the largest tax evasion settlement in British history.

We are taking further steps today. Hundreds of millions of pounds of tax loopholes are being closed with immediate effect, and we are investigating the abusive use of partnerships. HMRC will not have its budget cut over the next two years, unlike other departments. Instead, we will spend £77 million more on fighting tax avoidance, and not just for wealthy individuals.

We want to have the most competitive corporate tax system of any major economy in the world, but we expect those corporate taxes to be paid. We are therefore confirming today that we will put more resources into ensuring that multinational companies pay their proper share of taxes. We are leading the international effort to prevent artificial transfers of profits to tax havens. With Germany and now France, we have asked the OECD to take that work forward and we will make it an important priority of our G8 presidency next year. In total, we expect the action that we are announcing today to increase the amount of money collected from tax evasion and avoidance by a further £2 billion a year.

Fair and necessary as that is, it is not enough by itself to close the deficit. We need to ask more from the better-off. Punitive tax rates do nothing to raise

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money, and simply discourage enterprise and investment into Britain. Other countries on our doorstep are trying that approach and paying the price. We are not making that mistake. HMRC data reveal that in the first year of the 50% tax rate, tax revenues from the rich fell by £7 billion and the number of people declaring incomes of over £1 million fell by a half. A tax raid on the rich that raises almost no money is a tax con. We are going to have a top rate of tax that supports enterprise and we are going to raise more money from the rich. Here is a simple fact: the richest will pay a greater share of income tax revenues in every single year of the coalition Government than in any one of the 13 years of the last Labour Government.

However, to make sure that the deficit reduction remains fair, we need to raise more. We have already raised stamp duty on multi-million pound homes and next week we will publish the legislation to stop the richest avoiding stamp duty. But we will not introduce a new tax on property. That would require the revaluation of hundreds of thousands of homes. In my view, it would be intrusive, it would be expensive to levy, it would raise little and the temptation for future Chancellors to bring ever more homes into its net would be irresistible, so we are not having a new homes tax.

In this Parliament, we have already reduced the amount of tax relief that we give to the very largest pension pots. From 2014-15, I will further reduce the lifetime allowance from £1.5 million to £1.25 million, and reduce the annual allowance from £50,000 to £40,000. That will reduce the cost of tax relief to the public purse by an extra £1 billion a year by 2016-17. Ninety-eight per cent of the people currently approaching retirement have a pension pot worth less than £1.25 million. Indeed, the median pot for such people is just £55,000. Ninety-nine per cent of pension savers make annual contributions to their pensions of less than £40,000. The average contribution to a pension is just £6,000 a year.

I know that these tax measures will not be welcomed by all—ways to reduce the deficit never are—but we must demonstrate that we are all in this together. When looking for savings, I think that it is fair to look at the tax relief that we give to the top 1%.

I want to help the great majority of savers. That is why we are introducing a generous new single-tier pension, so that people know it always pays to save. That is why I will uprate next April the overall individual savings account limit to £11,520. We will also consult on allowing investments in equity markets for small and medium-sized enterprises, such as the alternative investment market, to be held directly in stocks and shares ISAs to encourage investment in growing businesses.

I have also listened to the concerns from pensioners about draw-down limits. I am today announcing that the Government will raise the capped draw-down limit from 100% to 120%, giving pensioners with such arrangements the option of increasing their incomes.

It is also fair to look at the way in which we uprate benefits and some tax thresholds. The basic state pension has this year gone up by the largest cash amount in its history. Next year, thanks to our triple

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lock, I confirm that it will rise by 2.5%, which is higher than either earnings or inflation. That takes the level of the basic state pension to £110.15 a week.

When it comes to working-age welfare, we have already made substantial reforms. We have cut £18 billion a year from the welfare bill. Benefits are being capped for the first time, so families out of work will not get more than the average family gets for being in work. We have increased efforts to fight welfare fraud. Today, we announce further measures and checks to save more than £1 billion in the next four years by reducing fraud, error and debt in the tax credit system. Next year, my right honourable friend the Secretary of State for Work and Pensions will introduce the new universal credit so that it always pays to work. Today, we are setting the key parameters, such as the levels of earning disregards.

We have to acknowledge that over the last five years, those on out-of-work benefits have seen their incomes rise twice as fast as those in work. With pay restraint in businesses and Government, average earnings have risen by about 10% since 2007. Out-of-work benefits have gone up by about 20%. That is not fair to working people who pay the taxes that fund them. Those working in the public services, who have seen their basic pay frozen, will now see it rise by an average of 1%. A similar approach of a 1% rise should apply to those in receipt of benefits. That is fair and it will ensure that we have a welfare system that Britain can afford. We will support the vulnerable, so carers’ benefits and disability benefits, including disability elements of tax credits, will be increased in line with inflation, and we are extending the support for mortgage interest for two more years.

However, most working-age benefits, including jobseeker’s allowance, employment and support allowance and income support, will be uprated by 1% for the next three years. We will also uprate elements of child tax credit and working tax credit by 1% for the next three years, although previously planned freezes will go ahead. Local housing allowance rates, which are a central component of housing benefit, will be uprated in line with the existing policy next April and we will then cap increases at 1% in the two years after that. For that measure, 30% of the savings will be used to exempt from the new cap those areas with the highest rent increases. The earning disregards for universal credit will also be uprated by 1% for two years from April 2014. Child benefit is currently frozen. It, too, will now rise by 1% for two years from April 2014.

Let me be clear: uprating benefits at 1% means that people get more cash, but less than the rate of inflation. Taken together, we will save £3.7 billion in 2015-16 and deliver permanent savings each and every year from our country’s welfare bill. To bring all those decisions on many benefits over many years together, we will introduce primary legislation in Parliament in the welfare uprating Bill. I hope that it will command support from both sides of the House.

We will apply a similar approach to uprating some of our tax thresholds to that that we are applying to welfare. The higher rate threshold will be increased by 1% in the tax years 2014-15 and 2015-16. So the

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income at which people start paying the 40% rate will go up from £41,450 to £41,865 and then to £42,285. I want to be completely clear with people: this is an increase; in fact, it is the first cash increase in the higher rate threshold in this Parliament, but it is not an increase in line with inflation, so it will raise £1 billion of revenue by 2015-16. Again, there are no easy ways to reduce the deficit, but from year to year, no one will pay a penny more in income tax.

In the same way, the capital gains tax annual exempt amount will be increased by 1% over the same period, reaching £11,100. The inheritance tax nil-band rate, which has been frozen since 2009 at £325,000, will be increased by 1% in 2015-16 to £329,000. Taken with the welfare uprating decisions, that is a fair approach to paying off Britain’s debts.

However, dealing with those debts is only one part of making Britain fit to compete in the global race. Countries like ours risk being out-smarted, outworked and out-competed by the new emerging economies. We asked Michael Heseltine to report on how to make the Government work better for business and enterprise. I think that it is fair to say that his answer has captured the imagination of all political parties.

We will respond formally in the spring, but here is what we will do now. First, government spending should be aligned with the priorities of the local business community. We will provide new money to support the local enterprise partnerships, and from April 2015, the Government will place more of the funding that currently goes to local transport, housing, skills and getting people back to work into a single pot that LEPs can bid for. Details will be set out in the spending review. Before then, we are putting more money into the regional growth fund, which is helping businesses create half a million new jobs.

Secondly, as Lord Heseltine also recommends, we will support industries and technologies where Britain has a clear advantage. With the support of my right honourable friend the Business Secretary, we will extend our global lead in aerospace and support the supply chains of advanced manufacturing. We are also taking big steps today to support British companies that export to new emerging markets in Asia, Africa and the Americas. I am increasing the funding for UK Trade & Investment by more than 25% a year, so that it can help more firms build the capacity of overseas British chambers and maintain our country’s position as the No. 1 destination in Europe for foreign investment. We are also launching a new £1.5 billion export finance facility to support the purchase of British exports.