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Mr. Boswell: This is positively my last response. I agree with the Minister's intentions, but I have a slight reservation about their implications, which may go further than he wanted. The amendments will mean that the objective test of physical or mental illness becomes a subjective test in the hands or opinion of the Secretary of State.
I realise that the Secretary of State--who now honours us with his presence--will want to act, as ever, reasonably and sensitively. If a commissioner were to be so incapacitated, I am sure that he would want to handle the case properly. I make that point merely because we should consider the detail of the Bill. There is a slight change in the burden of proof, and we should pause for thought on that point. At this stage of the proceedings, however--I hope that the Minister and his hon. Friends will not be disappointed--I am not disposed to test the will of the House with a Division.
The Minister has promised not to speak again, and it may be that he will not respond to what I shall now say. It would, however, be churlish of me not to conclude by thanking the Low Pay Commission and the Minister, appropriately given that we are discussing mental capacity. I have not previously had an opportunity to thank the commission for reasons that the Minister will appreciate. Indeed, we have occasionally complained about it. We do not like the context of the Bill, and we do not like the Bill itself, but we pay tribute, as has the Minister, to the commission's work. It will no doubt continue to work in future to monitor the Bill.
Secondly, when the Minister moved tonight from the class war that he fought before dinner to the conciliatory tones in which he responded to our probing of the amendments later in the evening, he showed that he has on his modest shoulders a sure head. He also, occasionally, has some sensitivity for the concerns of the Opposition, and we thank him for that.
Mr. Chidgey:
I, too, wish the Minister well after the way in which he has conducted the Bill. He has--almost invariably--been courteous, has never gone off the point and has certainly been industrious. He knows of our reservations about the Bill. He has always listened to them, even when he has not accepted them. He knows that we want to see the Bill pass safely through Parliament. We look forward to engaging him again in debate when the Low Pay Commission arises under secondary legislation. I congratulate him on a job well done.
Mr. Ian McCartney:
I thank the hon. Gentleman for those kind remarks. I am not so sure that I am a pussy cat. My new Secretary of State has already nicknamed me Joe Pesci. I accept the hon. Gentleman's points.
In response to the point made by the hon. Member for Daventry (Mr. Boswell), I must say that I was precise in the words that I used. The record will show the Government's clear intention to provide non-offensive wording to deal with circumstances that can sometimes be difficult. I am certain that if those circumstances arise--I hope that they do not--my right hon. Friend the Secretary of State will deal sensitively with the cases.
I must also say hallelujah, hallelujah to the hon. Gentleman. To hear someone from the Conservative Benches at last acknowledging the tremendous work of the Low Pay Commission is very welcome. I note that the shadow Secretary of State could not bear to be here to hear those words. However, I am sure that he will read them tomorrow. We intend to ensure that the commission plays an effective role in the management of our legislative programme.
I thank the hon. Member for Daventry for his kind words, but they will not help him if he makes a late application to join the commission. The Secretary of State is not quite ready to bend over so far as to allow the hon. Gentleman to be a member. However, I thank him for his kind remarks about me.
The Bill's progress has taken a long 12 months. I am deeply proud that a Labour Government have made so much effort to tackle at last the issue of poverty pay in Britain. I am proud, too, that I, a former low-paid worker, was given the opportunity to do that. Whatever else happens to me in politics, nothing will beat this moment,
at which I sit down in the certain knowledge that the National Minimum Wage Bill will become an Act.
Lords amendment agreed to.
Lords amendments Nos. 30 to 36 agreed to.
Committee appointed to draw up Reasons to be assigned to the Lords for disagreeing to certain of their amendments to the Bill: Mr. Clive Betts, Mr. Tim Boswell, Mr. Tim Collins, Mr. Frank Doran and Mr. Ian McCartney; Mr. Ian McCartney to be the Chairman of the Committee; Three to be the quorum of the Committee.--[Mr. Betts.]
To withdraw immediately.
Reasons for disagreeing to certain Lords amendments reported, and agreed to; to be communicated to the Lords.
Ms Beverley Hughes (Stretford and Urmston):
This is a petition from the family and friends of Mr. Nick Centi, the residents of my constituency and people in the wider locality around Manchester city centre. It concerns the brutal murder of Mr. Centi, an innocent young man who stopped to assist during an argument in the city centre. He was attempting to be a peacemaker, but was killed in a mindless incident of unprovoked violence, which the petitioners believe is all too common in our city centre. So far, 720 people have signed the petition, which reads:
Motion made, and Question proposed, That this House do now adjourn.--[Mr. Jamieson.]
Mr. Geoffrey Clifton-Brown (Cotswold):
Thank you, Mr. Deputy Speaker, for allowing me this opportunity to raise the important subject of the regulation of Lloyd's insurance market. I welcome the new Economic Secretary, the hon. Member for Leicester, West(Ms Hewitt) to her position. I hope that she will have a successful term of office, and that she has received the information that I gave her predecessor and is therefore aware of the issues that I shall raise, as that will make for a more informed debate.
It is estimated that 30 per cent. of the entire capacity of the Lloyd's insurance market is controlled by offshore-domiciled companies, mostly based in Bermuda. Within a year, that could rise to a staggering figure of more than 50 per cent. I shall explore the far-reaching consequences of that rapid trend for the entire future of Lloyd's.
Mr. Stephen Walton, who was then in the Lloyd's directorate of the Department of Trade and Industry, said in an excellent wide-ranging article on Lloyd's in the spring 1997 edition of the "Financial Stability Review":
Between 1988 and 1992, Lloyd's lost a staggering £8 billion. More than 30,000 names were disastrously affected, many being stripped of almost all their financial assets, including their homes. However, the majority were given a liferaft by the huge £11 billion rescue--the 1996 reconstruction and renewal reinsurance policy into Equitas Reinsurance.
However, it is increasingly beginning to emerge that names may have been fraudulently enticed into Lloyd's in the late 1980s, when a handful of senior Lloyd's underwriters certainly already knew of the serious long-tail environmental claims, including asbestosis in America. Problems were later compounded by the LMX spiral of multiple reinsurance of the same business. I pay tribute to my hon. Friends the Members for Runnymede and Weybridge (Mr. Hammond) and for North Shropshire (Mr. Paterson), who have been working on the detail of that problem.
There are also queries about whether the DTI, which was the regulator at that time, and the insurance directorate ever received written confirmation of the relevant Lloyd's resolution relating to the creation of Equitas. If it did not, how could the Government have had sufficient information to be able to say with confidence in the DTI press release on 4 September 1996:
The Lloyd's council amended the rules again, so that those with corporate capital can now form themselves into integrated Lloyd's vehicles, buying up capacity on individual syndicates, which is then not available to the current annual venture Lloyd's names. That has caused concern in some quarters that the end of the individual annual venture Lloyd's name is in sight. Indeed, that was presaged by Max Taylor, the chairman of Lloyd's, who said in the Financial Times of 20 June:
Charles Sturge, the editor of Lloyd's league table, is quoted in Post Magazine and Insurance Week on 11 June as saying:
Parliament passed the Lloyd's Acts to allow individual participation in the world's leading insurance market. Now there is a major risk that, next year, 50 per cent. of all Lloyd's capacity will be controlled by overseas- domiciled companies mostly based in Bermuda. A further proportion of the capacity--between 5 and 30 per cent.--will be controlled by UK-integrated Lloyd's vehicles.
If those two predictions are correct, as seems likely, what is to prevent those companies, which will cease to derive any benefit from an overly costly Lloyd's structure, from demanding that Lloyd's council dissolves itself and the society, and redistributes the new Lloyd's central fund, which currently amounts to £144,238,000, to the current underwriting members--or, more likely, ending its support for the central fund altogether?
If that happened, further far-reaching consequences would follow. The joint American trust fund, on which "finality" in the reconstruction and renewal scheme depends, could be withdrawn. That possibility alarms all the 30,000 names who were reinsured into Equitas, and it may well alarm the long-tail policyholders, who may expect to rely on their policies in the United States, and hence the United States insurance regulators.
Importantly, the Treasury, not the Department of Trade and Industry, now has responsibility for regulating Lloyd's under the Lloyd's Act 1982 and the Insurance
Companies Act 1982. In the circumstances that I have described, where the control of Lloyd's would pass outside the jurisdiction of this country to a number of large offshore insurance companies, which may be interested not in Lloyd's licences or the mutual society, but only in buying books cheaply, UK plc would lose its balance of payments advantages and, importantly, suffer reductions in receipts from corporate, income and capital gains taxes.
On 22 January 1998, the then Economic Secretary to the Treasury, the hon. Member for Airdrie and Shotts (Mrs. Liddell), in a revealing speech to the Life Insurance Association conference, said on the one hand:
The comments by the then Economic Secretary sit oddly at variance with today's announcement of the closing of the Insurance Brokers Registration Council, without the announcement of any statutory replacement. That is one of the most important things that I shall say tonight. We have just had the publication of the Financial Services Bill, a huge Bill extending to more than 250 clauses. It is unlikely, therefore, that the Bill will be passed into law for at least a year. By that time, it may well be too late--the Society of Lloyd's, as such, may by then be sliding into oblivion, along with the protection of past and present names and corporate capital. In the regulatory vacuum, many agents will make fortunes at the expense of their principals.
10.30 pm
The petitioners therefore request that the Secretary of State for the Home Department brings forward measures to improve the safety of city centres, strong action against those who commit violence on the streets, and tougher laws against violent crime.
To lie upon the Table.
10.31 pm
"Regulations need to ensure that the policy holder protection arrangements at Lloyd's are fully effective, that the regulation system of capital provision works effectively and that the market as a whole, is seen to be a fair and a clean place to do business."
So perceptive and accurate was Mr. Walton that he was rapidly moved onwards and upwards to a new post in the Treasury.
"adequate provisions have been made against current and possible future claims and that the minimum solvency margin that was required has been met"?
28 Jul 1998 : Column 281
How could they have said that when they did not know which names had unconditionally accepted the reconstruction and renewal?
It is against that background that I want to raise the current trends in the Lloyd's insurance market. As a result of the enormous losses to which I have already referred, in 1994 the council of Lloyd's voted to admit corporate capital. That was on the understanding that it would be done on a spread vehicle basis, which means underwriting over a number of syndicates. That was done without consultation with the members of the society.
"over time the current annual venture form of participation will become a minority part of the whole Lloyds Market . . . and those must expect to bear the costs associated with that form of trading."
The objective of the Lloyd's council, enshrined in successive Lloyd's Acts from 1870 to 1982, is the advancement and protection of the interests of members, who were at all times understood by Parliament to be individuals participating on an annual venture basis in the Lloyd's subscription market. The whole structure of regulation of Lloyd's is on that basis.
"Lloyd's is the best regulated market in the world but once the Names have gone the structure will disappear and it will be turned into a host of mini insurance companies".
That is the fundamental thrust of my speech.
"These arrangements will continue to allow scope for a major role by the Council of Lloyd's in ensuring that Lloyd's continues to be well-regulated."
However, she must have considered that that was improbable, because she continued on the other hand:
"Policies underwritten at Lloyd's should enjoy the benefits of the same kind of supervisory regime as those with policies issued by other insurers . . . I intend that the Financial Services Act will have . . . much more extensive supervisory powers in relation to Lloyd's . . . enhancing powers of intervention . . . authorisation of managing agents . . . direct authorisation and supervision of the Members . . . capacity auctions will be overseen."
In other words, she had in mind a very tough regulatory regime, which she would have had in mind only if she did not believe that the current self-regulation of Lloyd's was working properly.
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