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We reflected on that issue at some length in Committee. I think it is right that we try to future-proof legislation as much as possible, and we do not consider that a two-year sunset clause would be appropriate in this instance. That does not mean that I would reject the concept of the use of sunset clauses in other contexts. Indeed, as the hon. Gentleman knows, the Banking
(Special Provisions) Act 2008 contains a sunset clause, which is not the least of the reasons for our present consideration of the Banking Bill.
New clauses 4 and 5 would confer powers on the Treasury in relation to exempting directors and the financial services ombudsman. In Committee, as the hon. Member for South-West Hertfordshire mentioned, I cited specific instances in which the Treasury might use the power to change law. I understand that the hon. Gentleman wishes the Government to prescribe the pieces of legislation that they wish to amend, and to include them in the Bill. I must admit to feeling slightly guilty about selecting a couple of examples in an attempt to be helpful and clarify matters, and then discovering that I had probably not clarified matters to the hon. Gentlemans satisfaction.
I accept that both new clauses give the Treasury certain powers that may be useful in resolution and may make the exercise of the stabilisation powers more effective. However, the examples that I gave in Committee were intended to illustrate the wider point that there are pieces of legislation that we can identify as needing to be amended, but others to which, as things stand, that does not apply. We cannot know the specific stabilisation options and the particular circumstances of a failing bank in the future, and what might need to be done.
Even if the Government were to introduce measures such as new clauses 4 and 5, the powers in clause 72 would still be necessary. As I said in Committee, it is not possible to provide an exhaustive list of the legislative proposals that the Treasury may need to modify, because it is not possible to foresee each and every circumstance surrounding the failure of each bank and which pieces of legislation may be relevant to the resolution. If that were possibleagain, I explained this in Committeethere would be no grounds for taking the power, and we could and would have included the relevant changes in the Bill.
The Government also consider it more appropriate to preserve the generality of the power by not introducing examples into the Bill. We do not think that it would be advantageous to give the impression in legislation that these were the only parts of law that the authorities might need to modify in order to effect a successful resolution.
I recognise that clauses such as clause 72 are potentially controversial because they include a power to amend primary and secondary legislation by order, but they are not exceptional clauses. It is not the case that such measures have never been allowed through Parliament before. Nevertheless, it is right for them to be subject to rigorous scrutiny. I consider that our action in limiting the nature of the clause is appropriate. I hope I have reassured the House not only about the way in which the clause should be construed and the significant practical limitations of the power to amend law, but about why it is necessary for that power to be taken.
Sir Patrick Cormack: The hon. Gentleman is a very mild-mannered man, and I am sure he would never wish to be dictatorial in any way. The fact of the matter is, however, that we have gone far too far with these Henry VIII clauses. The power of the Executive has increased and is increasing, and, in the famous words of Dunnings motion, ought to be diminished.
I understand that the hon. Gentleman takes a very close interest in how Parliament works, its traditions and the way in which its powers are exercised,
and I also take that seriously. I would not want to be supporting a blunderbuss clause that just gives the Government the power to do anything they want if they decide that that is the right thing to do. That is why we have spent a lot of time ensuring we get the limitations imposed on clause 72 right. I believe this is now appropriate, and I hope I explained in Committee why that is the case. I also hope that the assurances I have given, particularly on the safeguards in both primary and secondary legislation, will give further reassurance to those outside stakeholders who are very interested in this part of the Bill.
Mr. Gauke: I am grateful to the Minister for his remarks. He has tried to be helpful throughout, which, as he mentioned, has perhaps caused him one or two difficulties in the context of clause 72. There are concerns that are both constitutional, as my hon. Friend the Member for South Staffordshire (Sir Patrick Cormack) pointed out, and practical and business related in the degree of uncertainty created by clause 72. We voted extensively on this in Committee, and I am glad that the Minister is consulting with the liaison panel. We will, perhaps rather generously, not press for any Divisions on clause 72, but we hope that the other place will examine it much further and see whether it can be made more focused.
New clause 3 relates to safeguards on partial property transfer. I almost detected a degree of sympathy for it from the Minister, because he recognises that it addresses a legitimate concern. It will enable the liaison panel to input its thoughts in this area. We would require the Treasury to consult with the business liaison panel in this area, and we think it would add a degree of protection to UK banks to know that if problems are being created by the legislation and the secondary legislation made under it, there will be an opportunity for Parliament to review it. The Treasury will be forced to review it, and consult if there are particular weaknesses. We think this would add significantly to the protections for the UK banking system and help further address the remaining concerns, so I will seek to press it to a vote.
Question put, That the clause be read a Second time:
After section 2C of the Bank of England Act 1998 (Financial Stability Committee: supplemental - inserted by section 225 above) insert
2D Debt responsibility mechanism
(1) The Financial Stability Committee must write to the FSA twice a year, setting out its assessment of financial stability and the FSA must have regard to that assessment in the exercise of its duties in respect of paragraph 4 of Schedule 6 to the Financial Services and Markets Act 2000 (threshold conditions: adequate resources).
(2) The Financial Stability Committee must publish its letter and the FSA must publish its response.. [Mr. Hoban.]
Brought up, and read the First time.
Mr. Hoban: I beg to move, That the clause be read a Second time.
Mr. Speaker: With this it will be convenient to discuss the following:
Amendment No. 6, in clause 5, page 4, line 2, leave out and.
Amendment No. 7, in page 4, line 3, at end insert , and
(g) the meaning of financial stability..
Amendment No. 4, in clause 93, page 46, line 6, at end insert
(5) Subsection (4) above does not take precedence over Schedule 6 to the Insolvency Act 1986..
Amendment No. 15, in clause 222, page 107, line 19, leave out or other financial institution.
Amendment No. 16, in clause 223, page 107, line 28, leave out or other financial institution.
Amendment No. 18, in clause 225, page 108, line 21, at end insert
(3) In doing so, the court of directors must have regard to the guidance on financial stability given in the code of practice issued in accordance with section 5..
Mr. Hoban: I am pleased that so many people are interested in the debate on new clause 7, which would add a further responsibility to a financial stability committee. The Bill establishes for the first time a committee of the Bank of England, which will be responsible for maintaining
Mr. Deputy Speaker (Sir Michael Lord): Order. Conversations are breaking out throughout the Chamber. Perhaps hon. Members who do not want to take part in the debate would like to leave the Chamber.
Mr. Hoban: Thank you, Mr. Deputy Speaker. As I was saying, the Bill sets up the financial stability committee of the Bank of England, a sub-committee of the court of directors. Its role is to contribute towards protecting and enhancing the stability of the financial systems of the UKdescribed in the Bill as the financial stability objective.
One of the issues that has developed over the course of the past 10 years is the build-up of an asset price bubble. We have seen the fastest rise in house prices in the developed world taking place in this country. That
period of asset price rises has been fuelled by significant expansion in the levels of debt in the economy as a whole. That is why we enter this recession with the highest level of personal debt among major industrialised countries. In that 10-year period, while the FSA supervised the activities of individual financial institutions, no one had the role of monitoring and responding to overall levels of debt in the economyespecially since the Government introduced their reforms of financial regulation in 1997. That is a major omission that contributed to the asset price bubble that we see today, and the bursting of that bubble is causing misery to families and businesses up and down the country.
We cannot allow that situation to go on. That is why we propose a debt responsibility mechanism, a form of macro-prudential regulation that will enable the Bank of England, as part of its process of identifying financial risks in the economy, to write to the FSA to require it to take into account its concerns about the level of debt, and to look at the way in which it supervises and monitors capital levels in individual financial institutions. This is an idea that we proposed towards the end of September. Since then, the Bank of England, in its financial stability report, has called for the introduction of macro-prudential regulation, echoing some of the concerns that we have had about the asset price bubble. That was followed by speeches by John Gieve and Charlie Bean, both executive directors of the Bank of England, so we believe that it is time to reform the regulation of the financial services sector to prevent the recreation in the future of further debt-fuelled asset price bubbles. New clause 7 gives us the opportunity to do so, and it will be a major improvement in the way in which we regulate the financial services sector
It being three hours after the commencement of proceedings on the motion , Mr. Deputy Speaker p roceeded to p ut the Questions necessary for the disposal of the business to be concluded at that hour , pursuant to Order [this day].
Amendments made: No. 19, in page 1, line 18, after 28,, insert 29,.
No. 20, in page 1, line 18, after 30, insert , 31.
No. 21, in page 1, line 19, after 43,, insert 44,.
No. 22, in line 19, leave out and 45 and insert 45 and 46. [Mark Tami.]
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