Financial Services Bill — House of Lords, 2021-04-14
Topic: Domestic Commerce
Natalie Bennett (Green Party, Left): My Lords, I apologise for the need to withdraw from the previous two groups, but I return to speak to Amendment 37 in my name, which was also kindly signed by the noble Lord, Lord Sikka. I look forward to his contribution to this debate I hope noble Lords recall that I had a similar amendment in Committee, in a debate rather truncated by the pressure of time. At that stage, I circulated an associated briefing addressing what is commonly called the finance curse or the problem of too much finance—the subject of growing and now extensive academic and policy commentary, which prompted this amendment. That briefing discussed, as I canvassed then at some length, the cost of too much finance, which was calculated for the UK between 1995 and 2015 as £4,500 billion, or 2.5 years of average GDP across the period, by Professor Andrew Baker and colleagues at the Sheffield Political Economy Research Institute I will not go through all that again, but I will go back to the exchange that I had with the noble Earl the Minister through Committee about the source of the Government’s figure, stated as the value of the financial sector to the UK and set at £76 billion in tax receipts. As was acknowledged, that includes £42 billion borne by customers in the form of VAT and by employees in the form of income tax and national insurance contributions The noble Earl kindly acknowledged to me by letter, after my initial question, that the source was PricewaterhouseCoopers, clearly not an independent source without an individual interest in playing up the financial sector of which it is part; although, to be fair to PwC, it does not claim, in that figure, to count costs. It is looking at only one side of the equation and adds the rider that it has "not verified, validated or audited the data and cannot therefore give any undertaking as to its accuracy." I wonder, given that I raised this question in Committee, whether the Minister has given any more thought to, or asked any more of his officials about, how they might look at the complete equation—the costs and benefits of the financial sector. Perhaps if the Government are not prepared to accept this amendment, or write one along their own lines, they could look into this in other ways. That is the key question I put to the Minister tonight I provided Members last time with that one calculation —one massive cost—but surely, if the Government are making decisions that will impact on the size of the financial sector and, in consequence, other areas of the economy, they have, or at least plan to have, a methodology for doing that. As your maths teacher might have said, you need to be able to show your working and have a result you arrived at yourself—or at least that you can source to an independent, respected reference When we talk about finance, people often feel daunted and concerned about apparently technical matters, so I shall draw a parallel with something many people in communities around the land are well familiar with: the planned arrival of a new out-of-town supermarket that promises 100 or so new jobs and growth for the town—a calculated economic benefit. Permission is given, the supermarket is built and then the residents notice, a bit later, that one week the greengrocer closes down. A few weeks later, the butcher’s goes. Then the stationery shop that supplied lots of small businesses also closes down. Spending has not increased but shifted. There is a limited market, a limited amount of resources, and they have been shifted to one central location That analogy works rather well for the financial sector, not just because, as I talked about last time, a maths PhD graduate going into finance is not going into manufacturing, agricultural research or considering education statistics, but because the financial sector, particularly the most lucrative parts of it, is overwhelmingly concentrated in London—indeed, within the City of London that is often used synonymously with the financial sector, even if a huge percentage of the actual money is held offshore in tax havens. I am sure that some Members of your Lordships’ House will leap up to point out that there are jobs in cities around the land. That is true, but that is not where the real money is It was clear that from the noble Earl’s answer in Committee that the drafting of my amendment then was unclear, so I have attempted to tidy it up somewhat. I have clarified the reference here to inequality, to explain that I am talking, at least chiefly, of regional inequality: that is something, of course, that, with the Government’s levelling-up agenda, I would expect them to be greatly concerned about. After Committee, I also honed the reporting areas, taking out references to risks that were not the major aim of the amendment I hope that the meaning is clear now, for in his answer in Committee I am not sure the Minister, although I acknowledge that the pressure of time undoubtedly truncated his answer, grasped a major point of the "too much finance" argument. He referred to the Bank of England’s Financial Policy Committee having the responsibility to identify, monitor and take action to remove or reduce systemic risks, and the Office for Budget Responsibility producing and presenting a fiscal risks report to Parliament every two years. In his answer in Committee, the noble Earl said that "the FCA and PRA are required to prepare and lay annual reports before Parliament, assessing how effectively their objectives have been advanced. These objectives are set by Parliament".—[Official Report, 10/3/21; col. GC 733.] However, what this amendment aims to do is to produce the information that could inform those objectives, to see whether the finance sector, as the SPERI report suggests, and as I would contend, is too large. How can those objectives be set in a fog, relying only on a clearly partisan source of data not presenting a complete picture The Buddhist text Udāna, dating back to about 500BC on the Indian subcontinent, refers to a group of blind men each touching part of an elephant. That produces a great deal of disagreement, as they debate what it actually is. I have my own view of the financial sector—I doubt that Members of your Lordships’ House have much doubt about what that is—but I am not asking your Lordships’ House, or the Government, to take my view, but just to have a complete, full view of the costs and benefits. For the avoidance of doubt, I am not planning to push this amendment to a vote this evening. This is, as I think my speech has made clear, a continuing discussion which I plan to continue to push the Government on, which I also invite opposition parties to do—and, indeed, Members from the Government’s side, including the noble Baroness, Lady Neville-Rolfe, who in her Amendment 24, as she often does, calls for a cost-benefit analysis or impact assessment, an approach that would be improved and strengthened by Amendment 25 in the names of the noble Lord, Lord Sharkey, and the noble Baroness, Lady Kramer. Both speakers thus far have stressed the need for information for proper scrutiny. I ask them to join me in thinking about the need for a full and complete view of what is undoubtedly the financial sector elephant stomping across the British economy.