Financial Services Bill (Second Reading)

My Lords, I will focus my remarks in this Second Reading debate on the opportunities for growth and investment in the East End of London, particularly in the Lower Lea Valley, where there is a real investment opportunity. When I first arrived in the East End, nearly 30 years ago, the Isle of Dogs was a wasteland. The local joke was that there were two buses a day to the island. At that time the financial centre at Canary Wharf did not exist. The culture of the public and voluntary sectors was anti-business, a dependency culture was rife, and it is fair to say that the councils running the surrounding London boroughs of Newham, Tower Hamlets and Hackney were mostly basket cases.

Over the past 30 years, major changes have taken place and east London has been transformed. Because of the focused leadership of the noble Lord, Lord Heseltine, and others, a phoenix is rising from the ashes. East London is once again becoming a global destination and a centre of enterprise, innovation, finance and business. It is increasingly recognised as a powerful engine of the British economy, as it was for several hundred years previously, before the demise of the docks. Many years ago, after the closure of the docks, the noble Lord, Lord Heseltine, began what many of us working on the ground have come to understand as a 50-year regeneration journey. As we prepare for the Olympics in six weeks’ time, we are half way through that journey. The opportunity to present the scale of business investment in the valley to the world, through this global event, is great.

However, do central and London government truly understand the importance and scale of this wider investment narrative around the Olympic site? Recent meetings that I have had with the key people responsible for articulating this story to more than 20,000 journalists, who are soon to arrive, have not filled me with confidence. They are not familiar with east London or its history and are struggling to develop a clear and concise story. We get one shot at selling east London to the world and we must not miss this investment opportunity. This matter is urgent.

Nearly 16 years ago, three of us met just a few hundred yards from the Olympic stadium. We began to dream about the Olympics coming to east London and to explore its potential added value. The instigator of the meeting was the indefatigable champion of a London Olympics bid, Richard Sumray. At that first meeting, we realised that if the Olympics were ever to come to London, the only place with enough land was the Lower Lea Valley-a forgotten corner of the city on our doorstep. Historically, this was the home of some of the country’s greatest innovators and entrepreneurs. Michael Faraday carried out his electrical experiments at Trinity Buoy Wharf, opposite the Dome. Isambard Brunel built his ship SS “Great Britain” there. The world’s first biotechnology process was developed at the Clock Mill in Bromley-by-Bow.

The Games provided us with a fantastic opportunity to give the world a new perspective on the Lower Lea Valley-a story of business, investment and the growth of an enterprise culture. The Olympics would be a catalyst that allowed us to reach out to investors across the world. They would connect the financial centre then emerging at Canary Wharf with other key development nodes in Greenwich, Canning Town and Stratford in the north. At that time, I reminded my colleagues that the late Reg Ward, who was the life force behind the Canary Wharf development, had always described east London as a water city. Fly into City Airport, look down, and you will see exactly what he meant. East London is surrounded by many miles of docks and waterways. We reminded ourselves that water had driven the economy in east London for 200 years. If the Olympics ever arrived, we needed a vision with integrity that we could communicate. We needed a simple story to draw in potential investment partners from across the world.

After this initial meeting, two of us went to see the noble Lord, Lord Rogers of Riverside, just to check that we were not coming off our trolleys. Within minutes, he agreed that water was the key to both the Games and future investment in the valley. Together, we wrote what must be one of the first documents to position the site for the Games at the heart of the valley and link it to the investment and development nodes that we saw emerging there. This document shows an emerging city in east London, growing around the waterways, ripe for investment and growth, and with the necessary infrastructure coming into place. It also champions new ways of growing enterprising communities with local residents by connecting them to this emerging business and enterprise culture. I still have the booklet today and the present buildings on the Olympic park are not far from what we imagined then.

We sit here 16 years on and we have seen a variety of people and organisations join the Olympic bandwagon. My colleagues and I do not claim all the credit for starting it moving, but we played an important small role as a catalyst beginning to connect the financial service industry at Canary Wharf to the growth potential that now surrounds it.

As chairman of the All-Party Parliamentary Group on Urban Regeneration, Sport and Culture, it has been a privilege in recent years to take many colleagues from your Lordships’ House and the other place by boat up the waterways of the Lower Lea Valley so that they might see the bigger picture around the Olympic site. The Olympics, although important, is not the biggest show in town in east London but it is a fantastic catalyst that can drive investment in the area and join the dots of development. Development nodes are well advanced in Greenwich around the O2, at the expanding City Airport, the growing international conference centre at ExCel, the global business district at Canary Wharf, the £3.7 billion of investment taking place in Canning Town and the £1 billion housing and regeneration scheme further north in Poplar that my colleagues and I are involved with. Here, I must declare an interest.

At the new Westfield shopping centre across the River Lea, we witnessed 1 million shoppers in the first week of opening and a new international station waiting for Eurostar to stop at its prepared platform. Today, with UCL relocating to Stratford, a life sciences-focused enterprise zone in the Royal Docks, the European Medicines Agency at Canary Wharf, and the Tech City concept at Old Street, the area is rapidly developing as a UK science and technology hub. As well as that, right there, there is also the Queen Elizabeth Olympic Park that will hold five new villages and a commercial district. Here, I must declare another interest as a director of what is now called the London Legacy Development Corporation.

Noble Lords are probably asking what all this has to do with the Financial Services Bill. I am no expert on the intricacies of financial regulation. I will judge the legislation by effect. But I know that all the above would not have been possible without individual entrepreneurs being able to take a calculated risk and back a promising idea. It was risk that made the docks the trading capital that they once were and that turned around the fortunes of the Lower Lea Valley once more. While not encouraging bankers to raise their heads recklessly above the parapets, I would remind them that the financial story of our nation would have been somewhat different if the Faradays, Brunels, and Heseltines had not dared to take appropriate risk. We did not build significant trading links across the world from east London by battening down the hatches and lowering the anchor.

While a stable, better regulated financial sector is an obvious benefit for all those involved in business and enterprise, my concern is whether an excessive focus on financial stability will prohibit banks and others taking calculated risks and backing potential growth. Over the coming years, in east London and across our country, I look forward to seeing small and large businesses being able to raise the capital that they need, local families taking out mortgages that they can repay, and entrepreneurs opening bank accounts with ease. At the moment, the bureaucracy surrounding these processes makes me think that it is easier to return to keeping the money under the bed.

It seems to me that the new Financial Policy Committee will set the tone for the financial sector. Although the FPC has a financial stability objective, the Bill prohibits it from doing anything to seriously prevent growth. But in the interests of long-term, sustainable growth, should there not be a strengthening of this provision? I believe that a secondary objective for the FPC should be created so that it can support the Government’s economic objectives and support growth positively.

Secondly, where is the human dimension to this legislation? My experience in other fields causes me to worry that the macro financial deals made in the lofty towers of Canary Wharf and the City may not be well connected with the micro realities on the ground at the foot of the towers or with the small businesses and practical day-to-day realities of earning a crust. I would remind the House that the City, whose wealth came through the docks in east London, started with coffee houses where people met each other and did deals. This world was about relationships and integrity-”my word is my bond”. You can create endless regulation and legislation but if people do not act with integrity and relate to each other it will not work.

Much has been done to encourage Canary Wharf and the City to deepen their ties with local and surrounding businesses. The Queen Elizabeth Olympic Park and the companies based at Canary Wharf are beginning to realise the long-term advantages of deepening relationships with local business and enterprise. While large organisations cannot be expected to connect with individual entrepreneurs, it is important for them to find a middle ground and to support successful businesses and enterprises which, in turn, will positively impact upon and attract individual entrepreneurs.

My experience is that being in a strong relationship with the world around you, rather than being isolated in ivory towers, is what keeps you safe and honest. If banks had focused on maintaining closer working relationships with their communities, many of our current difficulties could have been prevented. With this in mind, might it not be sensible to have a fifth external member join the FPC who positively engages with small business and has hands-on practical experience in the field? The micro and the macro need to be connected to generate success.

The questions we have to ask today are: will this legislation add to the isolation of the financial services industry or will it help further relationships with enterprise and business? The Bank of England needs to be concerned with more than financial stability. It needs to be concerned with issues central to business and enterprise growth, to have practical and pragmatic objectives, and to have a desire to provide assistance where needed. Theory is one thing but practice is quite another.