The comments made by Helen Liddell, Baroness Liddell of Coatdyke, on 15 January 2023.
I do not think there has been sufficient scrutiny of Trade Bills and that is not helped by the non availability of a trade strategy. This is the prevailing view of the International Agreements Committee of which I am a member. And a number of Peers from around the House shared that view.
The jury is out on whether we will get sufficient information in future, India discussions are likely to be a test of that.
The comments made by Helen Liddell, Baroness Liddell of Coatdyke, in the House of Lords on 9 January 2023.
My Lords, I welcome the Minister to his position. It is quite exciting to do your first Bill before any House and he has got off to a good start. I used to have a colleague in the other place who, at the end of a speech, would often say “it says here” because that way they could get out of any problems that had been created. I used to get notes from the civil servants saying, “Please read out paragraph 3 because that is the one that the judges need to hear about,” because I would quite frequently avoid doing that.
I have to announce to the House that I have no relatives in Australia or New Zealand, but I have spent a little time in Australia as British high commissioner. I followed in the footsteps of the noble Lord, Lord Goodlad, who had laid an excellent foundation for me and managed to keep me out of an awful lot of trouble.
Let me see if I have this right about this Bill. This Bill is needed to ensure that the procurement provisions of the trade deals with both Australia and New Zealand can go ahead with no delays. However, this Bill is to be superseded by the Procurement Bill that is starting in the other place in the next couple of days. That Procurement Bill will repeal this Bill, and both Bills have to go on the statute book around the same time. I have lost the plot here. I know that is not something I should admit to. Sometimes, I think I have followed my namesake Alice through the looking-glass, because this is the most bizarre arrangement I have ever come across in relation to a piece of legislation.
We are going to have to pass this Bill when we have been denied the full opportunity for scrutiny. That is a major issue. On both sides of the House, there have been arguments about the need for scrutiny of trade Bills. Furthermore, there is no published trade strategy, so how can we know whether these deals meet the criteria set for the negotiators? It is a very difficult thing to try to do. I am not casting aspersions on the Minister but there can sometimes be an addiction to hyperbole on the part of the Government. Not everything is an absolutely wonderful deal. There are failings in these deals; they are the first we have done since leaving the EU and it is no surprise that there will be difficulties. I can remember, as a Minister, standing at the Bar of the House and suddenly discovering from some of the experts on these Benches that I had completely ignored engineering in an energy Bill. I had to go back and table amendments. It happens; we do not get everything right all the time. I strive to get some things right occasionally, but my family say that I do not.
If we are to take these deals as setting the pace for trade deals around the world, we need to take into account things that are quite controversial, such as the CPTPP. We need more information and, again, more scrutiny, to be able to go down that path because in the CPTPP countries there are a number of examples of trade deals that we would be quite uncomfortable with—on both sides of the House—in this country.
One thing that concerns me about the Bill—it is very narrowly drawn Bill—is whether this is how we are going to be expected to scrutinise other treaties. Are we going to have to do everything by statutory instruments? That is not the right way to properly scrutinise something as significant as a trade Bill. It raises issues about the responsibility of government to Parliament. It is an unfortunate path to go down. I know that the Minister has met the International Agreements Committee, of which I have been a member since its inception, and we are enormously grateful for that, but we want to know: where are the transparency and openness in the debates and advice that have to be put before us? This very constrained Bill is the only opportunity that both Houses have to scrutinise these trade deals. The United States has better provision for the scrutiny of trade deals than we have in this country. That should be a warning to us that we need much better scrutiny.
Obviously, having spent time in Australia, I am going to concentrate on it. People do not seem to realise that Australia is 32 times the size of the United Kingdom. The United Kingdom can fit into the Northern Territory with quite a lot of space left over. When the noble Lord, Lord Goodlad, was trying to get it through to me that this was actually quite a big country, he showed me a postcard that had the United Kingdom in a corner of New South Wales. It is not just the fact that Australia is a big, big country; it also has 25 million people, while we have 67 million—and there are an awful lot of farms in Australia. They are known as properties and some of them can be the size of countries within the United Kingdom because of their scale. No wonder that we end up with a disparity between what the agricultural community says about the Bill and what the Minister has said from the Dispatch Box.
The Australians are delighted with this deal, as well they should be. But our Government gloss over the projected growth in GDP by 2035, which is only 0.08%. We have to bear that in mind and see what we can do to advance it. That could be why the Australian Government’s website is much more helpful to those of us who want to analyse the deal, while the UK Government have been remarkably coy. If you want information about this trade deal, go on to the Australian Government’s site and then you will get it.
I want to make one very particular point, given my Scottish accent. I want to thank the Australians for the deal done on Scotch whisky. That has suffered from what I used to describe as a nuisance tax, which was introduced to protect Bundaberg rum. I know that the noble Lord, Lord Frost, will be speaking in a few minutes’ time. The one problem that I always found with it was that Bundaberg is owned by Diageo, which owns most of the whisky distilleries in Scotland, so I could not quite work that one out. I have to be absolutely honest: Diageo allowed me to have a Scotch whisky evening every month so that we could promote the case for reducing the tariffs on Scotch whisky. Maybe the noble Lord, Lord Frost, knows the answer to that given his background in the Scotch whisky industry, because I have not a clue what it is.
Labour has said in the other place that the Bill will not be opposed. However, there are very real concerns about, for example, animal welfare, agriculture in general, and the lack of any provision for decent work and social goals through procurement. Lots of us know of young people who have gone out on two-year visas; some of them find themselves in pretty appalling circumstances. We need to make sure, as the migration period into Australia is increased to up to three years, that those who go as migrants are protected by the trade union laws and by the social and political goals. The TUC and the Australian Council of Trade Unions have made the same point, but in this country there seems to have been no interchange with the TUC about the difficulties around migrant workers in Australia. I recommend to the Minister that something needs to be done about that. A lot of Members on the other side, particularly in the other place, depend on rural communities, yet the most vociferous criticism of the deal comes from those communities. There is a problem here and it really has to be addressed.
It is significant that there has been a change of Government and now a much more engaged agenda on climate change in Australia. That could create huge opportunities for UK companies which are forging ahead strongly on renewables, carbon capture, storage and use. I refer to my entry in the register of interests as the president of the Carbon Capture and Storage Association. Under the previous Australian Labour Government there was considerable interest in CCS and use, with an experimental operation in Latrobe Valley. What attempts have been made to open the door to environmental businesses in this country in renewables and CCS and use? Under Prime Minister Albanese, who has made it quite clear he takes a completely different view on climate change from Prime Minister Morrison, there are opportunities to extend our success with the industry in Australia. During the passage of the Bill, we will want to know what prospects there are for that kind of improvement and let it be known that the lack of scrutiny afforded to Parliament casts the Government in a poor light. What are the Government frightened of when it comes to scrutiny?
Doing a deal with Australia and New Zealand is very important. Lots of people in Australia—a very high proportion—carry British passports. That is not true of politicians, because they have to resign their British passport when they enter Parliament, but they all take it back up when they leave Parliament; it is quite a nice little side deal for the Home Office to reissue these passports. We have some of our oldest security arrangements with Australia and New Zealand. They are our friends. It is good that our first deal is with them.
I look forward to the processes around this Bill, but I am deeply concerned that we are going to do scrutiny by statutory instruments. It is not the way in which a sophisticated Parliament should scrutinise trade deals.
The speech made by Helen Liddell, the then Economic Secretary to the Treasury, on 21 January 1998.
Thank you for inviting me to your conference. I know that this audience represents a wide range of insurance industry interests and I welcome this chance to get together again.
I should like to speak this morning about the Government’s plans for reform of financial services regulation.
The speed with which the new Government announced our reforms in May reflected the importance we attach to the industry. An efficient and clean financial sector is of benefit to the whole UK economy. Effective regulation is central to attaining our wider economic aim of a stable, low inflation economy with sustainable growth and high employment. An economy with a world-leading financial services industry, of which your own sector is a most important and valuable part.
The key element of our reforms is the creation of a single, statutory regulator.
A single regulator will be better placed to provide effective and consistent regulation across the traditional financial sectors of banking, investment services and insurance. This is the logical way to go as traditional business boundaries continue to get more blurred.
The single regulator will be more effective because there will be no duplication of effort, no doubt about which body is responsible. Firms will benefit because they will no longer be supervised by several bodies with overlapping regulatory demands.
Many firms are currently subject to a range of statutory regimes, for insurance, investments and deposit taking. In many cases equivalent provisions relating to different kinds of business are subtly different – in some cases radically so. It is not in anyone’s interests for firms to have to consider in each case which regime they are operating under. Neither theirs nor their customers.
Our reforms are already taking shape. Last October we launched the new regulatory body, the Financial Services Authority, under the excellent chairmanship of Howard Davies.
The transfer of banking supervision from the Bank of England to the FSA will be effected by a Bill currently before Parliament. At the same time, we are drafting a second bill which will complete the task of dismantling the old, fragmentary arrangements based on self-regulation and putting in place a new, fully statutory system. We intend to publish a draft of the bill for consultation in the Summer. As a result of the two bills, the FSA will replace nine existing regulators. The FSA’s role will also include the authorisation of those members of the professions who carry on investment business.
The FSA will be a unique one-stop service for financial regulation. There will be a single supervisor for all financial services providers. Wholesale and retail; from the smallest independent financial advisers to the biggest City firms. What it will not be is a one size fits all bureaucratic monolith.
When the Chancellor launched the FSA he announced that it would have a set of statutory objectives written into the second bill. The objectives will set down the responsibilities of the FSA, who will be required to comment annually on performance against them in their annual report to the Treasury.
The FSA will have a responsibility to sustain confidence in the UK financial system and markets. The FSA’s role as a prudential supervisor of financial institutions and its oversight of markets are both essential to the maintenance of confidence in the UK financial system.
The FSA must also protect consumers by ensuring that firms are competent and financially sound and give their customers confidence in their integrity, while recognising customers’ own responsibility for their decisions. This will set down in law the need to protect consumers.
I am sure I do not need to tell you how much importance I attach to this objective in the life insurance industry.
It is essential also that the FSA should promote the improvement of public understanding of the benefits and risks associated with financial products. I believe that the FSA has a key role in helping to educate customers, to enable them to discharge their own responsibility to themselves to make sensible choices.
The FSA must also monitor, detect and prevent financial crime.
In delivering these objectives, the FSA has an obligation to facilitate innovation in financial services and to take account of the international nature of financial services business.
The FSA will also have to be efficient and economic and to ensure that costs and restrictions on firms are proportionate to the benefits of regulation.
I know that this last point will be of particular importance to you, who will be responsible for meeting part of the FSA’s costs. I can assure that, as with all aspects of the objectives, we regard it as more than an aspiration.
Cost effectiveness goes hand in hand with effective consumer protection. The costs of regulation are met by firms. This means they are passed on to consumers in the form of higher charges or lower returns.
We will be taking specific steps in the Bill to achieve cost effective regulation. Not only must the FSA use its resources effectively, it will need to show the industry and the public that it is doing so. So it will be required to publish its proposed budget for consultation at the same time it publishes its proposals for fees.
Also, where the FSA introduces a new rule or change to an existing one, it will have to consult the public and practitioners by publishing the proposals. These proposals will include estimates of the costs and benefits, and other options. This requirement goes well beyond the requirement in the current legislation for the SROs to take account of the costs of compliance.
Now let me touch briefly on two further areas I know are of interest to those here today – the issues of consumer complaints and compensation. These are fundamental to our plans to provide an effective level of protection for consumers.
We intend to establish a system of complaints handling arrangements which will ensure that consumers receive help when they need it in a manner that is simple and easily accessible.
At present the Insurance Ombudsman Bureau and the Personal Insurance Arbitration Service are just two of at least eight schemes which relate to different sectors of the financial services industry. There are also separate procedures for complaints against professional bodies. These schemes operate in different ways, with differences between the schemes in terms of eligibility criteria and limits on awards.
The result is a confusing alphabet soup of arrangements. Consumers do not always know where to turn to when they have a complaint.
Whilst I welcome the recent initiatives which have been taken by the various ombudsmen to streamline their operations within the boundaries of the current system, we intend to undertake more fundamental changes to harmonise complaints handling arrangements in line with our approach to regulation. I have recently announced our intention to establish a single, statutory Financial Services Ombudsman. Consumers will have a single point of access to the complaints handling arrangements. There will be a clear and simple means to seek redress to a scheme which will be independent of both consumers and practitioners. The scheme will be compulsory for firms.
This will put firms in no doubt about the obligation to deal with complaints fairly and quickly. Complainants will have access to a highly visible ombudsman scheme.
The scheme will of course need to be set up in a way which draws on the best features of the existing schemes. I am confident that the FSA will enjoy the assistance and full cooperation of the various ombudsmen and of the industry.
We will also establish a simpler and where appropriate more harmonised set of arrangements for dealing with compensation when firms are unable to meet their obligations. Currently, there are multiple schemes – the Policyholder Protection Scheme, the Deposit Protection Scheme, the Investors Compensation scheme, the Building Society Investor Protection Scheme and even the Friendly Society Protection Scheme. Each has its own set of rules and eligibility criteria.
We will replace this patchwork with a single scheme with a single board with harmonised administrative arrangements. The creation of a single scheme, like the establishment of the Financial Services Ombudsman, will benefit both consumers and the financial services industry.
There will be easier access for consumers, greater clarity about who is eligible and in what circumstances. There will be clearer governance arrangements which will be underpinned by statute.
I believe that effective arrangements to deal with complaints and compensation will build confidence in the industry. The Financial Services Authority is currently consulting on these issues. I welcome their desire to work with the industry and consumers in order to get the details right.
There is one further very important area I would like to talk about, which is again relevant to our determination to apply statutory regulation consistently across the board. This is Lloyd’s.
For a vast majority of its time Lloyd’s has been a successful part of UK financial services industry, making an important contribution to the economy and balance of payments.
As you will be aware though, it suffered huge losses – 8 billion Pounds – in the period 1988-92. There were a number of reasons for this which were out of Lloyds’ hands – such as natural and man-made disasters. But the losses were exacerbated by bad underwriting decisions and practices.
Since then action has been taken. I should like to pay credit to Lloyd’s for resolving its financial difficulties through the successful implementation of Reconstruction and Renewal’ in 1996 and for all it has done to improve regulatory arrangements.
But more needs to be done. Lloyd’s itself has recognised the need for a greater independent element in its regulation. It rightly believes that businesses which are well regulated – and are perceived to be so -will be in a better position to compete in global markets.
Lloyd’s is a complex organisation – many of us tend to think of it as a big insurance business. But far from being one business it is – even now – many separate businesses operating under a common umbrella. This means that it needs to be looked at from a number of different angles.
The first is prudential supervision. As with all insurance regulation, the first priority is protection of policyholders. We intend to give FSA much more extensive prudential supervision powers in relation to Lloyd’s. These will be more like the powers it will have for insurance companies, such as fitness and properness checks and comparable powers of intervention. They will also include a requirement for FSA authorisation of managing agents. These are the people who are responsible in practice for running underwriting syndicates.
We intend that the FSA should have reserve powers to authorise and supervise Lloyd’s members direct, if that proves appropriate in future. But we do not intend that the FSA should supervise individual Names, so long as Lloyd’s own supervision is adequate.
Protection of capital providers is another important area. Individual members of Lloyd’s are advised by members’ agents, who act like financial advisers. We propose to extend the authority of the FSA in this area to the authorisation and regulation of members’ agents. This will give increased protection to members of Lloyd’s, some of whom have suffered from bad advice in the past.
We recognise that the main risk to capital providers is the risk to which they are exposed through the contracts of insurance which they underwrite. The enhanced insurance supervision arrangements I mentioned should also provide a substantial benefit to members in reducing those risks.
Next, I would like to say something about capacity auctions. Recently, participation on a syndicate has moved from being a privilege to a right. As a result, a market has developed in trading capacity for different syndicates. This market, which currently operates through a series of auctions run by the Corporation of Lloyd’s, is analogous to an investment market. This market will be overseen by FSA under a regime similar to that currently in place for recognised investment exchanges.
Finally, these arrangements will continue to allow scope for a major role for the Council of Lloyd’s in ensuring Lloyd’s continues to be a well-regulated, successful and important part of the UK financial services industry. This reflects the special role of the Council of Lloyd’s in controlling the affairs of the Society.
Taken together, I believe that these changes to the regulatory regime for Lloyd’s will however provide, for the first time in many areas, a major element of external regulatory accountability.
The Government is committed to reform and to achieving the best financial regulatory system we can. The UK financial services industry has achieved a great deal, but a lot of people remain, sometimes rightly, suspicious of its capacity to act in their best interests. This lack of confidence tarnishes the whole industry. The FSA and the industry it regulates need to work together to ensure that confidence is maintained in those areas where standards are highest and improved where standards have fallen short.
In short, the regulatory system must be more effective, providing an adequate level of protection for consumers. It must be transparent and inspire public confidence in the regulatory structure. It must be efficient, imposing only such burdens and restrictions which are necessary to achieve sound regulation.
I fully recognise the importance of working with the insurance industry and its customers in designing the new framework of regulation.
There will be further opportunities for discussion – not least when our draft bill is published for consultation next summer. But I do not want to wait until then to hear the views of the life insurance industry. Various representative bodies in the life insurance industry are already in touch with me and my officials to make sure we are aware of your ideas and concerns. I urge you to continue this dialogue in the coming months.
The speech made by Helen Liddell, the then Economic Secretary to the Treasury, on 1 June 1998.
I welcome the opportunity to speak to such an important gathering, to welcome you to London and to wish you well in the difficult and important work you are tackling here over the next two days.
Financial crime covers a multitude of sins ranging from advance fee fraud to market manipulation and insider dealing. Today I want to focus on one particular aspect of financial crime, the theme of this conference, money laundering.
This gives me an excellent opportunity to emphasise the importance the UK places on the fight against money laundering. The Treasury – and indeed the whole Government – is committed to defending the integrity of our financial systems and building stable and sustainable economic growth.
Money laundering is a threat to our democracies and our people. International organised crime, corruption, subversion, violence and misery inevitably thrives wherever criminal activities go unchecked. Estimates of the amount of money being laundered suggest that it is at least $500 billion per year. The risk that such flows of dirty money may destabilise our economies and corrupt our financial and legal institutions is apparent to all. And unless we can successfully tackle the proceeds of crime, we are not going to be effective in combatting the criminals themselves.
The international nature of money laundering means we have to tackle the problem together. Through international cooperation we can meet the challenge of building an alliance against crime that respects our legal, political, cultural and economic differences. Organised crime thrives on international inertia so we must act soon to seek out and plug the gaps in our approach.
The Commonwealth has always set high standards in this area and I am sure your work will add to that record of achievement.
Money laundering presents an ongoing challenge. The techniques and structures used by launderers are changing all the time as they try to circumvent the preventive measures we have introduced. Only ten years ago, in most of the world criminals could walk into a bank with the proverbial suitcase of ‘dirty money ‘ with little fear of challenge or detection. In many countries this has now changed – certainly the UK.
But if the criminals cannot risk putting the cash directly into the financial system, they transport it abroad to countries where questions are not asked. So issues concerning the use and transportation of high denomination notes are still with us. Indeed, this is one area where we are working closely with our European partners, as we prepare for the launch of the Single Currency. However, criminals are using increasingly sophisticated and complex ways of managing their financial affairs to legitimise assets, obscure profits and hide identity. There is increasing use of securities, derivatives and insurance products as well as the services of accountants, lawyers and financial advisors to launder money.
The Internet and electronic money also provide particular challenges, as they enable money to be moved around the world with relative ease and with little trace. So there is a need to constantly adapt and develop the fight against money launderers. Systems need to be flexible and experiences shared to ensure constant access to best practices.
The Commonwealth plays a crucial role in the fight against money laundering. Its role in the exchange of information is essential and I hope existing initiatives will be built on.
I particularly welcome the multi-disciplinary approach you are taking. To succeed, the legal and financial aspects of laundering must be tackled together.
We have worked together long enough to understand each other’s concerns. There is enough common ground to make us uniquely placed to contribute to raising the benchmark of international work on money laundering.
The leading international body concerned with developing policies to combat money laundering is the Financial Action Task Force – FATF. As many of you will know, the FATF has recently carried out a review of its future mission and strategy and the UK has played an active role in the agreement to extend the FATF’s mandate for a further five years.
The FATF’s 40 Recommendations are now widely recognised as the international benchmark in this area. But the FATF is not becoming complacent. It acknowledges that, although standards have improved enormously in the past few years particularly within its own membership, the challenge is to make those standards truly global. The FATF’s strategy for the future therefore emphasises the importance of establishing and strengthening regional efforts in every part of the world.
The great success and professionalism of the Caribbean Financial Action Task Force demonstrates how vital regional efforts are in moving forward. There are several reasons for the success of this regional approach. It encourages the use of mutual evaluation and peer group pressure. And crucially, it offers the flexibility to tackle local challenges with local solutions.
The Deputy Chairman of the Caribbean Task Force will be addressing you later. I urge you all to consider what role you can play in establishing and building up your respective regional bodies. Success is important not only in the fight against crime but also in encouraging soundly-based and sustainable economic growth.
Development and expansion of the regional Task Forces will be accompanied by the gradual expansion of the FATF itself. New members to Task Force are likely to be have key regional roles to play. The main Task Force should therefore to continue to grow in understanding and become more truly international in character.
The twin track approach, of strengthening and widening both the regional and main Task Forces will ensure real progress is made in the coming years.
Encouraging news on international action to tackle financial crime also emerged from the recent meeting of the Finance Ministers of the G7. Ministers agreed to review the laws and procedures on international cooperation and information exchange between financial regulators and law enforcement agencies. The review will identify ways of improving our systems and ways of implementing these measures as quickly as possible. The review will be completed by October.
Finance Ministers also decided to take a number of practical steps to improve cooperation. A G7 reference guide to procedures and contact points on information exchange in our countries has been drawn up and we intend to expand this Guide to cover all major financial centre countries.
The G7 also agreed a new initiative to improve the coverage of anti-money laundering systems and the effectiveness of tax authorities. The Initiative is designed to ensure that financial institutions report suspicions of tax related crime and that this information is shared both domestically and internationally.
This work will begin to address the potential loophole which allows criminals to masquerade as tax-dodgers in order to avoid the reporting obligations of our anti money laundering systems.
I think we all welcome these measures taken by the G7 and other international organisations to tackle financial crime more widely, money laundering in particular.
However, it is not only on the international stage that we are doing much to tackle money laundering. Many of you have active domestic programs. We are very busy in the UK too.
The anti-money laundering systems in place in the UK have, on the whole, been successful. There is, as indicated by the Financial Action Task Force’s mutual evaluation of the UK, some room for improvement.
We are actively addressing these issues. As a result of the Task Force report and an internal Treasury review of the impact of our money laundering systems, a number of weaknesses were identified which are now working to remedy.
Firstly, the Financial Services Authority, our new single regulator, will take a pro-active role in regulating compliance with money laundering requirements. This will be underpinned by a high level objective in primary legislation obliging the FSA to monitor, detect and prevent financial crime.
The FSA will have the power to make rules in relation to money laundering and bring criminal prosecutions for breaches of the UK’s money laundering regulations that are applicable to internal systems and training.
Secondly, we intend to introduce a system of civil penalties for behaviour which, though falling short of criminal, nevertheless damages, or has the potential to damage, financial markets. Again this power will be exercised by the Financial Services Authority.
Finally, our approach to asset confiscation has not been as successful as we had hoped. We are actively considering the idea of a national confiscation agency, that would have the remit to confiscate not only cash but also all property that might be derived from the proceeds of crime. These views are still at a tentative stage but the Government is determined to do all it can to take the profit out of crime.
I am delighted to have had the opportunity to address you on some of the key areas of activity on money laundering both internationally, and here in the UK.
I would also emphasise again my belief in the key role the Commonwealth can play in raising international standards in the struggle against financial crime. We have shown already how much we can achieve through working in partnership. We have to build on this success to ensure we tackle the ever more complex and dynamic challenges we face.
1 June 1998 wish you well in your work over the next two days – and perhaps more importantly – in carrying this work forward on the ground in the coming years.
The speech made by Helen Liddell, the then Economic Secretary to the Treasury, at the Association of Friendly Societies’ conference held in Leicester on 25 September 1997.
It really is a genuine pleasure to be here today. Any politician given an invitation to a conference of Friendly Societies will seize it gratefully. Indeed, to refuse it would be unthinkable. Ours is a profession whose invitations are sometimes issued in the same spirit of tolerance as the manager of Glasgow Rangers might expect if asked to speak to the supporters of Glasgow Celtic. Or vice versa.
But I have a particular personal reason for wanting to come here today – and not one, I suspect, shared by every Minister of the previous Government. Two of my grandparents were collectors for friendly societies. The community in which I grew up was typically working class, the kind of community where friendly societies always provided stability and security. Financial stability for many people not regarded as sound and profitable prospects for more commercial organisation; and financial security for the pre-NHS medical bills because we knew the “shilling a week” man always came good.
Every Scottish politician is expected, at one time or another, to speak at a Burns’ Night Supper and we become experts at quoting him. Burns had the immeasurable advantage of saying something about almost every subject under the sun, including, though he little suspected it at the time, your conference today:
“When first the human race began, “The social, friendly, honest man, “Whate’er he be, Tis he fulfils great Nature’s plan, And none but he.”
Social, Friendly. Honest. That was the motivation of friendly societies. They were trusted by communities who needed to trust someone, someone to turn to when times were bad.
Your societies were built on the principles of self-help and mutual support. I believe that many of the changes of recent times will work to your advantage. The Government elected on May 1 is a Government committed to community and equality, a Government which recognises what friendly societies have known since their creation – that encouraging thrift and providing protection and savings for those on modest incomes is not just good neighbourliness but sound economics.
Alistair Darling told you at last year’s conference, almost a year ago to the day, that the promotion of the savings culture would be an important part of our economic strategy. Our manifesto was our prospectus. It recognised that the benefits of savings and planning for the future – having something behind you for when the bad times come – should be available to all.
The Government is grateful for the help and advice which members of your Association are already giving to the Department of Social Security’s work on Welfare Reform. At the Treasury, I have already met representatives of the Association. I’ve learned from them. I look forward to many more meetings in the future.
One of the things we’re looking at is the Individual Savings Accounts which will embody our shared belief that it isn’t only the well-off who are entitled to share the fruits of prudence. Indeed, prudence matters most to those whose incomes are the least.
These Individual Savings Accounts are intended to encourage long-term savings, especially among those on low incomes, and to further the principles of existing savings schemes such as TESSAs and PEPs.
Ours is a Government where Scots, to say the least, are prominent, including the Chancellor, Gordon Brown. The Rainy Day is something with which, literally and metaphorically, we grew up. Putting something aside for it in the metaphorical sense is in our bones, part of our nature.
I know you are anxious to ensure that the spirit of mutual self-help which your individual societies represent can be made better use of and extended through the activities and functions which they are already authorised to carry out. We look forward to hearing what you may propose and to working with you to make those services, savings or insurances, even better to give comfort and confidence to those who want to provide for their future.
These are not empty words; they are also a well-meant and well deserved compliment to your Association. That so much has been achieved in only two years demonstrates the value of a unified movement which acts as a focal point and clearing house for discussion and analysis of future developments and can act as a direct route to Government.
I can assure you, with absolute confidence, that as the Government redraws the structure of Financial Services regulations in this country, your Association will have a key role in ensuring that the new structure will take into account the distinct needs of your unique contribution to the industry.
Let me tell you, briefly, what our intentions are and how you can play your part.
The 1980s saw a huge change in the nature of financial services, a change that outstripped the legislation. Financial products became increasingly sophisticated and complicated; the boundary lines between different kinds of financial institutions became blurred; the Financial Services Act, with its emphasis on self-regulation became out-dated and unable to meet the needs of the customers.
There were great scandals, too, not least the huge scandal of the mis-selling of personal pensions and we have by no means heard the last of that. I promise you.
Those scandals were the inspiration for the Chancellor’s statement on May 20 – less than three weeks after labour became the Government – that the entire regulatory structure would be reformed.
There will be only one financial regulator, which will give the retail customer one point of contact; within the new structure, there will be varying levels of sophistication so that the man and woman in the street can have complete confidence that their best interests are being cared for. At the other end of the spectrum, the wholesales end of the business will have the freedom to be creative while the regulator keeps track of the risks sometimes associated with complex financial products being traded.
Financial services are big business in Britain. To be world leaders, we must have a regulatory system which is also a world leader, one which will give our financial services industry a true, competitive advantage. Above all, the public must be certain that financial regulation is in the best possible hands.
Work on the necessary legislation has already begun. In July, Sir Andrew Large produced a Report for the Chancellor which charts a way forward to integrate the existing self- regulatory organisations and the other financial services regulators into an enhanced Securities and Investment Board (NewRO) which will become operational within two years or shortly afterwards. New Millennium, new regulator, to coin a phrase.
The Friendly Societies will fall within the ambit of the new regulator. It is important to you. Let me take a minute or two to explain why.
The chaos of the 1980s taught us that we need a consistent and coherent approach to the regulation and supervision of financial institutions which give advice or services to the public. It would be illogical to have Friendly Societies outside NewRO. More than that, excluding them would have sent the wrong signal about the value we place upon the societies’ work. In effect, exclusion would have downgraded the work you do and the service you provide.
What’s more, the benefits from bringing different regulators together, so that they can share best practice and learn from each other’s experience and expertise, are clear, apart from the financial and operational economies of scale which NewRO will create. If we are to breed public confidence in the new system, we need to demonstrate efficiency, and efficiency includes keeping a firm grasp upon cost. Placing friendly societies’ regulation at the heart of the financial services regulator will help us – Government and members here today – to create the kind of financial climate that will allow the members of your Association to prosper and grow. That’s where you come in. We need advice and guidance from you in creating this super-regulator and tailoring it to the needs of your societies and your members – and we want it now.
We will publish the Bill for consultation next summer. It will be long and complex. It will bring together and rationalise regulatory structures at present and set out in five major statutes and hundreds of pages of ancillary legislation and regulations. It is a mammoth task. I ask you now to work towards our publication timetable so that you can seize the opportunity to influence these fundamental changes.
The Prime Minister has made clear his ambition for a more modern Britain. A modern Britain is not compatible with closed, exclusive Government. We want those with knowledge and experience to help us in creating a framework for the future. The chance and the challenge I offer to you today is for you to help us create a financial services industry for the next century. One which we can together build on the crucial role friendly societies will have in providing a unique service to their members.
There’s a lot to be done in which we need your help. Individual savings accounts. Work on Welfare Reform. The reform of financial regulation. I know that you, in turn, are anxious that we should take into account the need to make the industrial assurance business more efficient. The present legislation is out of date, framed in the 1920s and the late 1940s – if I may say so, before I was born. That increased efficiency must be balanced by consumer protection for policyholders. Officials in my department are currently working with the Friendly Societies Commission and the Association of British Insurers to find a solution which meets these twin – and inseparable – requirements.
I think the future is exciting. There is the opportunity for fresh thoughts, new initiatives and modernised practices. But the principles on which they are to be based are already with us. They are timeless : mutual respect and assistance, the values of community. They are as valid today as they were when friendly societies were first created.
Your contribution over the past two hundred years has too often been unsung and unrecognised, except by those like me and my family who have been past beneficiaries.
You should raise the national profile of your work. Let a wider public know what you do. Friendly Societies are important institutions, with much to be proud of. They have a special role in our community. Of course, they are also big business. You collected 790 million Pounds in 1995, and your members benefitted from payments of 770 million Pounds. That is a great achievement. On that basis, you are well able to play your part by giving consumers an alternative to your more commercial competitors.
As I said earlier, there’s a lot to be done. Today, I am offering you the prospect of working with a Government which shares your aims and principles. You are serious people and so are we. You now have a once in a lifetime opportunity to help meet the challenges of the 21st century. I’m sure you will respond in the spirit of your traditions and make your future even more valuable than your past.