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. Friends 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
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 Englands actions might be subject to judicial review, which could provide a remedy if the Banks 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 systems operation. We feel that the amendment would unnecessarily restrict the Bank of Englands 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. 43a typographical errorI 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.
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.
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
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.
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 181I shall not refer to it again, Mr. Hoodthe 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 operators failure to observe or abide by requirements that seek to ensure the UKs 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 181respectively, 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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