Your Briefing and a returnable survey on issues the UK Government is addressing in the Queen’s Speech Introduction Last month, the Queen’s Speech outlined the details of the UK Government’s legislative programme for the 2009/10 session. There are several key priorities in the legislative programme which will affect Scotland. Three centrepiece Bills which relate to Scotland are; - The Financial Services Bill – a substantial piece of legislation which is designed to address many of the issues arising form the economic crisis and the failure of the banks.
- The Digital Economy Bill – The digital economy is a key part of the UK Government’s active industrial strategy and this Bill enables the roll out of new universal digital services and creates mechanisms to secure the future of regional news funding.
- The Energy Bill – This Bill launches the plan for carbon capture (CCS) technology power stations and places important new rules on the energy companies to protect consumers.
Within this briefing I have enclosed an outline of the main measures contained in each of these key Bills.
I am keen to hear your views on these issues we’re addressing in the legislative programme. Please find enclosed a survey which you can complete and return to my office at 154-156 Raeberry Street, GLASGOW G20 6EA. 
Ann McKechin MP Glasgow North The Financial Services BillThe UK Government is reforming our financial services industry to give consumers more protection and empower the Financial Services Authority (FSA) and the Government to introduce tougher regulation of banks and their risky practices to protect the taxpayer. The Government will ensure that the financial system that emerges from the crisis is one not only rebuilt on a stronger and sounder footing, but is also one that is fairer and works for consumers. The measures in the Bill seek to restore consumers’ confidence in financial services by providing them with greater levels of protection and education and by giving powerful and easier routes to redress where consumers have suffered widespread detriment. Building on the decisive action taken over the past year, the Government is now proposing to further strengthen and reform financial regulation. This Bill: - Toughens up prudential regulation and supervision of firms by giving the FSA new powers;
- Creates a new body to monitor and manage system-wide risks – called Council for Financial Stability, to help prevent this crisis happening again;
- Gives the FSA new powers so that banking remuneration is more appropriate and transparent;
Stability and Sustainability First The Financial Services Bill will create a new, statutory Council for Financial Stability (‘Council’) responsible for considering emerging risks to the financial stability of the UK and global financial system, and coordinating an appropriate response by the UK’s authorities consisting of the Chancellor (as chair), Governor of the Bank of England and Chairman of the FSA. As necessary, it will draw on external expertise and inherits the current role of the Tripartite Standing Committee. The Council will place financial stability arrangements on a more formal, transparent and accountable basis.
The Bill will strengthen the objectives of the FSA and enhance the FSA’s regulatory powers to support its new, strengthened and more systemic approach to regulation and supervision. The Bill is modifying the FSA’s rule-making powers so that they may be used in pursuit of any of the FSA’s objectives (not just consumer protection as at present); extending the FSA’s information-gathering powers to non-regulated firms – including hedge funds – if it considers that information relevant to financial stability; strengthening powers to take action in relation to firms and individuals which are guilty of misconduct; and establishing stand-alone powers to take emergency action to place restrictions on short selling and to require disclosure of short selling. The Bill will also give the FSA new powers over bankers pay. Controlling excessive pay for top bankers The FSA has already published its remuneration Code of Practice for Banks, which comes into force in January 2010. We are now imposing a duty on the FSA to require specified authorised persons to have remuneration clauses and to ensure that remuneration policies are consistent with the effective management of risk as agreed by the G20 Leaders at Pittsburgh. The FSA will also need to have regard to any future international agreements similar to the G20. The FSA will be given a new power to rule that employment contracts not complying with the code are void and unenforceable. The FSA will also be given the power to make provision for the recovery of any payment made under a void provision. Protecting the taxpayer The Bill will legislate for ‘Living Wills’, called Recovery and Resolution Plans to ensure that firms establish clear contingency plans for action in times of failure. These aim to reduce the probability of firm failure (the recovery element), and the impact of firm failure if it does occur on the wider financial system, the economy and the public finances (the resolution element). This will protect taxpayers from the costs arising from future bank failures. The Treasury will establish through secondary legislation timetables for Banks to implement such Living Wills and the FSA will be required to sign off on Banks plans for Living Wills. Protecting and supporting consumers The Financial Services Bill incorporates the creation of a Consumer Financial Education Body and a Money Guidance service for bank customers. We will require the FSA to establish a new independent authority with a remit for increasing consumer education and awareness and coordinating existing consumer education activities. This new authority will coordinate the rollout of a national Money Guidance service in 2010, which will deliver accessible and impartial financial guidance. Better routes to redress are needed where there has been widespread detriment to consumers. Measures in the Bill will enable consumers to obtain redress and compensation more easily in cases of widespread consumer detriment, by enabling a representative to bring an action through the courts on behalf of a group of consumers (so called ‘class actions’). Unsolicited credit card cheques The Bill also bans unsolicited credit card cheques, to prevent financial institutions from encouraging customers to borrow more than they can afford. Financial Services Compensation Scheme The Bill improves depositor protection by expanding the remit of the FSCS to allow it to act as an agent to deliver compensation to UK customers of financial firms based overseas. The context – Going for GrowthThis time last year, the world banking system and the global economy were staring into the abyss. The UK Government stepped into support our economy and led the global response through our leadership of the G20. The action we took is working, although the job isn’t finished yet. Without it, another 500,000 jobs would have been lost. Amongst the measures taken to support spending by the population in the economy to promote growth are; - Direct investment to create jobs with the £1bn Future Jobs Fund
- Protection of manufacturing jobs with the extended vehicle discount scheme
- A cut in VAT worth £20 a month to the average family and vital to local businesses, plus an income tax cut of £145 on the basic rate. These actions are helping hard pressed people affordably buy goods keeping firms open for business.
- Help for 150,000 businesses by allowing more time to pay their tax bills
- A guaranteed support scheme that has helped 300,000 fight off repossession.
- Increases in and maintenance of tax credits, benefits, pensions and pension credit.
The action taken to support a return to growth through spending is necessary. We must support the economy now and until recovery is secured.
The context - Dealing with the deficit Much has been made of the size of the national debt. However, before dealing with debt we first need sustainable growth. The UK Government has set out a plan to reduce the deficit, but only when growth is secured. It is important to outline with clarity precisely why the Government is focussing today’s spend on growth, not debt. The current deficit is attributable to falling tax revenues, rising welfare spending and the upfront costs of rescuing the banks – it is not attributable to discretionary fiscal stimulus. IMF figures confirm that the UK’s fiscal stimulus spend was actually modest and relatively brief (ending in 2010) by G20 standards. If the Government tries to reduce the deficit by cutting stimulus spend, it would reduce capacity for demand in the economy still further – demand which is vital to growth. The present and future costs associated with cutting Government spending when unemployment is rising are rarely mentioned in the public debate over the deficit. The figures show that business self investment has been slashed over the past 2 years; not only on capital assets but also intangible investments such as product development and skills training. This and the impact of higher unemployment reduce the tax return to the Government. This is why Government spending to fill the output gap is so necessary. With this in mind, it is clear that the proposal to instantly withdraw the Government fiscal stimulus plus public spending cuts presently is potentially disastrous. The UK Government has laid down a plan contained within the Fiscal Responsibility Act for halving the deficit over four years once the recovery has a firm foothold, and how we will plan for future growth. The Digital Economy Bill The UK’s digital economy is worth around 8% of our GDP. Britain’s creative industries have become number 1 in the world as a proportion of our GDP over the past decade. This Bill is a key part of the UK Government active industrial strategy and will maintain and build on Britain’s leading position. It includes measures to ensure a competitive digital communications infrastructure, protect intellectual property and maintain plurality in regional news. Britain has benefited from the digital revolution but we need to ensure our digital infrastructure is cutting edge to ensure businesses can compete globally. News in the nations and regions is under threat – many ITV regions have already merged and newsrooms have been downsized, with journalists being made redundant. We need to act to ensure that there is plurality in regional news provision. Illegal file-sharing is costing the UK’s creative industries and creative talent hundreds of millions of pounds a year. We need to legislate to reduce this widespread problem – and all the evidence suggests the simple and fair proposals we have will do so. Digital copyright The Bill seeks to ensure support for creative industries in a digital world by introducing proportionate measures to reduce the widespread problem of unlawful sharing of creative work (such as a song or film) online. These measures will place obligations on Internet Service Providers to work with rights holders and if necessary to take technical measures against persistent infringers; protecting authors by extending public lending rights to non-print books such as audio books and e-books; updating the UK’s 300 year old copyright framework through the regulation of collection societies (who collect revenue on behalf of authors) and to make provision for the granting of licenses for “orphan works” – creative works where the copyright holder is untraceable. Protecting regional news Action on public service content and broadcasting by providing for the setting up (through Ofcom) of Independently Funded News Consortia to maintain news on the regions and nations on channel 3 (ITV) and guarantee a plurality of news providers; securing the future of Channel 4 as a public service broadcaster by broadening its functions to make it fit for the digital age; Improvements to the digital communications infrastructure Measures are included to strengthen the communications infrastructure by updating Ofcom’s duties on technical issues such as mobile network and spectrum and; enabling rapid progress to be made on the technical roll out of digital radio across the UK. (The Government will also be introducing a universal service on broadband – it will deliver at least 2 mega bits per second to every household by 2012. Digital security and safety Measures ensuring protecting children by putting video game regulation on a statutory basis and; help to ensure the efficient and effective management and distribution of internet domain names. The Energy BillThe Bill follows on from the low carbon transition plan, published in July 2009. This plan aims to deliver emissions cuts of 34 per cent from 1990 levels by 2020 and of 80 per cent by 2050, while maintaining security of supply, maximising economic opportunities and protecting vulnerable consumers. Launching Carbon Capture and Storage (CCS) technology We need to use all the carbon free technology we have at our disposal to reduce carbon emissions today – we cannot afford to wait. The Energy Bill introduces a carbon capture and storage incentive to support the construction of up to four UK demonstration projects, to be chosen in a competition. CCS is one of the technologies we are investing in to cut carbon emissions. The plant collects CO2 which would otherwise go into the atmosphere, transports it and locks it permanently underground in empty gas and oil fields. This technology can reduce carbon emissions from coal fired power stations by 90 per cent. CCS introduction is projected to create and protect engineering and manufacturing jobs and will help to make possible a diverse supply of low carbon energy so as to tackle climate change. Imposing social duties on the Energy Companies The Bill provides for mandatory social price support to reduce energy bills for the most vulnerable. We will mandate the energy companies to discount bills for some of those on the lowest incomes. At the moment, more than 800,000 households receive discounts and other help with their energy bills, part of a voluntary agreement between Government and the energy companies. This agreement is due to come to an end in March 2011. This measure in the Bill ensures that when the voluntary agreement ends, discounts for the most vulnerable will continue not from a voluntary arrangement but in law, through compulsory social programmes. We will make sure there is an increase in the amount spent, and expect to target new resources at the most vulnerable consumers, particularly older poorer pensioners. Improving Ofgem The Energy Bill increases the powers of the statutory regulator, Ofgem, to deal with exploitation of electricity distribution constraints by generators and increases Ofgem’s power to fine companies. The Bill clarifies Ofgem’s objectives on tackling climate change, ensuring secure energy supplies and the role of measures other than competition in protecting the interests of consumers and gives the Secretary of State the power to ban cross-subsidy between gas and electricity accounts. Useful websites Listening Panel Survey: The Queen’s Speech I’d be very grateful to hear your views on the issues surrounding these key measures in our legislative programme.
1. The Government has prioritised reigning in unsafe practices and unjustified remuneration practices of UK banks along with investment in jobs and the economy to ensure a return to stable and sustainable growth. What do you think the Government should do next to ensure that banks and the economy work in the best interests of all people?
2. Constant improvements in technology are making old rules redundant and are changing the way we can access information and share data. The Digital Economy Bill is about updating the legal framework dealing with communications and broadcasting for a technology based economy. What priorities would you choose to ensure fairness in the ‘digital economy’?
3. The Energy Bill is focused upon making gas and electricity more affordable for people, controlling the practices of energy companies and kick starting the carbon capture and storage plan to make carbon free energy from coal – to supplement renewables and nuclear power to stop global warming. People need lots of affordable AND carbon free energy, today. How do you think this can this be achieved right now?
Thank you for taking the time to respond to the survey. - Please return responses to Ann McKechin MP, 154-156 Raeberry Street, GLASGOW G20 6EA, or by email to
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