§ The Chancellor of the Exchequer (Mr. Nigel Lawson)
I have frequent discussions with the Governor of the Bank of England on a variety of matters.
§ Mr. Hoyle
Has the Chancellor held any discussions with the chairman of Lloyd's? Will he also have discussions with Mr. Ian Hay Davison, who was the chief executive of the Lloyd's Council? Does he believe that the inquiry into Lloyd's set up by his right hon. and learned Friend the Secretary of State for Trade and Industry will restore confidence in a tainted City? If the inquiry produces an adverse report, what steps will be taken to implement its proposals as quickly as possible to put matters right?
§ Mr. Lawson
The hon. Gentleman is a day late. Trade and Industry Question Time was yesterday, and Lloyd's is the responsibility of my right hon. and learned Friend.
I do have responsibilities in the City, and I object strongly to the hon. Gentleman's reference to a tainted City. Certain parts of the City are tainted, but to suggest that the City as a whole is tainted is wrong. I hope that the hon. Gentleman will withdraw that remark.
§ Mr. Bruce:
As this week the Government have yet again been forced to raise interest rates, and as the highest 1192 real level in interest rates ever has come about during their period in office, when the Chancellor next meets the Governor of the Bank of England will he accede to his request to join the European monetary system and so help to stabilise the pound without having to impose such high and penal rates of interest?
§ Mr. Lawson
There are arguments both for and against joining the EMS. However, if the hon. Gentleman imagines that joining will mean that it will never again be necessary to raise interest rates, he is misinformed.
§ Mr. McCrindle
Next time my right hon. Friend speaks to the Governor of the Bank of England about the City of London, will he, on behalf of the thousands of my constituents who earn an honest living in the square mile, tell him that there is a considerable amount of irritation at the imputations by Opposition Members and others that the reputation of the City has been hopelessly besmirched? Will my right hon. Friend take that opportunity to underline the fact that that is not the case over a very wide area of activity? Will he remind the Governor, if any reminding is necessary, of the major contributions to the economy of this country made by invisible exports from the City?
§ Mr. Lawson
My hon. Friend is right. The City is pre-eminent among the financial markets of the world and makes a substantial contribution to the British economy in many different respects. Whatever may be said by Opposition Members below the Gangway, I am sure that the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley) would not wish to denigrate the City in the way that many of his hon. Friend's have done.
§ Mr. Skinner
Does not the Chancellor have a cheek to suggest that my hon. Friend the Member for Warrington, North (Mr. Hoyle) was wrong to criticise the City and say that it is tainted? Did not the Attorney-General, some nine or 10 months ago, in reply to a letter from a Tory Member, say that he found the level of City fraud unacceptable? Why did he say that? It was simply because at that time the PCW syndicate, whose two principals were Peter Cameron-Webb and Peter Dixon, had managed to get rid of about £130 million from Lloyd's—money that they had pocketed themselves. They have never been brought to book by the fraud squad. Why are the Government not doing something about it? Of course there is a scandal in the City, but this Government are not doing anything because most of them— —
§ Mr. Lawson
That accusation, which you may not have been able to hear Mr. Speaker, was a particularly scandalous one.
The Government have long been concerned about the problem and growth of financial fraud. One of the first tasks that I peformed on becoming Chancellor of the Exchequer in 1983—long before Opposition Members were talking about the problem—was to chair an interministerial group, out of which arose the setting up of the fraud investigation group which came into being on 1 January 1985. In 1983, long before the Opposition were alive to the problems, my right hon. and learned Friend the Secretary of State for Trade arid Industry, when he was Home Secretary, set up the Roskill committee with the Lord Chancellor to look into the legal aspects. That 1193 committee has just published a powerful report. As the House knows, we shall be legislating on that matter in the next Session.
§ Mr. Hickmet
Is my right hon. Friend concerned at the level of investment and penetration of our markets by Japanese banks and financial institutions in the City, especially as they are not subject to the Bank of England prudential lending limits? Has he discussed that matter with the Governor of the Bank of England, bearing in mind the steps taken by the Japanese to prevent our banks from competing in their markets on similar terms? What steps does he propose to take?
§ Mr. Lawson
My hon. Friend has raised an important matter. In general terms I think that the City of London and the United Kingdom have benefited from the existence of overseas banks and financial institutions in the City and the country. However, there has been a lack of reciprocity. We are increasingly making it clear that reciprocity is the name of the game. If Japanese financial institutions want to have an increasing presence in the City of London, then what is sauce for the goose is sauce for the gander. I am glad to say that there have been many recent instances of British financial institutions obtaining licences to operate in Japan as a result of the strong line that the Government have taken.
§ Mr. Hattersley
When does the Chancellor propose to announce the membership of the new board of banking supervision? Can we be assured that it will include members from outside the self-protected charmed circle of the City itself?
§ Mr. Lawson
The membership will be chosen on the basis of the ability and experience of the individuals concerned. I shall bear the comments of the right hon. Gentleman in mind. I deprecate his implication that anybody who comes from what he calls the "charmed circle of the City" must be in some way tainted.