Banking Bill

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Ian Pearson: As I was trying to explain, the purpose of the amendment is to reflect the circumstances if there was a sale through an auction process, because a market rate would have been determined. Once a price has been established, it seems a highly artificial exercise to have to go through the process of appointing someone. It seems odd, after the price has been decided, that an independent valuer should come to a different judgment about the price and determine the compensation due to transfers as part of the process of selling the institution.
The hon. Gentleman is encouraging me to think about whether “may” might be used in other cases that have no auction process and where there is no clearly identified price.
Dr. Pugh: Absolutely.
Ian Pearson: In response, the only indication why we would not want to go down the independent valuer route at the heart of the clause would be if an auction process or a similar mechanism had clearly and demonstrably provided an agreed market rate. However, there are safeguards. If people felt that there were particular problems with the route that we had adopted, they would obviously have legal remedies and a right of appeal against the compensation order.
Dr. Pugh: I accept some of the Minister’s remarks. I know what he intends. However, the legislation as framed could permit other activities than the benign acceptance of the consequences of an auction. Assurances given under the clause or elsewhere in the Bill would probably not be sufficient to eradicate that possibility. It may be a slim possibility, but it still exists in legislation.
Ian Pearson: To conclude, I hope that I have given assurances about the Government’s intentions on how the clause, if amended, would be used. However, I shall reflect on the matter and if more needs to be done to clarify things I shall endeavour to come back at a later stage.
Mr. Gauke: I want to speak about the independent valuer. My comments may be more appropriate to clause stand part, but if I raise the issue now we may not need a clause stand part debate.
The role of the independent valuer will be important. On occasion, it is possible that some political pressure may put on the valuer. I can imagine circumstances in which our constituents wrote to us to raise concerns about the valuer, so independence is clearly important, as is the perception of independence.
The Government have given some indication of how independence is to be maintained, based on the limited grounds on which an independent valuer can operate. Will the Minister give us a little guidance on the type and status of the person the Government will be looking for to fill that position? Will he give us more information about the role of the appointing person? Subsection (3)(a) refers to the Treasury making arrangements
“to identify a number of possible independent valuers, one of whom is to be selected by the appointing person”.
Will the Minister give us a little more detail about the “appointing person”?
Ian Pearson: I do not think it possible at this stage to debate a job description for the independent valuer. Suffice it to say that they will be people with sufficient experience to make the judgments required of them in the circumstances. As for the appointment of an independent “appointing person”, I shall check with officials but I would be surprised if it was made under anything other than the normal public appointments process, following the normal rules that the Government apply in those circumstances. Should the position be different, I will revert to the Committee.
Amendment agreed to.
Amendment made: No. 107, in clause 49, page 22, line 25, at end insert
‘; and subsections (2) to (5) apply to an order which includes provision for an independent valuer.’.—[Ian Pearson.]
Clause 49, as amended, ordered to stand part of the Bill.

Clause 50

Independent valuer: supplemental
Question proposed, That the clause stand part of the Bill.
5.45 pm
Dr. Pugh: On the face of it, the clause seems innocuous. It simply says, “supplemental”. However, when I studied it I had some concerns, which I need the Minister to clear up before I can be completely happy with the clause. Although the clause is supplementary, it is wide-ranging. I draw attention to the fact that the independent valuer can publish and disclose information—which we would expect—but can also withhold information. Yet, subsection (8) states:
“Records of an independent valuer are public records for the purpose of the Public Records Act 1958.”
I am not sufficiently learned in the law to know whether that makes an exemption from a freedom of information request. I could imagine that if in certain circumstances a valuer was deemed to withhold crucial and important information, more than one interested party would wish to get hold of that information. They might have a right to do so, particularly if the information concerned the disbursement of an ailing bank and resources being allocated in one direction or another. The clause appears to create that sort of exemption and make it immune from any legal challenge, so that if people want information that an independent valuer has, primary legislation says that he has the right to withhold it. That exemption seems to be created. It may not, as a result of being created, be challengeable in law, but it may not be consistent with the principles of natural justice.
My other concern is more a matter of amplification. Subsection (3) states that jurisdiction may be conferred on a court or tribunal, and subsection (6)(b) states that there can be an appeal to a court. A number of courts are referred to, and I would simply like to know which courts we are thinking of—courts that exist and can be identified, or courts to be created for the specific purpose.
I have a similar question on subsection (3)(d), which states that at some future date a criminal offence might be created by a statutory instrument. That is not a most desirable way to create a criminal offence. I imagine that the offence would be along the lines of withholding information from an independent valuer. I wish that the Minister could give us an inkling as to what types of offences the Treasury has in mind.
Dotted through the clause are areas where clarification is required. Let me rehearse them again. First, will the clause create an exemption to freedom of information requests for information from independent valuers? Secondly, where courts or tribunals are referred to, precisely which are they? Are the appeal court and the court upon which jurisdiction is conferred one and the same? Thirdly, are we creating a new kind of misdemeanour, or the possibility of one, and if so what will it look like?
That is a complex and detailed set of questions. If the Minister wants to reply in writing, that is great by me, but if he can give amplification straight away, that will be equally acceptable.
Mr. Bone: Briefly, clause 50(2)(b) will allow the Treasury to instruct an independent valuer to withhold information. The independent valuer is there to arrive at a compensation figure. I cannot imagine any legitimate grounds on which the Treasury should instruct an independent valuer not to publish information used in obtaining compensation levels for a third party. Does the Minister have any examples of where that would apply? If not, I am not sure why it is in the Bill.
Ian Pearson: I can respond to some of hon. Members’ points, but I might have to respond in writing to give further detail. The hon. Member for Southport asked why the independent valuer will be able to withhold information. The reason is the normal reason for which an independent valuer might wish to do so: the information is subject to commercial sensitivities. In that respect, article 6 of the European convention on human rights requires only the reasons for a valuation decision to be made public, not every single piece of information.
We certainly recognise that there will be a degree of interest in the independent valuer’s determination, but it is the Government’s assessment that it would be inappropriate to designate the independent valuer a public body for the purposes of the Freedom of Information Act. In particular, the independent valuer does not meet both the conditions for section 4 of that Act to apply, as he or she will be an independent person with the sole function of assessing compensation in accordance with the order and any contractual arrangements and is likely to seek commercial return for the work.
Because of the unique nature of the valuer’s function and status—they will discharge a quasi-judicial function—the Government do not consider it appropriate to designate the valuer a public body. Furthermore, the application of the Freedom of Information Act may inhibit the valuer’s ability to obtain full information from other institutions and individuals on their relations with the failed bank. That is why we do not think it appropriate for the independent valuer to be subject to the Freedom of Information Act.
On criminal offences, I am advised that the issue must relate to the provision made under subsection (2): in other words, it must involve a refusal to disclose information. I hope that is helpful to the hon. Member for Southport.
On the publication of information, the independent valuer will be able to select documents suitable for permanent preservation as a matter of public record. Selection takes place in two stages: when records are passed out of active use and later when they are subject to review. At that later stage, the independent valuer may select records worthy of permanent preservation in the National Archives; it is for the valuer to select which.
The clause provides for the Treasury to make provision in an audit for the remuneration and allowances of independent valuers, the staff of independent valuers and appointing persons. As hon. Members will be aware, there are a number of detailed provisions in the clause. I think that most of them are uncontroversial, although there is naturally Committee interest in the public disclosure matters to which I have referred.
Question put and agreed to.
Clause 50 ordered to stand part of the Bill.

Clause 51

Independent valuer: money
Ian Pearson: I beg to move amendment No. 108, in clause 51, page 23, line 38, leave out ‘and’.
The Chairman: With this it will be convenient to discuss Government amendments Nos. 109 and 111.
Ian Pearson: This clause provides for the Treasury to make provision in an order for the remuneration and allowances of independent valuers, the staff of independent valuers and appointing persons.
While the Treasury will pay the remuneration and expenses of the independent valuer, the Treasury must put in place a monitor to oversee the remuneration and any allowances for the independent valuer, including pension arrangements. As part of his or her role, the monitor may be required to approve certain actions including the appointment of staff. The Government amendments to this clause are intended to ensure that the Treasury can remunerate and reimburse the expenses of the monitor for the functions that he or she is undertaking, which I am sure the Committee will agree is a sensible provision.
Returning to the provisions of the clause, it also provides that independent valuers and their staff should not be liable for damages for actions taken in good faith. The exemption is, however, limited so the exemption will not apply if the act or omission is ultra vires, or in bad faith, or would prevent an award of damages under section 6(1) of the Human Rights Act 1998 in respect of acts or omissions that are unlawful. This is a relatively common provision.
Finally, I wish the Committee to note that the provisions to put in place and provide the independent valuers with powers and remuneration are to be made by an order subject to the negative resolution procedure. Of course, the compensation orders themselves, which will set out such matters as valuation principles, will be subject to the draft affirmative procedure.
I hope that hon. Members will agree with this Government amendment to ensure that the monitor can be remunerated. I have provided the Committee with an explanation of the purpose and effect.
Mr. Gauke: We certainly will not be opposing this amendment but I would be grateful if the Minister clarified the role of the monitor. Will the monitor have the right of veto over specified actions? Perhaps the Minister can elaborate on what those actions will be.
Mr. Bone: I was not following the Minister’s statement as intently as I should have done. I thought he said “negative” resolution for one of the provisions. As far as I am aware, all the statutory instruments related to this Bill so far have been affirmative. This, of course, means that Members have the chance to debate them in one and half hours but they are not amendable. A negative one—unless it is prayed against—will just go through. I missed which one they were trying to sneak through without any proper scrutiny.
Ian Pearson: We are not trying to sneak anything through. As I explained to the Committee, the compensation orders will be subject to the draft affirmative procedure. It is the compensation orders that are likely to attract the most interest. The provisions to put in place and provide the independent valuer with powers and remuneration will be subject to the negative resolution procedure. That is the right balance to adopt.
We have not made express provision as to who the monitor would be but it is our intention that he or she should be an independent person with relevant experience. They could be a civil servant; they could come from the Audit Commission; they could be undertaking the task on a commercial basis. We would want to look at who was most appropriate depending on the circumstances. To clarify, the monitor cannot veto action but can and will be expected to provide an independent audit and report to the Treasury on expenses. I hope that the Government amendments will be supported.
Amendment agreed to.
Amendment made: No. 109, in clause 51, page 23, line 39, at end insert ‘, and—
(d) monitors.’.—[Ian Pearson.]
Clause 51, as amended, ordered to stand part of the Bill.
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