Sir
Peter Viggers: I am of course aware that the explanatory
notes do not form part of the Bill and have not been endorsed by
Parliament, but one nevertheless looks to them for an explanation. In
relation to clause 180 they
state: “The
application is to a justice of the peace, who can issue the warrant
only if certain conditions are
fulfilled.” The
fact that “conditions” is plural could lead one to think
that all the conditions need to be fulfilled, but my reading of clause
180(1)(b) is that the warrant can be issued if
“any of the
following conditions is
satisfied.” I
take it from my reading of the Bill that any of the conditions laid out
is sufficient to enable a warrant to be issued. The Minister is
indicating
assent. With
regard to the amendment moved by my hon. Friend the Member for
South-West Hertfordshire, I do not think that anyone disagrees that
inspectors act reasonably. That rather flows back to my point that the
words
“otherwise
co-operate with an inspector”
in clause 179 are
really quite broad. One would like to think that the mandate imposed on
the inspector is that he should act reasonably, so for what it is
worth, I lend my support to my hon. Friend’s
amendment.
Ian
Pearson: I congratulate the eagle-eyed hon. Member for
South-West Hertfordshire on amendment No. 43, which changes
“think” to “thinks.” It was a
typographical
error and he spotted it. Either it will be corrected, or I will happily
accept the amendment. However, apart from that example, the
Government’s view is that the amendments are unnecessary and
inappropriate.
Amendment No.
39 would amend clause 180. When determining whether to
“issue a warrant
entitling an inspector or a constable to enter
premises,” a
justice of the peace must look at a range of issues to see whether any
of the conditions are met in order to issue such a warrant. I am happy
to confirm to the hon. Member for Gosport that his interpretation is
right; it is any one or more of the “following
conditions”. The justice of the peace will look at whether the
requirements on the operator of the payment system, including the
requirement to co-operate with an inspector, have been met. If they
have not been met, the JP will ask why, but even if the JP considers an
inspector to have acted unreasonably, or that it was reasonable in the
circumstances for the operator of the payment system not to comply, a
warrant will not be issued unless one of the other conditions has been
met. There is, therefore, no need to amend the subsection in the manner
suggested.
Amendments
Nos. 40, 42 and 44 relate to different clauses in the Bill and in
essence have the same purpose. As hon. Members are aware, the Bank of
England is adept at balancing public and private interests. As a public
body, it is expected that it will act reasonably when undertaking its
functions under this part of the Bill. It would be inconsistent with
existing legislation to include the word “reasonably” in
relation to the conduct of a public authority. For those reasons, the
proposed amendments are inappropriate.
The Bank of
England’s actions might be subject to judicial review, which
could provide a remedy if the Bank’s conduct was found to be
unreasonable, unfair or disproportionate. That is the normal way in
which legislation is passed in this House and the other House. The word
“reasonably” is not used in relation to public
authorities, because it is expected that public authorities will act
reasonably.
Amendment No.
41 would mean that the Bank of England can require a report only if it
“substantially” assists the Bank in carrying out its
functions. However, it might require a report in order to acquire
further information, should it feel that an operator of a recognised
inter-bank payment system is failing to meet its requirements. It may,
therefore, be impossible to say at the outset that such a report would
“substantially” assist the Bank of England. The report
might be of only partial assistance, and would need to be combined with
other information to provide a full and accurate picture of the
system’s operation. We feel that the amendment would
unnecessarily restrict the Bank of England’s ability to require
the production of such a report. I therefore ask the hon. Gentleman to
withdraw the amendment, although if he wishes to press amendment No.
43—a typographical error—I shall be happy to accept
it.
Mr.
Gauke: I express my gratitude to the Minister with
regard to amendment No. 43. He has demonstrated that Ministers can be
reasonable, and it would be unreasonable to object to that. When we
reach clause 185, I shall press the amendment.
As
for the other amendments in the group, I am pleased to learn that it is
assumed that public authorities act reasonably, although we can
probably all think of circumstances in which that does not apply.
However, given that the Minister has assured the Committee that the
provisions reflect the manner in which statutes tend to be drafted, I
am prepared not to press the point today. I am slightly alarmed by his
comments about “substantially”, as he may be leaving open
the opportunity for the Bank of England to go on what can only be
described as fishing expeditions for further information. I am not sure
that the drafting of clause 181 really provides protection for
operators of banking systems in such circumstances, given that an
independent report could be quite expensive and other factors need to
be borne in mind, such as the management time that it could
impose. If
the Minister can provide an assurance that independent reports will be
used only in exceptional circumstances and that he does not regard them
as a matter of routine, it could prevent the need for a stand part
debate on clause 181. I would be happier if the Bank of England does
not use independent reports under clause 181 for the purpose of fishing
expeditions but, in the circumstances, I do not intend to press
amendment No. 41.
Ian
Pearson: It may help the Committee if I say that we do not
see clause 180 and clause 181 on the independent report as being
routinely exercised. If they were required, it would be for exceptional
and unusual matters. I repeat that we expect the Bank, as a public
authority, to act reasonably in making requests in such
areas.
Mr.
Gauke: I beg to ask leave to withdraw the
amendment. Amendment,
by leave,
withdrawn.
The
Chairman: Will the Minister help the Chair? Do I take it
from his response to amendment No. 43 that it was accepted as it drew
attention to a typographical
error?
Ian
Pearson: I am happy to accept amendment No. 43,
which I assume that we shall vote on when we reach clause
185. Question
proposed, That the clause stand part of the
Bill.
Stewart
Hosie: Subsection (1) states that a
“justice of the
peace may on the application of an inspector issue a warrant entitling
an inspector or a constable to enter
premises”. Will
the Minister confirm that he really means that that would cover a
justice of the peace issuing a search warrant in Scotland, which is a
different jurisdiction from England, or does he mean a sheriff in such
circumstances? If so, would the legislation under which that applied be
the warrants procedure under the Police and Criminal Evidence Act 1984
or would it be the equivalent Scottish legislation? In any event, does
that legislation allow only for a search warrant to be issued by a
justice of the peace in England? Will the hon. Gentleman explain why
the normal wording that ensures what legislation evidence is treated
under is not included under this part of the Bill? Usually, when
legislation outlines how a search warrant is issued, it specifies at
the same place in the legislation under what legislation
the evidence would be collected and treated, whether it is PACE in
England or separate Scotland legislation. Will he confirm that the
Government mean that a justice of the peace will issue a search warrant
when that is necessary in Scotland, or should it be a sheriff, and will
he say under what legislation the evidence or productions in Scotland
will be treated, and how that system will
work? 5
pm
Ian
Pearson: The hon. Gentleman makes a fair point. I do not
have the answer, and I do not believe that anyone else in the room does
either. I refer him to clause 180(7), which mentions the
Police and Criminal Evidence Act 1984, but, as that does not clearly
answer his question, I shall write to him about the situation. An
amendment may be required to clarify
matters. Question
put and agreed to.
Clause 180
ordered to stand part of the Bill.
Clauses
181 and 182 ordered to stand part of the
Bill.
Clause
183Publication Question
proposed, That the clause stand part of the
Bill.
Mr.
Gauke: We were getting carried away, were we not, with the
speed of progress? I wish to ask the Minister a couple of
questions. We
again have the words, “may publish”. I can see an
argument for some discretion for the Bank of England as to whether it
publishes details of compliance failure, particularly in respect of
minor circumstances, but I wish to flag up a point about major
failures. The
Minister may be able to provide some reassurance to the Committee as to
the steps that will be taken by the Bank of England and, indeed, the
Treasury, if a major compliance failure is identified within a payment
system but the information has not necessarily reached the public
domain. If some type of failure is identified by the Bank of England,
it may cause publication, which may cause some damage to confidence in
that payments system. I would be grateful to know whether the Minister
has given any thought as to how such issues will be dealt with, because
we do not want regulatory authorities to be unprepared when publication
of some breach of the code of practice or principles is revealed to the
public and there is a sudden decrease in confidence in a particular
payment
system.
Sir
Peter Viggers: I am concerned about a lack of specificity
in clauses 181 to 183. Clause 183
states: “The
Bank of England may publish details of a compliance failure by the
operator of a recognised inter-bank payment
system.” How
will it get those details? I assume that it would get them under clause
181, as it
“may require the
operator of a recognised inter-bank payment system to appoint an expert
to report on the operation of the
system.” If
I were starting from scratch, I would prefer to say in clause 181 that
the Bank may appoint an expert at the cost of the
operator.
The
Chairman: Order. I have a suspicion that the hon.
Gentleman is speaking to clause 181, which has already been decided by
stand part. It is okay for him to refer to it but not to go into any
great detail. He is speaking to clause 183 stand
part.
Sir
Peter Viggers: Indeed, Mr. Hood, but clause
183, which I have just read, gives the Bank power to publish details of
a compliance failure. How is the Bank to get the information which,
under clause 183, it will require to carry out those powers? I should
have thought that the Bank would prefer, in preparation for the
exercise of powers under clause 183, to have its own independent
inspection. We have seen that under clause 181—I shall not refer
to it again, Mr. Hood—the Bank does not itself have
power to authorise an inspection. Instead, it has power only
to
“require the
operator...to appoint an
expert”. When
he discusses clause 183, will the Minister explain how the Bank will
pull together all the information it needs to enable it to publish
details of a compliance failure? It does not have under its thumb or
control the inspector who carries out the inspection into the bank
under inquiry. I therefore would have thought that clause 183 would be
much more powerful if preceding it there was a description of the
detailed manner in which the Bank will pull together all the
information it needs. How can the Bank produce details of a compliance
failure if it has not had someone working specifically to produce the
details for it? I hope that the Minister understands the point that I
am making. It is a matter of concern that the Bank will not readily be
able to exercise the powers in clause 183 without the all the
background information that it needs to be clear and
specific. Mr.
Peter Bone (Wellingborough) (Con): I assume that the word
“may” in clause 183 is genuine and that it gives
discretion to the Bank. That goes to the heart of one of the problems
with the Bill and the banking system. A serious compliance failure by
one of the major banks that is published could cause a run against that
bank. Not to disclose such a failure might, in the long run, be better,
but if the bank got into serious trouble, the Government would be in a
great deal of trouble because the bank did not publish details of the
failure earlier. Do the Government think that such things should be
disclosed, or should they be kept quiet to stop the damage being done
to the relevant
bank?
Ian
Pearson: Clause 182 establishes the meaning of the term
“compliance failure”, and clauses 183 to 185 set out
sanctions that may be imposed if an operator of a recognised inter-bank
payment system commits a compliance
failure. The
first sanction is set out in clause 183, which provides that the Bank
of England may publish details of a compliance failure. In effect, it
is a power of public censure. The disclosure of an operator’s
failure to observe or abide by requirements that seek to ensure the
UK’s financial stability is intended to act as a deterrent
against non-compliance. There are other sanctions, which we will move
on to discuss, in case of more serious failures, but we think it right,
in the exceptional circumstances that I am happy to confirm we are
talking about, that the Bank has a range of measures at its
disposal.
The hon.
Member for Gosport asked how the Bank might have the powers of
information to be able to come to its conclusions. Compliance failure
is defined in clause 182 as a failure to observe a requirement under
clauses 175, 176, 177 and 181—respectively, the codes of
practice, system rules, directions and the independent report. Other
sanctions, as I said, are set out in clauses 184 and 185. When it comes
to looking at compliance with the code of practice and the system
rules, the Bank will routinely gather a lot of information, given its
oversight
role. In
addition, clause 190(1) gives the Bank power that
it “may
by notice in writing require a person to provide
information”, so
there are a range of mechanisms to ensure that the Bank has the
information that it requires to make the judgments that it wants to
make. I should stress that the publication of a report is
simply one way in which the Bank can act following a compliance
failure, which is why, in response to the hon. Member for
Wellingborough, the word should be “may”. It may be
better, if there was a serious breach of systems, not to publish a
report but to go for other remedies that we will discuss later. That
would be a judgment for the bank to make when considering the
circumstances of the
case. Question
put and agreed
to. Clause
183 ordered to stand part of the
Bill.
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