Speech to the Finance and Leasing Association Annual Dinner

Grosvenor House Hotel, London

In many ways your world and mine have both changed out of all recognition recently.

For example, not so long ago there were forty “Double A” rated banks in the world. Now, I am told, there are only about eight – and four of them are Australian.

So you could say your world has not merely changed, but literally turned upside down.

Politicians, as you well know, have had a pretty bad time too.

Still, in my eighteen years as a Member of Parliament I have had many unique and enjoyable experiences – and I am sure tonight will be one of them.

But I am a little nervous.

My experience of finance and leasing is, to be honest, limited.

Yes, I’ve got my fair share of credit cards and I’ve bought more than one car using a dealer’s finance package.

But I have only ever had two leases – one for a PC and one for a photocopier. Neither was a great success but, after some pretty pungent correspondence with the leasing companies concerned, both stories ended happily enough.

And at least I didn’t have to use the Financial Ombudsman Service, whose speed and efficiency you are right to be concerned about!

But there is a serious point here for any consumer-facing business and industry – MPs, journalists, civil servants are all your customers and our experience shapes our attitude to you.

So let me reassure you that I do know just how important the financial arrangements you make are for many individuals and for businesses of all sizes.

A huge proportion of capital investment, car purchases and consumer credit are provided by the members of your association.

That said, doing my research for this speech was a little frustrating. No one I spoke to seemed that concerned about leases – they worked, so what was there to be said?

For you in this room, encouraging enough – but for a politician who wants to say something interesting, fairly thin gruel. But I will try.

As Chairman of the Business, Innovation and Skills committee it falls to me about twice a year to cross-examine the Noble Lord, Lord Mandelson - our Secretary of State.

At my committee’s sessions with Lord Mandleson, we try to determine the truth.

That is the job of select committees. Acting in a non-partisan way, we look at the facts and examine government policy objectively.

To a remarkable extent, we succeed. For those who sneer at the “Punch and Judy" nature of modern politics I have a two word answer – “Select Committees”.

I will resist the pun about “new leases of life” – I suspect you hear it often enough at these dinners. But if Parliament is to get the new lease of life it needs, it will come in large part through the work of select committees
So I am delighted to have this opportunity to express my gratitude to the FLA for its constructive engagement with my committee.

But I have a confession. When we looked at the Enterprise Finance Guarantee Scheme and the Automotive Assistance Programme, I think we should have paid more attention to the concerns this Association expressed in its evidence about the role of non-bank lending in supporting business investment.

Credit for business seems to be getting a little easier – but working capital and investment funds can be more elusive in the upswing. So getting these government schemes right still really matters.

The EFGS worked – but it would have been better if it had included asset finance.

The Automotive Assistance Programme which promised £2.3 billion of guaranteed loans over a year ago has done nothing – literally nothing.

Yes, the scrappage scheme brought real benefits to retailers, but car manufacturers might have done better out of a scheme that helped dealers to finance more deals.

So I’m sorry that the government still hasn’t taken your frustration seriously enough – although I believe you have had more success with the Bank of England’s Asset Purchase Scheme.

But these apparently simple ideas can get complex very quickly – indeed, one thing that my political life has taught me over and over again is how untrue that old cliché is that “everything, when properly understood is rather simple.”

In fact it’s quite the opposite.

Everything when properly understood is really rather complicated.

And there are three apparently simple but really rather complicated things that I want to talk about.

First, the one big issue in the coming election - the need to mend the public finances.

Even communicating the scale of the problem is a challenge. Can voters ever be expected to begin to understand the size of the numbers we are talking about?

They engaged with the Parliamentary expenses disaster because the numbers were on a scale they could understand – and often the biggest rows were over the smallest items – things like bath plugs and dog food.

But the annual deficit and the stock of debt are both on a scale so huge that it probably defies the imagination of even the most financially aware, people like you in this room tonight.

So will we be able to explain to the British people that a debt stock of a trillion pounds and an annual deficit of £178 billion really do mean some tough choices over the next five years?

Perhaps some context would help. Taking an idea from the West End hit “Enron” - which I saw on Friday and strongly recommend;

A billion seconds ago it was 1978.

A little over a billion minutes ago, Jesus was alive.

A billion hours ago our ancestors were living in the middle of the Stone Age.

A billion days ago nothing walked on the earth on two feet – we had another two hundred thousand years to wait for the first Homo Sapiens to emerge.

And 178 billion seconds takes us back to roughly 3,700BC - the beginning of Minoan civilisation on Crete!

To put it another way, a trillion seconds is around 32,000 years - and woolly mammoths had another 20,000 years left roaming the planet before their extinction.

But sometime next year total government debt will top a trillion pounds – and by 2015 it will be one and a half trillion pounds.

The challenge is urgent – and it’s even harder because the deficit is largely structural.

A few weeks ago, at a committee meeting in the Commons, I tried to get the Prime Minister to face up to this.
I reminded him that his own Treasury’s chief economic adviser says that around 70 per cent of the deficit is structural and that the IMF says that Ireland, Spain and the UK are the three countries with the worst underlying structural problem.
But he said,
“I do not agree with the structural problem that you detail.”
If he denies this truth, he makes the political challenge of dealing with it much harder.

Second, I turn to Conservative plans for the regulation of consumer credit

We made our proposals last July because we believe they are worthwhile in themselves and because we believe the tripartite system of bank regulation has failed and must be replaced.

The existing approach to financial services consumer protection is divided and confused – it doesn’t work for consumers or for the industry. This is something you recognised in your own compelling evidence to the House of Lords committee on regulators three years ago.

The Financial Services and Markets Act 2000 gives the FSA a statutory objective for “securing the appropriate degree of protection for consumers” of financial services. But under the Consumer Credit Act 1974 the OFT is responsible for regulating all consumer credit - except first charge mortgages.

From a consumer perspective it means that their first charge mortgage lender is held to a different standard of behaviour from their second charge lender. From an industry perspective it means firms have to seek authorisation from two bodies and meet two separate sets of rules.

Indeed there are about 21,000 firms which both hold an OFT consumer credit licence and come under FSA regulation.

We need a new approach - an approach which offers firms and consumers more consistency, gives consumers better protection but at the same time reduces the regulatory burden on firms.

So a Conservative Government would create a new consumer protection agency - CPA.

This agency will combine the FSA and OFT’s existing responsibilities, creating a single authority with responsibility for consumer protection across the financial services industry.

This will create one point of accountability, one source of authority and one rule book.

However it isn’t just about the architecture. We also need a new approach to regulation. We plan to give the new CPA a mandate to act as a genuine consumer champion.

This means taking a tougher approach to enforcement and, where appropriate, product regulation.

I know this bit worries you, so let me offer some reassurance.

First, it emphatically does not mean creating an even more unwieldy rule book.

Consumer regulation, like prudential regulation, requires judgement, not simply the mindless application of rules.

Any decent consumer regulator must fully consider the consumer benefits of competition and low-priced products.

An expensive and time-consuming sales process which makes some products unaffordable is not likely to be in the real interest of consumers.

There is a complicated balance to be struck between consumer protection, innovation and competition.

These are difficult issue issues which is precisely why we need a far more focused and expert regulator to deal with them.

And because we recognise their complexity, we will not rush these changes. There will be full and open consultation. You will have plenty of time to get your views across.

That opportunity alone should generate plenty of work for the FLA to justify the membership fees of your members from the consumer credit sector!

Third, and briefly, I turn to the real economy – the economy that your activities support. How do we make sure that more of the capital equipment, cars and consumer goods that you finance are actually made here in the UK?

Some say it’s already too late for manufacturing. My own local newspaper’s weekly columnist wrote recently,

“It now looks as if manufacturing in this country will disappear within the next few years.”


A new government must make strengthening our manufacturing base a real - and continuing - priority.

So I’m really glad that glad that one of my Party’s recently announced eight “benchmarks” by which our economic stewardship will be judged is “Creating a more balanced economy”.

Well I’ve got a lot of suggestions for how to do that - over and above the obvious and urgent need for
• better infrastructure
• simplification of and reductions in corporate and employment tax, and
• tackling the regulatory burden.

But I’ll restrict myself to one idea tonight.

Let’s all agree to stop talking manufacturing down.

Yes, I know manufacturing’s share of GDP has shrunk, but in absolute terms we are making more things than ever.

We are the sixth largest manufacturing nation on the planet.

We are number two in the world in aerospace.

We are number two in the world for life sciences.

We are number one in the world in motorsport – and that’s a huge and highly specialised industry employing thousands of engineers.

We have the second largest premium car industry in the world.

And we have a lot of more traditional industries too – chemicals, metals, ceramics and so on that can still flourish in a globalised carbon-conscious economy.

We should all be saying that British manufacturing is still strong but that it should have done - and could still do - even better.

And we should be encouraging more young people to get into manufacturing and engineering by talking up the opportunities and giving them better careers advice in schools.

Of course there’s much more we need to do than this – but on the whole those other things needn’t cost much. It just needs us to believe that manufacturing has a real future and then, with confidence, to set the policy framework in which that can happen.

For example, another of my Party’s eight “benchmarks” is “Building a greener economy”, including developing green manufacturing businesses in the UK

Here I know your members have a lot to contribute – and I know something of your frustration that government policy doesn’t fully reflect this.

There are big opportunities for you to lease low carbon equipment and help make the often heavy capital costs of going green easier to bear.

This time, don’t let’s forget manufacturing during the upturn, whenever it comes.

So, in conclusion…

There are difficult times ahead – bringing the public finances and the national economy back into a better balance will be real challenges for the next government.

But I am confident that your members, represented so vigorously and effectively by the FLA, will continue to pay a major role in financing our economy.

For that, thank you.

And incidentally, while I’ve been speaking, the government has borrowed another five million pounds.


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