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Mr. Geraint Davies: The hon. Gentleman has made some play about the Chancellor intervening in the extreme circumstances of economic shocks; yet earlier we heard the former Chancellor--the right hon. and learned Member for Rushcliffe (Mr. Clarke)--say that there is no
opportunity for us to intervene. Where do the Opposition stand on the convergence criteria, as it appears that there are enormous divisions?
Mr. Tyrie: I am not on the Front Bench. I am expressing my view on the Bill. If we are going to go for independence, we must make a proper job of it and not have the sort of half-baked hotch-potch of a job that we have with this Bill. If we are going to go for independence, we must give the Bank not only operational responsibility but target or goal-performance responsibility.
Mr. Davies: Will the hon. Gentleman give way?
Mr. Tyrie: No, I will not give way a second time.
I am also concerned that members of the Monetary Policy Committee will not be permitted to speak their minds after committee meetings.
Mr. Tyrie:
Yes, it is like a gagging order. I disagree not so much with the purdah period that the committee has decided to impose on itself around the time of the meetings, as there is some sense in that, as with the six-week lag between meetings and publication of the minutes. Minutes should be published much more quickly, within a few days. Moreover, committee members should be free to speak about them and, if necessary, to dissent from the decisions that have been taken. The forces of collegiality in the committee will be strong enough to ensure that the freedom to speak will be exercised only in extreme circumstances.
If the Treasury succeeds in beefing up its role, we shall get at least half a loaf because, compared with current practice, there will be an increase in democratic accountability. For the first time, Parliament will have a little say in monetary policy.
It will, however, be only half a loaf. Today, we are not debating a proposal for genuine independence. At best, it is a faltering step along the way; at worst, it is another political stunt--an attempt by new Labour to shed responsibility for tough decisions while keeping its hands on policy.
Mr. Keith Vaz (Leicester, East):
I welcome the Bill and pay tribute to my right hon. Friend the Chancellor of the Exchequer for his boldness and determination in attempting to reform one of our most redoubtable institutions, the Bank of England. I congratulate him on the Bill's provision for transferring control of interest rates to the Monetary Policy Committee. For far too long, our economic strategy has been characterised by the boom and bust policies preferred by the Conservative party. The Bill will guarantee the fiscal and monetary stability that our economy badly needs.
I welcome also the Bill's provisions for transferring control of the regulation and supervision of banks to the Financial Services Authority. The measure will be of great
benefit on two counts: first, allowing the Bank to concentrate on its central task of maintaining economic stability; secondly, removing from the Bank a responsibility which it was totally inept in fulfilling--an incompetence demonstrated in its scandalous misconduct in the regulation of the Bank of Credit and Commerce International and of Barings.
The House knows of the long-standing support of many hon. Members for the campaign to obtain justice for the thousands of depositors who lost everything in the BCCI collapse. In the six and a half years since the bank closed, I and other hon. Members have met the tragic victims of BCCI. I remember meeting a man who won the Spanish lottery and put his winnings into BCCI one week, only to lose them in the bank's collapse a week later. I remember also pensioners in Gibraltar who lost their life savings, and people driven by the shock to hunger strike and, in some cases, almost to suicide. I continue to receive letters from people for whom the suffering and stress is as great and as real today as it was on 5 July 1991, the day that BCCI closed.
Six years after the then Secretary of State for Trade and Industry established a liquidation committee to chase up the $10 billion stolen by the fraudsters and to return the lost funds to the victims, depositors are not much closer to recovering their money than they were in 1991. Only one dividend, amounting to 24.5 per cent., has been paid out. Today--I do not know whether it was in advance of this debate--the liquidators announced for next year a second dividend, of 11.5 per cent. Despite those two payments--which amount to only 36 per cent. of the money that people had placed in BCCI--the tragedy of the bank's collapse continues.
I should remind the House of the closure of BCCI. It closed because the Bank of England used its supervisory powers to step in and shut down the bank's operations. The merit of that decision is questionable, because it was within the Bank's remit temporarily to restrict the bank's licence, to force a management change, or even to mount a rescue operation, as it had done in the case of other banks. It remains a matter of great consternation for thousands of victims that the Bank employed what can be described only as a discriminatory attitude towards BCCI, whose situation was not totally dissimilar to other banks facing crisis or fraud.
The decision to close the bank was made in a private meeting between the then Prime Minister, the then Chancellor of the Exchequer, the then Governor of the Bank of England, Mr. Leigh-Pemberton, and the then Deputy Governor of the Bank of England, Mr. Eddie George. At the time, we pointed out that Mr. Eddie George, despite his involvement in the bank's closure, was promoted to the Bank's governorship. I stopped calling for Mr. George's resignation over BCCI because, every time I did so, he was promoted by the previous Government. Today, I resist the temptation to praise him or to call for extending his contract, as it may have the opposite effect.
Whatever the merits of the decision to close BCCI, the Bank's neglect of duty in allowing the fraud to be perpetrated for as long as it was, jeopardising the investments of thousands of depositors, is beyond doubt.
Lord Justice Bingham was asked to conduct the inquiry established by the then Chancellor of the Exchequer into the supervision of BCCI. He found that
Lord Justice Bingham's report stated that the Bank's attitude towards a 1988 incident, in which BCCI was linked to drug traffickers, was
I should add that the full story of the Bingham report has not yet been told, as some of the appendices have been withheld from the public.
Mr. Tyrie:
What does all that have to do with the Bill?
Mr. Vaz:
Unfortunately, the hon. Gentleman has not read the Bill. He will see that the Bill deals with transfer of regulatory functions from the Bank of England. My speech therefore has absolutely everything to do with the Bill. Had he been in the Chamber for the opening speeches--
Mr. Vaz:
--the hon. Gentleman will have heard the Chief Secretary to the Treasury refer specifically to BCCI and Barings and the need for independent regulation.
I ask my hon. Friend the Economic Secretary to the Treasury to deal in her reply with the previous Government's decision to refuse to publish the confidential memorandums and appendices to the Bingham report. I do not want to put her on the spot, because I know that she will want to consider the matter carefully. In consultation with the Chancellor of the Exchequer, will she, please, consider the possibility of publishing that confidential information? It is not often that I find myself in total agreement with the liquidators of BCCI. At today's meeting in the House, however, they called for publication of the report. I hope that the Government will consider doing so.
I should like to pay tribute to those who have been involved in the campaign over the past six years. I pay tribute to Dr. Elias, who is chairman of the depositors protection association; Bernard Clarke, who has been advising the liquidation committee; and, most recently, Mr. Paul Lehmann and Mr. Jonathan Hirshler, both of whom are involved in trying to get justice.
I must also mention the position of BCCI employees. Hon. Members who can cast their minds back to 5 July 1991 will know that the then Governor of the Bank of England, who had supervisory jurisdiction over the bank, described the employees of BCCI as part of a "criminal culture". As a result of that statement, many of the ex-employees, who were not involved in any way in the fraud, have found it extremely difficult to obtain employment.
The Bingham report and its appendices are now history, but the Bank's conduct over BCCI is not. It is clear that the previous Administration failed to learn the lessons of Bingham. Norman Lamont, who was Chancellor at the time of publication of the report and who lost his seat on 1 May, told the House that Lord Justice Bingham said:
"the Bank's supervisory approach to BCCI was in my opinion deficient".
Further in the report, he said:
"the Bank did not pursue the truth about BCCI with the rigour which BCCI's market reputation justified".
Lord Justice Bingham stated that no action was taken before 1991 to change the structure or management of BCCI, despite representations having been made to the Bank about fraudulent conduct within BCCI throughout the 1980s, and despite evidence having been presented to the Bank by the Foreign Office and the intelligence services. Lord Justice Bingham painted a picture of a Bank of England whose employees failed to communicate properly with each other, that disregarded and misplaced evidence that was being fed into it, that had a laid-back and relaxed attitude to the tasks in hand and that was incapable of acting decisively, despite having all the information before it.
"so off-hand as to suggest a lack of interest."
Elsewhere in the report, again and again, the Bank was found to have
"failed to live up to the task."
Such conduct was totally unacceptable then, and it is totally unacceptable now. No disciplinary action of any type has been taken against any employee of the Bank of England.
"the Bank of England's general approach to supervision has served this country well"--[Official Report, 22 October 1992; Vol. 212, c. 580.]
Mr. Lamont also agreed with the recommendation that a radical recasting of the legal structure of banking supervision would not be appropriate. It is important to note that that was the policy pursued by the Conservative party for a number of years, which is why we greatly welcome the Bill and the fact that there is going to be a change.
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