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The noble Lord, Lord Redesdale, asked several questions, but I was rather disappointed in him today. I have been reading the Morning Advertiser and I know that he has had a survey done. He asked the readers of that august journal to support rejection of the order. I was interested to know what figures the noble Lord had but he did not give them.

Lord Redesdale: The responses showed that 63 per cent wanted the order shelved and 36.8 per cent wanted it kept. However, I was interested, on reading the responses, to see that a large number of health charities had taken part. There seemed to be a division between the publicans who responded and those who are involved in the health industry.

Lord Brett: I am not really surprised. I was rather disturbed that one of the questions said that local authorities and the police were opposed to the order when, in practice and at operational and national level, we can show that it is not true in the case of the police. It is also not true of local authorities and the public. There were several other questions, none of which, I think, would fundamentally change the debate. As I have said, the order has been scrutinised by the JCSI and the Merits Committee. We consulted and there was a 90 per cent response. We consulted twice, in 2008 and 2009.

Finally, one word that I do not think can be applied to the order, although it has been applied by the noble Lord, Lord Redesdale, is "draconian". The order is not draconian; it is proportionate. There is, I am sure, room for improvement in the future. I am sure we will return to this when further evidence is available. This is a proportionate measure to bring some relief to communities that suffer from the misbehaviour and anti-social behaviour of people who induce themselves to get drunk as quickly as possible in circumstances where they are behaving irresponsibly. Those landlords and others who do not support the responsible drinking patterns that most of us have make up the minority. I pay tribute to the noble Lord, Lord Redesdale, for his leadership of organisations that seek to support responsible drinking patterns. On this occasion, the order is required and I trust your Lordships will support that view.

Motion agreed.

Financial Services Bill

Committee (2nd Day) (Continued)

8.33 pm

Amendment 25

Moved by Baroness Noakes

25: Clause 3, page 3, line 14, at end insert-

"( ) Where a matter has been omitted from either the annual report or the minutes published under section 2(4) and the action

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involves financial assistance as defined in section 257 of the Banking Act 2009, a report should be laid before Parliament when the conditions under subsection (3) no longer apply."

Baroness Noakes: My Lords, in moving Amendment 25, I will speak also to Amendment 28. Amendment 25 adds a new subsection to Clause 3. Amendment 28 adds a new clause after Clause 4. They both concern informing Parliament about financial support. Both focus on financial assistance.

Noble Lords may know that the inspiration for the amendments came from the late disclosure of the emergency loans of £62 billion given to HBOS and RBS in October 2008 by the Bank of England. The Treasury indemnified the Bank as this was clearly way beyond the capacity of the Bank's own balance sheet. This was made public only when the Governor of the Bank of England revealed it during evidence to the Treasury Select Committee in another place in November last year. The Chancellor of the Exchequer was then forced to make a Statement to another place setting out the facts. It was revealed not only that these extraordinary loans were kept secret for over a year from shareholders and Parliament but also that the Chancellor had not even informed the chairman of the Public Accounts Committee or the Treasury Select Committee on a confidential basis. This brings me to my two amendments.

Amendment 25 is concerned with the annual report and the minutes of the Council for Financial Stability. In any case of financial assistance, once the conditions of secrecy set out in Clause 3(5) and Clause 4(3) cease to exist, a report should be laid before Parliament. This report would obviously contain the information redacted from the minutes and the annual report.

Amendment 28 concentrates on financial assistance to the Bank of England, which would be the normal route for such assistance. This lays on the Treasury the basic obligation to report to Parliament. That report should be made as soon as possible but may be delayed if there is a threat to financial stability. There is no need for a commercial confidentiality let-out here. Parliament must be told if taxpayers' money is being put at risk unless there is a reason at the national level to withhold such information. Importantly, the amendment provides that, if such a report is delayed, there is a positive obligation on the Chancellor to inform Members of Parliament on a confidential basis. It is for him to determine which Members of Parliament that should be. This is the area where the Chancellor badly let Parliament down in relation to RBS and HBOS last year. We must not allow that to happen again.

These amendments overlap to some extent, but I hope that together they demonstrate the range of concerns that should be addressed in this Bill in response to the serious concerns arising from the non-disclosure of the RBS and HBOS arrangements. I beg to move.

The Financial Services Secretary to the Treasury (Lord Myners): Amendment 25 explicitly concerns information about financial assistance as defined in Section 257 of the Banking Act 2009. The amendment

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would provide for information of this nature that was discussed in a Council for Financial Stability quarterly meeting but not minuted or covered by the annual report of the council to be made public in a report to Parliament when the confidentiality concerns in Clause 3(3) no longer apply.

As I am sure the House is aware, there are already appropriate reporting mechanisms in place for financial assistance under the Banking Act 2009. It might be useful to set out these processes. First, under Section 228(6) of the Banking Act 2009, where funds for financial assistance are paid directly from the Consolidated Fund, the Treasury shall as soon as reasonably practicable lay a report before Parliament specifying the amount but not the identity of the institution to or in respect of which it is paid. This would normally take the form of a Written Ministerial Statement such as in the case of the £1.6 billion payment made under Section 228(5) in March 2009.

Secondly, under Section 229(6), where a loan for financial assistance purposes is made from the National Loans Fund, the same reporting requirement as under Section 228(6) applies. No financial assistance loans have been made from the National Loans Fund to date.

Finally, under Section 231, the Treasury is required to lay before Parliament a report about any arrangements which may involve or require reliance on Section 228(1). This will include financial assistance payments made from voted money or directly from the Consolidated Fund under the Banking Act. It will also cover guarantees and commitments entered into as financial assistance where the making of future payments could require reliance on the Banking Act. The report must not specify individual arrangements or identify, or enable the identification of, individual beneficiaries.

These arrangements provide the right framework for reporting financial assistance under Section 257 of the Banking Act. There is no need, therefore, for further reports as part of the reports made by the Council for Financial Stability on its activity, especially as the council would not itself be taking any decisions about the giving of financial assistance.

In terms of disclosure of financial assistance to the Bank of England, the Government are in discussion with the chairs of the Public Accounts Committee and Treasury Select Committee about how extremely sensitive information would be notified to Parliament in the unlikely event of additional confidentiality being needed in the future. As Sir Nicholas Macpherson, the Treasury's Permanent Secretary, indicated to the Public Accounts Committee when he appeared before it on 14 December:

"The Chancellor and indeed the official Treasury are acutely aware of the importance of parliamentary accountability".

We would work to establish an arrangement for exceptional cases, such as the assistance that the Treasury made available to provide emergency liquidity against security-not a giving of benefit, as suggested by the noble Baroness-to HBOS and the Royal Bank of Scotland.

These arrangements are in addition to the normal processes for managing public money, which require the department to notify Parliament of statutory liabilities in the form expected by the legislation and any other

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major non-standard liabilities using a standard form of minute. These departmental minutes describe the amount and expected duration of the proposed liability; they explain which bodies are expected to benefit and why; and they explain how the authority for any expenditure required under the liability will be sought. As well as being laid in the House 14 sitting days prior to the liability being taken on, they are copied to the chairs of both the Public Accounts Committee of another place and departmental committees. In cases of particularly large or unusual liabilities, a ministerial Statement accompanies the minute. The Government are in discussion with the chairs of the Public Accounts Committee and the Treasury Committee to agree a process that will work effectively and ensure appropriate confidentiality. That will ensure that no action places at risk the very financial stability that we are seeking to achieve. Accordingly, I invite the noble Baroness to withdraw her amendment.

Baroness Noakes: My Lords, I thank the Minister for that response. He said that the Council for Financial Stability would not get involved in any such decisions and that Amendment 25 was therefore not necessary. We have pretty well established that the Council for Financial Stability does not have any real meaning, so perhaps Amendment 25 is not relevant.

However, I am less clear about Amendment 28. We know that the Government did not inform Parliament about the HBOS and RBS arrangements until the Governor of the Bank of England had informed Parliament. That clearly did not work, and the fact that the Permanent Secretary at the Treasury is acutely aware of parliamentary accountability seems not to have achieved a result that many would have found satisfactory. I am not sure whether we can leave it to Ministers of the day, as advised by their Permanent Secretaries. I shall withdraw Amendment 25, but I give notice that, in a minute or so, I shall press Amendment 28 formally.

Amendment 25 withdrawn.

Clause 3, as amended, agreed.

8.45 pm

Clause 4 : Definitions

Amendment 26 not moved.

Clause 4 agreed.

Amendment 27 not moved.

Amendment 28

Moved by Baroness Noakes

28: After Clause 4, insert the following new Clause-

"Disclosure of financial assistance to the Bank of England

(1) Where the Treasury provides financial assistance to the Bank of England in order to facilitate actions by the Bank of England in pursuit of its financial stability objective under section 2A of the Bank of England Act 1998, the Treasury shall lay a report setting out details of the financial assistance before Parliament.



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(2) A report under subsection (1) shall be laid as soon as possible after the provision of the financial assistance but may be delayed for as long as the Treasury considers that there would be a threat to the stability of the UK financial system if such a report were laid.

(3) Where the laying of a report is delayed, the Chancellor of the Exchequer shall ensure that information is given on a confidential basis to those Members of Parliament whom he considers should be informed.

(4) "Financial assistance" includes giving guarantees or indemnities and any other kind of financial assistance (actual or contingent)."

Amendment 28 agreed.

Amendment 29

Moved by Baroness Noakes

29: After Clause 4, insert the following new Clause-

"Bank of England's financial stability objective

After subsection (1) of section 2A of the Bank of England Act 1998, insert-

"(1A) In considering that objective, the Bank must have regard to-

(a) the economic and fiscal consequences for the United Kingdom of instability of the UK financial system;

(b) the effects (if any) on the growth of the economy of the United Kingdom of anything done for the purpose of meeting that objective; and

(c) the impact (if any) on the stability of the UK financial system of events or circumstances outside the United Kingdom (as well as in the United Kingdom).""

Baroness Noakes: Well, my Lords, I am at a loss for words. As noble Lords will be aware, that does not very often happen. I shall move Amendment 29 and speak to Amendment 32. Both of these amendments concern the differences between the financial stability objective for the Bank of England, which was created in last year's Banking Act, and that for the FSA which is created in Clause 5. The Bank of England's financial stability objective is set out in Section 2A of the Bank of England Act 1998, which says that the objective is,

in the UK. We had several discussions during the passage of the Banking Act last year about whether a more precise definition should be given, but the Government refused to budge on that.

When we come to this Bill, the FSA's new financial stability objective in the proposed new Section 3A(1) of FiSMA is phrased in much the same way as it is for the Bank, but new Section 3A(2) goes on to say that the FSA has to "have regard to" some very sensible things; namely:

in,

the UK and,

the UK. My Amendment 29 simply adds those sensible things to which the FSA should have regard to the financial stability objective for the Bank of England. I

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cannot think that the Government would want the two bodies to be working to substantially different terms of reference for financial stability, so I am sure that the Minister will agree with my amendment.

The second amendment in this group, Amendment 32, adds a new clause after Clause 4. It also probes a difference between the wording used for financial stability in last year's Banking Act and in this Bill. Last year, the wording referred to the financial systems of the UK, while this year the parliamentary draughtsman has used, "UK financial system"; that is, last year, there was more than one system, and this year there is one. If the courts ever come to interpret this Bill and last year's Act, there would be a prima facie case that the Government intended different things, since they have used different language. The normal interpretation from that is that the difference was deliberate. Amendment 32 says:

"For the avoidance of doubt",

the financial systems wording means the same as this year's wording. I beg to move.

Lord Myners: Amendment 29 would give the Bank of England a list of factors to which it must have regard when considering its financial stability objective. These three factors are identical to those set out for the Financial Services Authority by Clause 5. They are the economic and financial consequences of instability for the UK, any effects on economic growth of the FSA's stability-enhancing measures and any impacts of overseas events or circumstances on UK financial stability. I understand why the noble Baroness might think that it is sensible for the FSA and the Bank of England to have their financial stability objectives framed in precisely the same way. However, I will explain why this is neither necessary nor appropriate.

The amendments to the Financial Services and Markets Act proposed by the Bill follow the existing style of that Act. As noble Lords are aware FiSMA sets out a detailed legislative framework by which the FSA must operate. Section 2(3) of the Act lists a number of matters to which the FSA must have regard. The list of factors to which it must have regard when pursuing its financial stability objectives have been drafted to be consistent with this approach. FiSMA currently focuses on providers and consumers of financial services and does not mention taxpayers or the wider economy. The style of FiSMA offers no flexibility on the FSA's objectives and "have regard to". The list inserted by new Section 3A(3) in Clause 5 requires the FSA to consider these wider factors when undertaking its detailed statutory functions and operations.

The Bank, on the other hand, is generally not constrained in the same way. Although the Bank of England Act 1998 goes into some detail it is not the case that all the Bank's operations are set out in detailed statute. For that reason, the Government do not believe that it is appropriate to give the Bank the same parameters as the FSA for its financial stability objective. The Bank and the FSA have different roles and different tools. Until the financial crisis, the FSA was focused on micro-level regulation. We are now giving it a wider set of factors to consider, but the Bank has always had a wider macroeconomic approach.

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I agree that it should consider the factors set out in the new clause to the extent it judges appropriate, but it can already do so. In contrast, it is an extension of scope for the FSA to be asked to look beyond the narrowly defined financial services sector. I hope that I have explained why the proposed new clause is not necessary and urge the noble Baroness to withdraw her amendment.

I now turn to Amendment 32, which would include specific provision such that where the Bill refers to "the UK financial system", it means the same as,

as in the Banking Act 2009. That expression is not defined in the Banking Act but is used in a number of places, mainly in Part 1 in relation to the special resolution regime. Under normal principles of statutory interpretation as set out in the Interpretation Act, words in the singular include plural and vice versa unless the contrary intention appears. Accordingly, we do not consider that there is any need to include a provision in the Bill along the lines of the amendment that has been tabled. I therefore ask the noble Baroness not to press it.

Lord Howard of Rising: Many people have voiced their differences on the tripartite government system, and we are all concerned with that. Are not the Government building into this system further potential problems by having different definitions? The Minister explained it by describing what was required of the FSA but I cannot see that by putting in the definition of what the Bank of England has to look at in any way binds or changes what the FSA has to look at. Perhaps the Minister can explain that. He explained it via the FSA but the amendment has to do with the Bank of England.

Lord Myners: I thank the noble Lord, Lord Howard of Rising, for his contribution. However, I have already addressed his point. I made it very clear that the Bank of England already has very wide powers to take into consideration macro factors and does not need these to be further memorialised in statute. The Bank of England has made no request to us when we were drafting the Bill that that should be considered.

Baroness Noakes: I am a bit mystified. Which sections of any of the Bank of England Acts contain these macroeconomic factors that they have regard to? I cannot remember which sections he is referring to.

Lord Myners: I did not say that I was referring to the Act. I said that they already take into consideration a wide range of macro factors.

Baroness Noakes: I am mystified by this. The Bank of England Act is not specific on this. The only broader references might be in relation to the specification of the Monetary Policy Committee's objective in the 1998 Act. However, I do not think that the 1948 Act-if that is the right year-the 1998 Act or last year's Banking Act specified these broader aspects. We continually refine what the Bank of England is supposed to do. Surely it is right to use best practice from other parts. We have the FSA with the financial stability objective expressed in different ways from the Bank of

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England. Are they not supposed to be achieving the same thing? Are they achieving different things? The Minister has not explained why they should be expressed differently.

Lord Myners: I can only go over the ground that I have already covered. No one is suggesting that there are any weaknesses at the moment in the authorities and powers of the Bank of England or its approach to the management of the stability of the financial system. The Treasury has come across no situations in which it believes that the Bank might be inhibited or restricted by statute from performing the function which we would look to the Bank of England to carry out, nor has the Bank of England in the representations that it has made to us in connection with the Bill cited this as an area where it would suggest that it would be appropriate to mirror the wording which is used for the FSA.

Baroness Noakes: Well, my Lords, I am sorry about this. The creation of tripartite authorities gets messier and messier. As the Government try to tidy one bit up-the FSA-we get other bits of untidiness. We cannot allow this to continue. I would like to test the opinion of the House.


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