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Financial Services and Markets Bill [HL]

My Lords, if I may respond to that, I had thought until recently that what we were debating was a response to the Skeoch commission established by the last Government, but we have new amendments now, it seems—Amendment 160A and the abandonment of clauses—that are really throwing ring-fencing out. I guess that they are tabled in response to a speech by the leader of the Conservative Party, Kemi Badenoch—a speech underpinned by a policy document from her party. That speech, the policy document and this amendment are not asking to think things through further from the Skeoch report: they have made their minds up. Kemi Badenoch announced

that a future Conservative Government will end ring-fencing—definitive end of discussion. That, I believe, would be a bad idea. So did the review by Keith Skeoch, who was commissioned by the Conservative Government to opine on this and whose recommendations we are now trying to take forward.

Worse still, the evidence for Mrs Badenoch’s statement is based on really questionable claims, numbers and Mickey Mouse logic. For example, the claim was that the Skeoch report reckoned that the cost of ring-fencing was £1.5 billion. In fact, the report notes that that figure was presented to the review and that

“it has not been possible to draw a strong conclusion based on aggregating these costs”.

The report recognises that there are some costs to ring-fencing, but notes that that was expected and acknowledged by the Independent Commission on Banking, which said that that would not be a cost to the economy, but rather

“a consequence of returning risk to where it should be—with bank investors, not taxpayers—and so would reflect the aim of removing government support and risk to public finances”.

The policy paper has a Mickey Mouse logic that costs should be placed on the taxpayer, when they should be paid by the banks and the investors in the banks.

We should of course be in favour of reviewing the ring-fencing regime to be sure that it is properly doing its job. This is what Skeoch did and, now, if this Bill follows that report, I ask the Minister to ensure that we are careful with definitions in the implementation. For example, we should ensure that, within the growth allowance, the definitions are very carefully drawn up. We do not in future want the taxpayer subsidising proprietary trading—what many refer to as “casino capitalism”.

Badenoch suggests that her reforms would release £450 billion in capital—another number from nowhere. I know that the noble Baroness, Lady Neville-Rolfe, will not have a lot of time to sum up, but I would be grateful if she might write afterwards on how these numbers have been derived and what reduction in bank equity capital they assume. If these numbers do not stack up, that pulls the rug from under the policy document and the speech that was made by the leader of the Conservative Party.

The policy paper suggests that we should abandon the Financial Ombudsman Service. In this industry, which represents 8% of GDP but attracts 42% of corporate fines, Mrs Badenoch has decided that the front-line institution that protects consumers should be abolished. We could say that this does not matter and that Kemi Badenoch is unlikely any time soon to be Prime Minister, but it should matter to us. As the noble Baroness, Lady Noakes, has pointed out, there is considerable expertise in financial services across all parties in the House. Although we have differences, we are united, I hope, in trying to set a framework for the industry that allows it better to serve its purpose: to serve the outside world; to help get money from point A, where it is, to point B, where it is needed; to keep our money safe; to help us transact; and to help us share risk.

If the Opposition Benches feel mandated to follow the policy documented last month, we have a problem. I could not find a single reference in that document to

any input from any consumer group anywhere. It felt like a lobbyist document from the City, but I have talked to at least one lobbyist who said “No, it goes way further than we would ever suggest”.