HL Deb 04 November 1986 vol 481 cc1013-5
Lord Campbell of Croy

My Lords, I beg leave to ask the Question standing in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government what opinion they have formed of the effects so far of the recent fundamental changes upon financial institutions in the City.

The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth)

My Lords, it is too early to form a judgment on the effects of the deregulation of dealing commissions and the start of dual capacity in the Stock Exchange which took place only last week, on Monday, 27th October. In the long term, I would expect competition in the financial markets to help investors, industry and commerce.

Lord Campbell of Croy

My Lords, I am grateful to my noble friend for that reply. Does he agree that these changes were essential to retain Britain's position as a major financial centre and serving still industry and investors as efficiently as possible? But are the Government satisfied that the breakdowns which took place last week in screen systems and the delays in settlements were teething troubles only?

Lord Lucas of Chilworth

My Lords, I am grateful to my noble friend for his first supplementary question. Certainly the present changes in the City reflect the response of many of the financial institutions, including the Stock Exchange, in order to keep ahead of competition in the rest of the world. So far as the breakdowns are concerned, my understanding is that apart from the two serious breakdowns in the Topic system early last week, the Stock Exchange has reported no general interruption in the screen service. So far as settlements are concerned, I am informed that a number of Stock Exchange bargains were incorrectly recorded for the purpose of settlement through the Talisman system, but efforts are being made to clear up this backlog.

Lord Bruce of Donington

My Lords, is the noble Lord aware that we concur in his view that it is far too early to form an objective judgment of what the consequences of deregulation are likely to be? Does he agree that nothing that has so far happened is inconsistent with the widely held view that there is still a role for the small stockbroking firm that has not so far been gobbled up by banks and by other very large institutions?

Lord Lucas of Chilworth

My Lords, I am grateful for what the noble Lord has said in his first supplementary question. Certainly there is a role for the smaller stockbroker and the provincial stockbroker, and for the provincial exchanges. Each of the various parts of the financial sector make up the whole in a very important enterprise in London. I am quite sure that the noble Lord will acknowledge the earnings of the City, with some £7,500 million to the British balance of payments in 1985, which is a creditable performance.

Lord Nugent of Guildford

My Lords, is my noble friend aware that there is already a discernible trend for the narrowing of commissions on deals?

Lord Lucas of Chilworth

My Lords, I have heard and read in the press that this is so. This is, of course, to be anticipated since one of the objectives of the change was to increase competition and therefore the opportunities for further business between all the parties involved—industry as well as the smaller investor.

Lord Leatherland

My Lords, may I ask the Minister this question: If a stockbroker loses his livelihood as a result of these changes, will he be eligible for the dole?

Lord Lucas of Chilworth

My Lords, I am not too familiar with the rules regarding the claiming of the dole. But provided that he lost his living in what I might call something that was not fraudulent, I believe that he would be entitled to the benefits that are available to all people in similar circumstances.

Lord Cledwyn of Penrhos

My Lords, is it not the case that in the days following the so-called Big Bang, which really was not a bang at all, there was universal criticism throughout the country and certainly in the media, including the Financial Times, about the way in which the new system was working? Can the noble Lord say whether there was any merit in that criticism, to what extent it is serious and whether one of the criticisms—namely, that it will take at least two years for the new system to find its feet and to work efficiently—is true?

Lord Lucas of Chilworth

My Lords, I am grateful to the noble Lord the Leader of the Opposition for his supplementary questions. I think it is true to say that there was a good deal of criticism in the very early days, and some of that was perhaps justified. The volume of business using the new market system certainly exceeded the exchange's expectations. I think it would be premature to cast judgment now on the reported failures, and I really think that all your Lordships will join me in congratulating Sir Nicholas Goodison and his team on the speed with which the initial problems were identified and dealt with. I have seen reports that it may take two years to make alterations to the system. My understanding is that that is an exaggeration of the facts.

Lord Taylor of Gryfe

My Lords, may I ask the Minister, now that he has created the essential framework through the Financial Services Bill for the changes that are taking place in the City, whether he will now turn his attention to the problem of a revival of British industry and wealth production?

Lord Lucas of Chilworth

My Lords, the noble Lord asks an interesting question which is significantly far from the original one on the Order Paper. I shall be happy to answer him if he cares to put down another Question on another day.

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