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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
26 Nov 2008 : Column 839
(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. Gentleman’s 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 possible—again, I explained this in Committee—there 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 Dunning’s motion, “ought to be diminished”.

Ian Pearson: 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,
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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:—

The House divided: Ayes 171, Noes 264.
Division No. 340]
[7.24 pm


Afriyie, Adam
Amess, Mr. David
Ancram, rh Mr. Michael
Arbuthnot, rh Mr. James
Atkinson, Mr. Peter
Bacon, Mr. Richard
Baldry, Tony
Baron, Mr. John
Barrett, John
Bellingham, Mr. Henry
Beresford, Sir Paul
Binley, Mr. Brian
Bone, Mr. Peter
Bottomley, Peter
Brady, Mr. Graham
Brake, Tom
Brazier, Mr. Julian
Breed, Mr. Colin
Brokenshire, James
Brooke, Annette
Burns, Mr. Simon
Burstow, Mr. Paul
Burt, Alistair
Burt, Lorely
Butterfill, Sir John
Carmichael, Mr. Alistair
Carswell, Mr. Douglas
Chope, Mr. Christopher
Clappison, Mr. James
Cormack, Sir Patrick
Cox, Mr. Geoffrey
Davey, Mr. Edward
Davies, David T.C. (Monmouth)
Davies, Philip
Davis, rh David
Djanogly, Mr. Jonathan
Dodds, Mr. Nigel
Dorries, Mrs. Nadine
Duncan, Alan

Dunne, Mr. Philip
Ellwood, Mr. Tobias
Evennett, Mr. David
Fabricant, Michael
Field, Mr. Mark
Foster, Mr. Don
Francois, Mr. Mark
Fraser, Christopher
Garnier, Mr. Edward
Gauke, Mr. David
Gibb, Mr. Nick
Gidley, Sandra
Gillan, Mrs. Cheryl
Goodwill, Mr. Robert
Gove, Michael
Gray, Mr. James
Grayling, Chris
Green, Damian
Gummer, rh Mr. John
Hancock, Mr. Mike
Hands, Mr. Greg
Harper, Mr. Mark
Harris, Dr. Evan
Hayes, Mr. John
Heald, Mr. Oliver
Heath, Mr. David
Heathcoat-Amory, rh Mr. David
Hemming, John
Hendry, Charles
Hoban, Mr. Mark
Holloway, Mr. Adam
Holmes, Paul
Horam, Mr. John
Horwood, Martin
Hosie, Stewart
Howarth, David
Hughes, Simon
Hunt, Mr. Jeremy
Hunter, Mark
Jack, rh Mr. Michael
Jackson, Mr. Stewart
Jones, Mr. David
Kawczynski, Daniel
Keetch, Mr. Paul
Key, Robert
Kirkbride, Miss Julie
Laing, Mrs. Eleanor
Lait, Mrs. Jacqui
Lancaster, Mr. Mark
Laws, Mr. David
Leech, Mr. John
Leigh, Mr. Edward
Letwin, rh Mr. Oliver
Lidington, Mr. David
Lilley, rh Mr. Peter
Loughton, Tim
Mackay, rh Mr. Andrew
Maclean, rh David
MacNeil, Mr. Angus
Main, Anne
Malins, Mr. Humfrey
Maples, Mr. John
Mason, John
Mates, rh Mr. Michael
May, rh Mrs. Theresa
McIntosh, Miss Anne
McLoughlin, rh Mr. Patrick
Mercer, Patrick
Miller, Mrs. Maria
Milton, Anne
Moore, Mr. Michael
Mundell, David
Murrison, Dr. Andrew
Neill, Robert
Newmark, Mr. Brooks
Paterson, Mr. Owen
Pelling, Mr. Andrew
Penrose, John
Price, Adam
Pritchard, Mark
Randall, Mr. John
Reid, Mr. Alan
Rennie, Willie
Robathan, Mr. Andrew
Robertson, Angus
Robertson, Hugh
Robertson, Mr. Laurence
Rosindell, Andrew
Rowen, Paul
Ruffley, Mr. David
Russell, Bob
Scott, Mr. Lee
Selous, Andrew
Shapps, Grant
Simmonds, Mark
Simpson, Mr. Keith
Soames, Mr. Nicholas
Spicer, Sir Michael
Spink, Bob
Stanley, rh Sir John
Steen, Mr. Anthony
Stuart, Mr. Graham
Stunell, Andrew
Swayne, Mr. Desmond
Syms, Mr. Robert
Taylor, Mr. Ian
Taylor, Matthew
Thurso, John
Timpson, Mr. Edward
Tredinnick, David
Turner, Mr. Andrew
Tyrie, Mr. Andrew
Vaizey, Mr. Edward
Villiers, Mrs. Theresa
Walker, Mr. Charles
Wallace, Mr. Ben
Weir, Mr. Mike
Whittingdale, Mr. John
Wiggin, Bill
Willetts, Mr. David
Williams, Mark
Williams, Mr. Roger
Williams, Stephen
Willott, Jenny
Wilshire, Mr. David
Wilson, Mr. Rob
Wilson, Sammy
Winterton, Ann
Winterton, Sir Nicholas
Wright, Jeremy
Yeo, Mr. Tim
Young, rh Sir George
Tellers for the Ayes:

Mr. Crispin Blunt and
Mr. Richard Benyon


Abbott, Ms Diane
Ainger, Nick
Alexander, rh Mr. Douglas
Allen, Mr. Graham
Anderson, Mr. David
Anderson, Janet
Armstrong, rh Hilary
Atkins, Charlotte
Austin, Mr. Ian
Bailey, Mr. Adrian
Banks, Gordon
Barlow, Ms Celia
Barron, rh Mr. Kevin
Battle, rh John
Bayley, Hugh
Beckett, rh Margaret
Begg, Miss Anne
Benn, rh Hilary
Betts, Mr. Clive
Blackman, Liz
Blackman-Woods, Dr. Roberta
Blizzard, Mr. Bob
Borrow, Mr. David S.
Bradshaw, Mr. Ben
Brennan, Kevin
Brown, rh Mr. Nicholas
Brown, Mr. Russell
Browne, rh Des
Bryant, Chris
Buck, Ms Karen
Burden, Richard
Burgon, Colin
Burnham, rh Andy
Byrne, rh Mr. Liam
Caborn, rh Mr. Richard
Cairns, David
Campbell, Mr. Ronnie
Caton, Mr. Martin
Cawsey, Mr. Ian
Challen, Colin
Chapman, Ben
Chaytor, Mr. David
Clark, Ms Katy
Clarke, rh Mr. Charles
Clarke, rh Mr. Tom
Clelland, Mr. David
Clwyd, rh Ann
Coaker, Mr. Vernon
Coffey, Ann
Cohen, Harry
Connarty, Michael
Cooper, Rosie
Cooper, rh Yvette
Cousins, Jim
Crausby, Mr. David
Creagh, Mary
Cruddas, Jon
Cummings, John
Cunningham, Mr. Jim
Cunningham, Tony
David, Mr. Wayne
Davidson, Mr. Ian
Davies, Mr. Dai
Davies, Mr. Quentin
Dean, Mrs. Janet
Denham, rh Mr. John
Devine, Mr. Jim
Dhanda, Mr. Parmjit
Dobson, rh Frank
Donohoe, Mr. Brian H.
Doran, Mr. Frank
Dowd, Jim
Eagle, Angela
Eagle, Maria
Efford, Clive
Ellman, Mrs. Louise
Engel, Natascha
Ennis, Jeff
Farrelly, Paul
Fisher, Mark
Fitzpatrick, Jim
Flello, Mr. Robert
Follett, Barbara
Foster, Michael Jabez (Hastings and Rye)
Francis, Dr. Hywel
Gapes, Mike
Gardiner, Barry
George, rh Mr. Bruce
Gerrard, Mr. Neil
Gibson, Dr. Ian
Godsiff, Mr. Roger
Goggins, Paul
Goodman, Helen
Griffith, Nia
Griffiths, Nigel
Grogan, Mr. John
Gwynne, Andrew
Hain, rh Mr. Peter
Hall, Mr. Mike
Hall, Patrick
Hamilton, Mr. David
Hanson, rh Mr. David
Harris, Mr. Tom
Havard, Mr. Dai
Healey, rh John
Hendrick, Mr. Mark
Hepburn, Mr. Stephen
Heppell, Mr. John
Hesford, Stephen
Hewitt, rh Ms Patricia
Heyes, David
Hill, rh Keith
Hillier, Meg
Hope, Phil
Hopkins, Kelvin
Howells, Dr. Kim
Hoyle, Mr. Lindsay
Hughes, rh Beverley
Humble, Mrs. Joan
Hutton, rh Mr. John
Iddon, Dr. Brian
Irranca-Davies, Huw
James, Mrs. Siân C.
Jenkins, Mr. Brian
Johnson, rh Alan
Johnson, Ms Diana R.
Jones, Helen
Jones, Mr. Kevan
Jones, Lynne
Jones, Mr. Martyn
Jowell, rh Tessa
Joyce, Mr. Eric
Keeley, Barbara
Keen, Alan
Keen, Ann
Kemp, Mr. Fraser
Kidney, Mr. David
Kilfoyle, Mr. Peter
Knight, rh Jim
Kumar, Dr. Ashok
Ladyman, Dr. Stephen

Lammy, rh Mr. David
Laxton, Mr. Bob
Lazarowicz, Mark
Lepper, David
Levitt, Tom
Lewis, Mr. Ivan
Linton, Martin
Lloyd, Tony
Love, Mr. Andrew
MacShane, rh Mr. Denis
Malik, Mr. Shahid
Mallaber, Judy
Mann, John
Marris, Rob
Marsden, Mr. Gordon
McAvoy, rh Mr. Thomas
McCabe, Steve
McCarthy, Kerry
McCarthy-Fry, Sarah
McCartney, rh Mr. Ian
McDonagh, Siobhain
McDonnell, John
McFadden, rh Mr. Pat
McFall, rh John
McGuire, rh Mrs. Anne
McIsaac, Shona
McKechin, Ann
McNulty, rh Mr. Tony
Meale, Mr. Alan
Merron, Gillian
Miliband, rh Edward
Miller, Andrew
Moffat, Anne
Mole, Chris
Moon, Mrs. Madeleine
Moran, Margaret
Morgan, Julie
Morley, rh Mr. Elliot
Mudie, Mr. George
Mullin, Mr. Chris
Murphy, rh Mr. Jim
Naysmith, Dr. Doug
Norris, Dan
O'Brien, Mr. Mike
O'Hara, Mr. Edward
Olner, Mr. Bill
Osborne, Sandra
Owen, Albert
Palmer, Dr. Nick
Pearson, Ian
Plaskitt, Mr. James
Pope, Mr. Greg
Pound, Stephen
Prentice, Bridget
Prentice, Mr. Gordon
Primarolo, rh Dawn
Prosser, Gwyn
Purchase, Mr. Ken
Purnell, rh James
Raynsford, rh Mr. Nick
Reed, Mr. Andy
Reed, Mr. Jamie
Reid, rh John
Robertson, John
Roy, Mr. Frank
Roy, Lindsay
Ruane, Chris
Ruddock, Joan
Russell, Christine
Ryan, rh Joan
Salter, Martin
Sarwar, Mr. Mohammad
Sharma, Mr. Virendra
Shaw, Jonathan
Sheerman, Mr. Barry
Sheridan, Jim
Simon, Mr. Siôn
Simpson, Alan
Singh, Mr. Marsha
Skinner, Mr. Dennis
Smith, rh Mr. Andrew
Smith, Ms Angela C. (Sheffield, Hillsborough)
Smith, Angela E. (Basildon)
Snelgrove, Anne
Soulsby, Sir Peter
Southworth, Helen
Spellar, rh Mr. John
Starkey, Dr. Phyllis
Stoate, Dr. Howard
Strang, rh Dr. Gavin
Straw, rh Mr. Jack
Stuart, Ms Gisela
Tami, Mark
Taylor, David
Thomas, Mr. Gareth
Thornberry, Emily
Timms, rh Mr. Stephen
Todd, Mr. Mark
Touhig, rh Mr. Don
Truswell, Mr. Paul
Turner, Dr. Desmond
Twigg, Derek
Ussher, Kitty
Vis, Dr. Rudi
Walley, Joan
Waltho, Lynda
Ward, Claire
Watson, Mr. Tom
Watts, Mr. Dave
Whitehead, Dr. Alan
Wicks, rh Malcolm
Williams, rh Mr. Alan
Wills, rh Mr. Michael
Winnick, Mr. David
Winterton, rh Ms Rosie
Wood, Mike
Woodward, rh Mr. Shaun
Woolas, Mr. Phil
Wright, Mr. Anthony
Wright, David
Wright, Mr. Iain
Wright, Dr. Tony
Wyatt, Derek
Tellers for the Noes:

Ms Dawn Butler and
Ian Lucas
Question accordingly negatived.
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New Clause 7

Debt responsibility mechanism

‘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.’.

Government amendment No. 52.

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 UK—described 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
26 Nov 2008 : Column 845
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 economy—especially 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].

Clause 1


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.]

Clause 60

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