§ Mr. GouldI beg to move amendment No. 63, in page 25, line 28, leave out clause 40.
In Committee we had a thorough debate on whether Lloyd's should be within the Bill. I have no intention of rehearsing fully all the arguments which were expressed on that occasion. It is important that the House, the City and the public should have an opportunity to hear the issue ventilated once more so that it may be judged on its merits. For that reason, we tabled our amendment and we are delighted it has been selected.
The fundamental point is that Lloyd's is deliberately excluded from the Bill. The Bill regulates investment business. As such business is carried out at Lloyd's, by normal principles it should therefore be within the Bill. Clause 40 makes a specific exclusion in favour of Lloyd's and that is the starting point of the argument. In my view, the onus should be on those who drafted the measure rather than on those who have argued that, based on the general principle, Lloyd's should be within the Bill.
At first sight, most people would be surprised that Lloyd's has been singled out for this special treatment. If one asks the public or those in the City which institution cried out most for regulation, I am sure the answer would be Lloyd's. Lloyd's has been the source of outrageous scandals and has caused much public concern. Lloyd's is the epitome of self-regulation, and therefore the epitome of what can go wrong. On the face of it, Lloyd's is an odd candidate for special treatment.
Other institutions — the stock exchange or the Eurobond market— which could legitimately state that they have a clean record and have done well over recent years, could ask why they are being picked upon. Such protestations are rejected, and I believe that is correct. But it is curious that Lloyd's, which cannot assert such a good record—it has a spotty and blemished record—should receive special treatment.
One of the arguments advanced in favour of this special treatment is that Lloyd's is already regulated as an insurance business by the Department of Trade and Industry. Almost every other institution covered by the Finance Bill is regulated by some other agency. That is true of the friendly societies, the building societies, the insurance companies and the professionals.
It is argued that Lloyd's is covered by the Lloyd's Act 1982 and that is why it is excluded from the Bill. The 1982 Act was simply an assertion of self-regulation. We have now decided that self-regulation, especially in the light of all that has happened in the City since 1982, is no longer enough. It does not produce acceptable results and cannot be relied upon. Why is self-regulation allowed to stand for Lloyd's when it is clear that it is inadequate?
It is also argued that because Lloyd's, since the beginning of 1983, has put its house in order, it should not be criticised for defalcations and other offences which were committed before that date. We were able to detail many 571 aspects of Lloyd's record since 1983 which led us to have little confidence in the view that Lloyd's had learnt anything about the dangers of self-regulation.
I do not propose to dwell on those matters, because most hon. Members will be familiar with them. However, there is the whole question of Lloyd's failure to regulate in the case of the PCW syndicate and its attitude to those of its members who suffered substantial losses in consequence of the fraud and theft and the trading pattern which ensued due to those frauds and thefts. Lloyd's has frustrated and obstructed its members and investors from pursuing legitimate remedies.
§ Mr. John Butterfill (Bournemouth, West)We touched on this yesterday, but I would like to stress again that I have no personal interest in Lloyd's. The hon. Gentleman is again making assertions for which there seem to be no firm foundations. I understand that Lloyd's has made proposals to deal with the fraud element in the PCW syndicate. The subject of the dispute between Lloyd's and some of its names concerns the subsequent management of the syndicate and whether that management was prudent or rash—underwriting risky business—thereby creating further losses for those names. That is quite different, and the hon. Gentleman is surely misleading the House when he suggests that Lloyd's was responsible for both aspects.
§ Mr. GouldIt may be that the hon. Gentleman's almost unique position—a Conservative Back Bencher with no links with Lloyd's — has led him to be more than credulous in these matters. What he has described is a device used by Lloyd's to escape its responsibilities. It is true that Lloyd's has attempted to draw a line after 1982. It has argued that all that happened before that date was theft and fraud, but that all that happened after that was due to ordinary trading losses. The fact is that those trading losses were incurred because the crooks chose to underwrite business with no regard for the long-term consequencies. All they were interested in doing was maximising the short-term premium income so that they could cover their tracks and give themselves time to get away — and that is what happened. The PCW names have been pursuing their claim and have met nothing but obstruction from Lloyd's.
§ Mr. GouldI shall not give way again because we had a substantial debate on this in Committee.
I remind the House of a matter of immediate and central significance. Lloyd's, in its preparedness to frustrate a decent and honourable solution of the PCW affair, went to the length of deliberately misleading the hon. Member for Edinburgh, Central (Mr. Fletcher) when he was a Minister at the Department of Trade and Industry, to the extent that he was induced to come to the House and tell us a deliberate—not on his part—lie. I say that advisedly. He was given facts and figures that must have been known by those who gave them to him to be false and were subsequently demonstrated to be false.
For those who are looking puzzled, I remind the House that the statement made by the hon. Member for Edinburgh, Central concerned a number of those who were alleged to have passed the solvency test among those who were names in the PCW syndicate. That does not 572 build confidence in the reliability and honour of Lloyd's or in its sense of responsibility, or show that it has learnt any lessons as a consequence of its unfortunate experience.
I could go on. I could refer to the argument with the Inland Revenue, which had to insist that a whole series of activities by Lloyd's members were designed specifically to avoid tax and could not be tolerated. I could point to the circumstances and reasons for the resignation of the then chief executive, appointed by the Governor of the Bank of England to clean up Lloyd's. In other words, there are many signs that, after 1983, Lloyd's is still not to be trusted to look after its own affairs.
The one remaining argument and explanation as to why Lloyd's should be excluded from the Bill, contrary to all the general principles that have been laid down, is the one that the Under-Secretary who will reply to the debate advanced in Committee: the admittedly unusual feature that investors in Lloyd's— its members or names— are a section of the investing public whose interests are, in some senses, in direct conflict with those of another section of the public—the policyholders. While accepting that in any conflict between the interests of the investors and those of policyholders, it must he the latter that prevail—to do it justice, that has always been Lloyd's policy, quite rightly — it cannot be argued that the price of meeting and protecting the interests of policyholders is necessary that investors at Lloyd's must have their affairs dealt with at a standard lower than and different from that accepted and recognised as appropriate throughout every other part of the City. I cannot believe that that argument would be seriously supported or advanced by the members of Lloyd's Council or Lloyd's.
True to my undertaking that I would not rehearse at length the arguments that I put in Committee, I hope that I have conveyed enough to suggest that we still believe—if anything, our belief is strengthened by these events—that it is an outrage, a scandal and a dereliction of duty that Lloyd's should be excluded from the Bill. Lloyd's remains the last bastion of private privilege in the City—the last private fiefdom. Unless it is brought within the Bill, it will be impossible to take the Bill seriously.
§ Mr. Nicholas Baker (Dorset, North)I have not had the privilege of hearing the arguments rehearsed in Committee by the hon. Member for Dagenham (Mr. Gould), but he has been extremely selective in the points that he. admittedly briefly, has put for why Lloyd's should be included in the Bill. The major point that he keeps reiterating is that members of Lloyd's are investors, and that, as I know very well because I declare my interest as a member, is exactly what members of Lloyd's are not. Investors are people who deposit a sum of money and usually get someone else to deal with their money on their behalf, hoping that their investment will increase in that way. Members of Lloyd's are not like that. They are actively engaged in trading, and the fact that some of them take rather less interest in monitoring their trade and ask fewer questions than they should have done, is well known. However, it does not alter the fact that, for tax and in reality, they are traders and not investors.
§ Mr. GouldI intervene to save the hon. Gentleman further embarrassment. If he will take the trouble to read the speech made by the Under-Secretary in Committee, he will see the clearest possible, and extremely helpful, 573 exposition of the three respects in which the business undertaken at Lloyd's by Lloyd's underwriters and by the Lloyd's Council is investment business within the definition of the Bill.
§ Mr. BakerI am answering the point as to whether members of Lloyd's are investors, and they are not. My hon. Friend has a certain view, but the purpose of the Bill is to protect investors. That was the title of the papers by Professor Gower that originally were the background for the Bill.
§ Mr. AshdownIf the hon. Gentleman will not accept the opinion of the Under-Secretary on this matter, perhaps he will be prepared to comment on the remarks of his hon. Friend the Member for Wiltshire, North (Mr. Needham) who complained vigorously in the papers because he was clearly informed that this was a safe investment. Is it not odd that the hon. Member should be out of kilter not only with the Minister but with one of his hon. Friends?
§ Mr. BakerIf my hon. Friend said that, he was wrong. I am talking about what an investor is. He is someone who in principle is not doing what a member of Lloyd's is doing.
Those who joined as members of Lloyd's, as I did, post 1982, had every reason for concern about the risks that they took, which are completely different to those taken by investors. They have had the confidence to join because of the provisions of the 1982 Act. I have not heard the hon. Member for Dagenham present any case to the House, although he may have done so in Committee, to show in which respects the powers given to the Lloyd's Council by the 1982 Act are deficient, or how the exercise of those powers has been deficient. He has quoted a number of incidents, most of which do not relate to whether the 1982 Act was sufficient for the governance of Lloyd's.
I took confidence. I have another interest to declare because I was one of the promoters of the 1982 Bill. I had at that stage no interest in Lloyd's, but I felt that, in helping to promote the Bill, I was doing something that would give a new framework for the governance of Lloyd's, and that is what we have. In doing that, we had the support of the Committee chaired expertly and successfully by the hon. Member for Oldham, West (Mr. Meacher). He did an extremely good job to see that the rules that Lloyd's would have to apply were tightly defined.
The Lloyds Act 1982 does not offer protection that is any less than members of Lloyd's or the public would derive if Lloyd's were within the ambit of the Bill. If that later turns out to be the case, there will be other opportunities to legislate. There is a good argument for allowing the 1982 Lloyd's Act to do what it was intended to do and to govern in a self-regulating manner those who work in and are members of Lloyd's. It would he wrong and inappropriate for Lloyd's to be brought within the ambit of the Bill.
§ Mr. AshdownIt is with some chagrin and no great enthusiasm that I have to tell the hon. Member for Dagenham (Mr. Gould) that while I share his deep anxiety about the way in which Lloyd's is run, and have listened to him putting his impressive case both eloquently and powerfully in Committee and in this debate, I shall not join him tonight in the Lobby.
§ Mr. Campbell-SavoursWho is under pressure from the large institutions now?
§ Mr. AshdownThe hon. Member for Workington (Mr. Campbell-Savours) talks about big city institutions. I shall happily give way to him if he would like to name one big city institution that would be prepared to put any kind of pressure on me. I shall be delighted to hear of it and perhaps I shall be knocking on its door tomorrow.
§ Mr. Campbell-SavoursPerhaps the hon. Gentleman will tell us if my accusation is correct. Is it not true that a number of very senior people in the Liberal party are members of Lloyd's? Would he like me to give their names?
§ Mr. AshdownI can assure the hon. Member for Workington that if that is the case I do not know either the number or the names. As I recall, the hon. Member who is the adviser to the Leader of the Opposition is also a member of Lloyd's. I cannot remember his name but I believe that the hon. Member for Dagenham (Mr. Gould) knows perfectly well who I am talking about and no doubt Government Members know as well. If the hon. Member for Workington is unaware of the name he ought to make himself aware of it fairly fast before he casts aspersions on others. As far as I know, not one of my hon. Friends is in that position.
The reason I say, with some lack of enthusiasm, that I will not be able to go through the Lobbies with the hon. Member for Dagenham and his right hon. and hon. Friends is not akin to the rather tortuous and theological reasons put forward by the hon. Member for Dorset, North (Mr. Baker) or indeed for the equally tortuous and theological reasons that will be put forward by the Minister if his reply is anything like last time. My reason is quite simply that I do not believe an appropriate way to deal with the problems of Lloyd's is by bringing Lloyd's within the scope of the Bill.
I do not differ in a single word from the hon. Member for Dagenham in the way that he outlined those problems and their impact on the probity of the whole City. I differ from his opinion on the matter because we would be better advised to deal with the problem that he has so carefully outlined by directly amending the Lloyds Act 1982. That would be better than to bring Lloyd's within the ambit of the Bill.
Having said that, it is incumbent on me to say how I wish to see that done. We all know that the Neill inquiry is currently sitting, and I moved an amendment in Committee which sought to give a sort of year's grace until we saw what Neill recommended. The answers that the Neill inquiry should provide are not about whether to do something but about what needs to be done. I have no doubt that something needs to be done, and if the Neill inquiry were to say that nothing should be done, it may well be that it would be right to vote with the hon. Member for Dagenham, because to do nothing about that problem will give rise to considerable difficulties.
I wish to see the problems of Lloyd's resolved through five separate forms of change in policy and that could be done under the Lloyd's Act 1982. We need to tackle directly the reinsurance system and we will have to introduce some system of licensing for reinsurance. There needs to be closer monitoring of the agencies, and that monitoring should include the power of spot checks. There also needs to be closer monitoring of the funds, especially 575 the personal reserve funds, so that those can be not just checked on 31 December but audited on an efficient basis throughout the year. We need to tackle the problem of conflict of interests, recognising that in the PCW scandal the underwriter not only wrote the reinsurances but managed the company that employed them.
§ Mr. McCrindleIf the hon. Gentleman sees as one of the solutions to what he poses as the Lloyd's dilemma as the licensing of reinsurers, what steps would he take to license those many reinsurers who are outside these shores?
§ Mr. AshdownThe hon. Member for Brentwood and Ongar (Mr. McCrindle) has asked a fair question. I did not go into that kind of detail because I did not think it was appropriate. However, he asked the question and I shall give him a reply. It would not be difficult for those people in reputable companies in places like the United States, Canada and Australia to have reciprocal agreements which would ensure that those licences were effective. In such cases as offshore reinsurance houses which are not directly licenced there ought to be some kind of authority required to use those agencies for reinsurance. It would be proper and appropriate for auditors to report back and reassure those people who have placed money through Lloyd's in that sector that the reinsurances have been carried out correctly.
It is important to cope with the conflicts of interest that I have discussed, and vitally important that the Secretary of State should be able to appoint. and be accountable in the House for, the chief executive of Lloyd's. Those are the things that should be done, and for that reason I support the sentiment of the hon. Member for Dagenham, but bringing Lloyd's into the ambit of this Bill would create a special new dimension of problem for the SIB in its early days and create a situation which would be cumbersome and difficult to manage. Of course it would not swamp the SIB, but it would certainly inhibit the formation in the SIB of the kind of action which would be effective to control the market place. That will be difficult enough to do within the time frame anyway.
§ Mr. GouldI am puzzled by the hon. Gentleman's last point. Does he not expect that we are asking the SIB to rely upon SROs which do not yet exist? Why should Lloyd's, which proclaims that it has a wonderful record of self-regulation, pose such a problem to the SIB?
§ Mr. AshdownThe hon. Member for Dagenham has carried out his research carefully and well and has been deeply immersed in this subject for some time. No doubt he has spoken to Sir Kenneth Berrill on this very matter. Of course we should not accept Sir Kenneth Berrill's word as the last word on the subject, but the hon. Gentleman may know as well as I do that Sir Kenneth has said that to take on Lloyd's would overstretch the capacity of the SIB precisely because the SIB's main task is to get the other SROs off the ground within the time frame that is available. Sir Kenneth Berrill is a reasonable judge of these matters and I am impressed by his arguments.
It is not just a matter of taking over an existing SRO in the case of Lloyd's, but a matter of taking over a malfunctioning inefficient SRO that is not fulfilling its opportunities and its rules effectively. That will overstretch the resources available to the SIB. I share the description of Lloyd's given by the hon. Member for Dagenham, and 576 I share his concern about the damage that that has created. I have to depart from him on my point about waiting for the Neill inquiry report and then properly and appropriate amending the Lloyds Act 1982. That is the better way to bring about the reforms that he and I agree are essential.
§ Mr. Brian Sedgemore (Hackney, South and Shoreditch)I do not intend to detain the House by rehearsing the arguments that were put forward in Committee. I can help the hon. Member for Yeovil (Mr. Ashdown) and the House reporting the main conclusions of the Neill inquiry. First of all, I should like to say how we reached those conclusions. When this Bill was introduced into Parliament, there was the threat of a Back-Bench revolt by some Government Members and the Neill inquiry was set up to buy time and to buy them off. Sir Patrick Neill has effectively concluded his inquiry and has reported that he believes there are a number of aspects about the situation at Lloyd's that need to be cleared up. He is not sure whether or not changes will be required to the Lloyds Act 1982.
Sir Patrick has also reported that he does not believe that it would be appropriate to bring Lloyd's within the ambit of the Financial Services Bill or to bring it under the aegis of the Securities and Investments Board. Nor does he believe that it would be appropriate for any other body to be put over the existing Lloyd's machinery.
Sir Patrick was in effect asked to carry out a political task by the British establishment. He has performed that political task. He has reported to tie British establishment and the British establishment is grateful. I understand that it will not be long before Sir Patrick reports the findings to the Minister who will then be able to come to the House and question me about them.
§ Mr. Nicholas BakerThe hon. Gentleman is obviously a member of the British establishment. Could he let me have a copy of the report?
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§ Mr. SedgemoreThe hon. Gentleman is one of those with whom I sympathise. He is out in the cold and in order to find out what is going on in the British establishment one literally needs contacts in the highest places. What I have just told the hon. Gentleman is the truth. I hope that the report will not be too long delayed. There are a number of hon. Members in the House who know those facts and I hope that it will not be too long before the Minister is informed. Then we can have a fuller discussion about the individual points which Sir Patrick has raised.
§ Mr. SedgemoreThat may well be right. This Minister is not part of the British establishment, as I understand it.
I realised that this was the kind of report that Sir Patrick was going to produce when I was going through the questions of one of the witnesses who was being questioned by the Neill committee This does not contain the report, but Mr. Dennis Allport who, as everybody knows, is one of the members of the Committee, seemed to me, in asking a rather elongated question, to give expression to all the kind of worries that Labour Members have.
577 I simply read out that one question that Mr. Allport asked of the witness at the hearing who gave me the papers and to whom I have spoken on a number of occasions. Mr. Allport said:
If you set up a body, say, along the lines of the SIB to overview Lloyd's, that would involve a degree of much more stringent control. Do you not think that that might detract from some of the strengths of Lloyd's, namely its flexibility and the fact that it works? I readily accept there have been some awful scandals and real nonsenses, but they are the sort of headline grabbing stuff. During that period, though, nevertheless the balance of payments of this country has been greatly enhanced by the fact that Lloyd's exists at all. Despite all that has happened, it has a very big reputation still, and still does a very significant amount of business. If in fact you brought in over Lloyd's some regulatory agency of the type that you are mentioning, what arc your views as to the extent to which that could undermine the way Lloyd's do business?I find that statement by Mr. Dennis Allport deeply disturbing, because he begins by saying that he does not want stringent control and that is bizarre. He goes on to draw a fantastic logical non sequitur which is that somehow if one has more stringent control by putting a body over Lloyd's, that would damage the balance of payments. That, as I put to one of the top members of the British establishment yesterday, is simply nonsense. Nobody in his right mind could make that assertion. What he is really saying is, "Yes, we have had a number of scandals and we are a hit upset about those, but let us forget all that and let's get on with the Lloyd's Act 1982."The only other point that I want to make is simply that my hon. Friend the Member for Dagenham (Mr. Gould) was right. I am not worried about the Stock Exchange because I constantly contrast what I believe to be the integrity of the people who run the Stock Exchange with what is happening among those who are fairly near and at, or were at, the top of Lloyd's, and a number of them are still fairly near the top of the Lloyd's tree. It is difficult for the public and Parliament to trust them. On Second Reading I outlined some of the difficulties of trust that had occurred — I do not want to go through that again — over Sir Peter Green, a past chairman of Lloyd's, in relation to the case of Unimar. When I submitted some evidence to Sir Patrick Neill I raised that issue with him. I said that it had all been going on for seven years and that seems to be too long to find out the truth of what happened.
I was able to produce in the House papers which suggested, I put it no higher, that there was a prima facie case of serious dishonesty in this case. I picked up my Sunday Telegraph, which is not a paper that I usually read, but I am told that its news reporting is accurate—I am told that it is another establishment paper—and I saw an article by Christopher Elliott which said that the Department of Trade and Industry had completed its report on Unimar. It says here that there were serious criticisms of Sir Peter Green and senior members of Lloyd's — that is the same argument that we are adducing in this Bill—and that the report is going to the Director of Public Prosecutions.
I am happy to tell the House that a Minister at the Department of Trade and Industry, whom I thank, said, in answer to a question from me asking him to publish the report, that he will do so as soon as possible. I congratulate 578 him on that. The Attorney-General has said that he now has that report into Minet Holdings plc and WMD underwriting agency and he is considering what goes on.
Labour Members are concerned with many other things which we have set out before. We are deeply disturbed at the kind of attitudes developed by the kind of people at the top of Lloyd's who have been running that particular part of the City. Of all the bodies which one might exclude on that one ground alone, it is extraordinary that Lloyd's should be the one that is excluded. Something must be done either about the Lloyd's Act or about changing it.
I have just been talking about Unimar and the seven-year delay. It is right to ask how one licenses the reinsurers when they are set up offshore. How would that have been done in the Bellew Parry Raven case? Those companies were set up in Bermuda by Bermudan lawyers who were the directors and shareholders. It is virtually impossible. But those companies were founded in 1970 and it is now 1986 — 16 years on. My understanding is that Lloyd's has asked its solicitors to draw up charges against the people involved. It will be another two or three years before those charges have been heard. There will be an appeal and that will take another year. The papers may go to the Director of Public Prosecutions and we shall be in the 1990s before we know anything about what went on.
What is the purpose of having a regulatory organisation when it can take 20 years before we can draw the appropriate lessons from what went on. Of course it is nonsense. Of course it is a scandal. Of course it is unsatisfactory.
§ Mr. ButterfillI had not intended to speak on this issue, but I shall do so briefly simply to say that I am rather surprised at the Opposition's attitude on this. The relevant point here is that the general public should he protected by legislation. That is the purpose of the Bill. Lloyd's is impacting most upon the general public amongst those who take out insurance.
All that Labour Members have done is to say that there have been one, two, three or possibly four bad apples in Lloyd's. Of course, there are in any organisation, but the really important point that the House should consider, and the message that I hope will go out from the House if we have any concern for the standing of the City, its wellbeing and Britain's overseas earnings, is that no person who has taken up insurance with Lloyd's has lost any money as a result of any of the scandals. All insured persons have had their claims met in full. That is what is important for the insurance industry and for those who use the British insurance industry from overseas to understand. There is no risk to them. There have been a few bad apples, but the overriding important thing is that the public has not been prejudiced in any way.
§ Mr. Campbell-SavoursThe hon. Member for Bournemouth, West (Mr. Butterfill) has got it all wrong. There are 25,000 investors in Lloyd's and they are named in a book that I have in my office. Of the investors, 99.9 per cent. recurring regard themselves as investors. Apart from those who are politically motivated, the investors look to the House of Commons to provide adequate investor protection arrangements to cover their interests. That is why the Labour party, without the support of the Liberal party, has for sometime relentlessly pressed for the inclusion of Lloyd's in the financial legislation.
§ Mr. ButterfillCan the hon. Gentleman name one of them? Apart from the PCW syndicate, who has asked for the legislation?
§ Mr. Campbell-SavoursThe problem is that many Lloyd's investors speak of their affairs in confidence. I have seen correspondence to and from hon. Members expressing anxiety about arrangements in Lloyd's. I do not intend to identify the hon. Members involved. If the hon. Gentleman has done his homework, he will have seen the correspondence. There are hon. Members present tonight who have also seen that correspondence. We all know that there is anxiety among investors.
It is crucial that we take action in that area. The framework of the legislation is the way forward.
§ The Parliamentary Under-Secretary of State for Trade and Industry (Mr. John Butcher)I address my opening remarks to my hon. Friend the Member for Dorset, North (Mr. Baker), because I would not wish him to leave the debate with the impression that there is something between us as regards the definition of the mainstream business of Lloyd's. Of course the mainstream business of Lloyd's is insurance and the underwriting of risks. My hon. Friend may not have benefited from the advantage of participating in our long debates on Lloyd's in Committee and may not be fully aware of clause 67, which says, to paraphrase a well-known American songwriter, "It ain't what you do, it's the way that you do it."
It is the way in which Lloyd's conducts its business, not so much the product in which it trades, that can be defined as a collective investment scheme. That may be regarded as a somewhat semantic point, but it is worth emphasising because I would not wish my hon. Friend to think that Ministers suffer under some misapprehension as to the type of product in which Lloyd's trades.
It is no surprise that the amendment should have been moved. It concerns one of the major differences across the Floor of the House. As hon. Members will know, the Neill inquiry is well under way; Sir Patrick and his colleagues have been at work for some months. They have received many written submissions and are taking oral evidence. We look forward to their report.
I digress briefly to remark on the interesting and incredible observation made by the hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore). He tried to tempt us to give some details of the preliminary findings of the Neill inquiry's investigations.
§ Mr. SedgemoreThe Minister has got it wrong.
§ Mr. ButcherI can only assume that that is why the hon. Gentleman made his speech in the terms that he did.
Sir Patrick was originally asked to present his conclusions by the summer. The Neill inquiry has received a considerable volume of written material and is in the midst of taking oral evidence. It is unlikely that it will have completed taking that evidence before the middle of July. Where the hon. Gentleman gets the idea that a report is simmering away to which he has exclusive access, I do not know. Nor do my officials in the Department have any idea of the report's conclusions.
§ Mr. SedgemoreI shall tell the Minister at the back of the Chair afterwards. I shall give him the person's name.
§ Mr. ButcherI would be grateful to the hon. Gentleman, but he has made a career of making this sort of observation. I refer him not only to the need to make 580 those observations in public when it is desirable, but to put evidence to the Director of Public Prosecutions, which he has not done in the past, in a manner that will help him to bring prosecutions rather than divert his energies from serious investigations to chase the hares which the hon. Gentleman starts running. To pursue the investigations may he counter-productive. I refer to a letter written to the hon. Gentleman by the fraud investigator which he chose to make public.
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The Neill inquiry will need time to consider the substantial body of evidence. It is essential that it has the opportunity to analyse the issues thoroughly. Because of that, the inquiry said, and we have agreed, that we should not expect its report until the autumn. As we originally announced, it will then be published.
On Second Reading and in Committee, we debated Lloyd's at length. The Government's case remains that, although we are well aware of the problems that have arisen at Lloyd's, it has, as recently as 1982, set up its new regulatory structure. It is not right to condemn that newly reformed structure now. We set up the Neill inquiry to consider whether the system set up to protect the interests of members of Lloyd's provides comparable protection to the system we shall set up under the Bill for investors in general. Until we have Sir Patrick's conclusion, it would be wrong to proceed further.
I remind the House that in December, before the Neill inquiry was set up, the Prime minister said that we were watching events at Lloyd's closely and would not hesitate to take whatever legislative or other action was necessary. We have set up an inquiry and expressed our will to act should our consideration of the conclusions of the inquiry show that to be necessary.
Against that background, the Opposition's repeated demand to apply the Bill to Lloyd's is unjust and unwise. It is unjust because, having set up the Neill inquiry, we must allow it to do its work and not pre-empt its conclusions. Deleting clause 40 amounts to that, because it would subject underwriting agents of Lloyd's to a new and separate regime from that in the Lloyd's Act. It is unwise because, as we explanied at some length in Committee, the Bill is not a suitable instrument for the protection of members of Lloyd's.
It might help the House if I briefly deployed elements of that case again. The Bill is about the protection of investors. The business of Lloyd's is complex, and the legislation governing it must have regard to two factors: first, the protection of the members of Lloyd's as investors in insurance business; but, secondly, and more importantly, the protection of the ordinary holders of Lloyd's insurance policies. The paramount public interest is to ensure that insurers meet their liabilities, and in that Lloyd's has been singularly successful.
Those two aims — investor and policyholder protection— must often conflict. A we I-known example of the conflict which lies at the heart of Lloyd's is the principle of unlimited liability, or the ultimate punt as it has been called by some commentators. The unlimited liability of members of Lloyd's to meet claims is an important protection for policyholders, but it is hard to appreciate it as a measure of investor protection for the members of Lloyd's. The regulation of Lloyd's must be carefully balanced between those two antagonistic aims. Simply throwing the activities of Lloyd's into the Financial 581 Services Bill, as the amendment proposes, will not achieve that balance. A special regime to integrate the two systems would be required to achieve that balance.
We have drawn attention to the length and complexity of schedule 8, which achieves that balance with long-term insurance companies where investor protection on marketing matters covered by the Bill must be balanced with the regulation of solvency under the Insurance Companies Acts by my Department. The schedule is long and complex, but it deals with a far simpler problem, not least because in the case of long-term insurance companies the investors and policyholders whom we are trying to protect are the same people. At Lloyd's they are not.
I hope that the House will therefore wait for the report of the Neill inquiry before reaching any conclusions. I appreciate that the hon. Member for Hackney, South and Shoreditch will probably say that he wrote half of it. I hope that the House will also accept that this Bill is not the appropriate vehicle for regulating Lloyd's, and I advise hon. Members to reject the amendment.
§ Mr. Campbell-SavoursOn a point of order, Mr. Deputy Speaker. Before any Division, will you enlighten the House about the position of those hon. Members who are members of Lloyd's and who wish to vote?
§ Mr. Deputy Speaker (Sir Paul Dean)I remind the House of a ruling given by Mr. Speaker on this very point at an earlier stage, namely, that this is a matter of public policy, and every hon. Member is entitled to exercise his vote.
§ Mr. GouldI shall be brief. The Minister is to be congratulated in that his argument that we must wait for the Neill report before addressing the question whether Lloyd's should come within the terms of the Bill is a magnificent example of back to front reasoning. The one point on which I agreed with him was that this remains an issue that divides the two sides of the House. I regret that we shall not have the support of the Liberals in the Lobby, but we shall give effect to the divide that separates us on this issue by pressing the amendment to a Division.
§ Question put, That the amendment be made:
§ The House divided: Ayes 42, Noes 164.
583| Division No. 222] | [8.20 pm |
| AYES | |
| Archer, Rt Hon Peter | Holland, Stuart (Vauxhall) |
| Atkinson, N. (Tottenham) | Hoyle, Douglas |
| Banks, Tony (Newham NW) | Hughes, Dr Mark (Durham) |
| Bennett, A. (Dent'n & Red'sh) | Leighton, Ronald |
| Campbell-Savours, Dale | Lewis, Terence (Worsley) |
| Carter-Jones, Lewis | McDonald, Dr Oonagh |
| Cocks, Rt Hon M. (Bristol S) | Madden, Max |
| Cohen, Harry | Millan, Rt Hon Bruce |
| Cook, Frank (Stockton North) | Nellist, David |
| Cook, Robin F. (Livingston) | Orme, Rt Hon Stanley |
| Crowther, Stan | Pike, Peter |
| Davis, Terry (B'ham, H'ge H'l) | Roberts, Allan (Bootle) |
| Deakins, Eric | Robinson, G. (Coventry NW) |
| Dewar, Donald | Sheerman, Barry |
| Dormand, Jack | Smith, Rt Hon J. (M'ds E) |
| Faulds, Andrew | Spearing, Nigel |
| Field, Frank (Birkenhead) | Stewart, Rt Hon D. (W Isles) |
| Fisher, Mark | Wilson, Gordon |
| Foster, Derek | Winnick, David |
| Freeson, Rt Hon Reginald | |
| Gould, Bryan | Tellers for the Ayes: |
| Haynes, Frank | Mr. Allen McKay and Mr. John McWilliam. |
| Hogg, N. (C'nauld & Kilsyth) |
| NOES | |
| Amess, David | Hickmet, Richard |
| Ancram, Michael | Hill, James |
| Ashby, David | Hind, Kenneth |
| Aspinwall, Jack | Hirst, Michael |
| Atkinson, David (B'm'th E) | Hogg, Hon Douglas (Gr'th'm) |
| Baker, Nicholas (Dorset N) | Holt, Richard |
| Baldry, Tony | Howard, Michael |
| Bellingham, Henry | Hunter, Andrew |
| Benyon, William | Jenkin, Rt Hon Patrick |
| Bevan, David Gilroy | Jessel, Toby |
| Biggs-Davison, Sir John | Jones, Robert (Herts W) |
| Blackburn, John | Joseph, Rt Hon Sir Keith |
| Blaker, Rt Hon Sir Peter | Key, Robert |
| Boscawen, Hon Robert | King, Rt Hon Tom |
| Bottomley, Peter | Knight, Greg (Derby N) |
| Bottomley, Mrs Virginia | Knowles, Michael |
| Bowden, A. (Brighton K'to'n) | Lang, Ian |
| Bowden, Gerald (Dulwich) | Lawler, Geoffrey |
| Brandon-Bravo, Martin | Lawrence, Ivan |
| Bright, Graham | Leigh, Edward (Gainsbor'gh) |
| Brinton, Tim | Lester, Jim |
| Brooke, Hon Peter | Lightbown, David |
| Brown, M. (Brigg & Cl"thpes) | Lilley, Peter |
| Browne, John | Lloyd, Peter (Fareham) |
| Bruinvels, Peter | McCrindle, Robert |
| Budgen, Nick | MacKay, John (Argyll & Bute) |
| Burt, Alistair | McNair-Wilson, M. (N'bury) |
| Butcher, John | Major, John |
| Butler, Rt Hon Sir Adam | Malone, Gerald |
| Butterfill, John | Marlow, Antony |
| Carlisle, John (Luton N) | Mather, Carol |
| Carttiss, Michael | Maxwell-Hyslop, Robin |
| Cash, William | Meyer, Sir Anthony |
| Chapman, Sydney | Miller, Hal (B'grove) |
| Chope, Christopher | Mitchell, David (Hants NW) |
| Churchill, W. S. | Montgomery, Sir Fergus |
| Clark, Dr Michael (Rochford) | Nelson, Anthony |
| Clark, Sir W. (Croydon S) | Newton, Tony |
| Clegg, Sir Walter | Osborn, Sir John |
| Conway, Derek | Ottaway, Richard |
| Coombs, Simon | Page, Sir John (Harrow W) |
| Cope, John | Percival, Rt Hon Sir Ian |
| Corrie, John | Powell, William (Corby) |
| Couchman, James | Proctor, K. Harvey |
| Cranborne, Viscount | Rhodes James, Robert |
| Crouch, David | Ridsdale, Sir Julian |
| Currie, Mrs Edwina | Rossi, Sir Hugh |
| Dicks, Terry | Rowe, Andrew |
| Douglas-Hamilton, Lord J. | Sayeed, Jonathan |
| Dunn, Robert | Shelton, William (Streatham) |
| Emery, Sir Peter | Shepherd, Colin (Hereford) |
| Evennett, David | Shepherd, Richard (Aldridge) |
| Fallon, Michael | Sims, Roger |
| Fletcher, Alexander | Skeet, Sir Trevor |
| Forman, Nigel | Smith, Tim (Beaconsfield) |
| Forsyth, Michael (Stirling) | Spencer, Derek |
| Forth, Eric | Spicer, Jim (Dorset W) |
| Fox, Marcus | Steen, Anthony |
| Fraser, Peter (Angus East) | Stern, Michael |
| Freeman, Roger | Stevens, Lewis (Nuneaton) |
| Galley, Roy | Stewart, Allan (Eastwood) |
| Gardner, Sir Edward (Fylde) | Stewart, Andrew (Sherwood) |
| Garel-Jones, Tristan | Taylor, John (Solihull) |
| Glyn, Dr Alan | Taylor, Teddy (S'end E) |
| Goodhart, Sir Philip | Temple-Morris, Peter |
| Gorst, John | Thomas, Rt Hon Peter |
| Greenway, Harry | Thompson, Donald (Calder V) |
| Griffiths, Sir Eldon | Thompson, Patrick (N'ich N) |
| Griffiths, Peter (Portsm'th N) | Thorne, Neil (Ilford S) |
| Gummer, Rt Hon John S | Thornton, Malcolm |
| Hamilton, Hon A. (Epsom) | Thurnham, Peter |
| Hamilton, Neil (Tatton) | Twinn, Dr Ian |
| Hampson, Dr Keith | van Straubenzee, Sir W. |
| Hargreaves, Kenneth | Viggers, Peter |
| Harris, David | Waller, Gary |
| Harvey, Robert | Ward, John |
| Hawkins, C. (High Peak) | Wardle, C. (Bexhill) |
| Hayward, Robert | Watts, John |
| Heathcoat-Amory, David | Wells, Bowen (Hertford) |
| Whitfield, John | Yeo, Tim |
| Wiggin, Jerry | |
| Wilkinson, John | Tellers for the Noes: |
| Winterton, Mrs Ann | Mr. Mark Lennox-Boyd and |
| Wolfson, Mark | Mr. Tim Sainsbury. |
| Wood, Timothy |
§ Question accordingly negatived.