Clause
143Application
of Other
Law Amendment
made: No. 15, in
clause 143, page 77, line 11,
leave out subsection (2).—[Ian
Pearson.] Question
proposed, That the clause, as amended, stand part of the
Bill.
Mr.
Gauke: With regard to my previous question as to whether
clause 65 might be used to amend the Company Directors Disqualification
Act 1986, I was half expecting the Minister to say no because it would
be done under clause 143, which appears to be another Henry VIII clause
that enables the Treasury to change primary legislation by order. I
have no intention of repeating all the arguments of a constitutional
nature that we used about clause 65. I think clause 65 is much more
important in that respect as it raises issues of uncertainty in
important areas.
Clause 143 is
more tightly drawn, but it is worth asking what the Government have in
mind. What sorts of orders can be made under these powers? Why are we
not trying to address them specifically in the course of the
Bill’s proceedings? Do the Government have concerns about using
statutory instruments to amend Acts, given that the level of scrutiny
is much lower? I acknowledge that the affirmative resolution procedure
applies but do the Government have no concerns in this area? Why is the
clause necessary and where may it apply?
Ian
Pearson: The clause provides a power for amendments to
insolvency legislation to be applied to the bank insolvency procedure
and provides a power to apply or amend insolvency provisions. We need
that power because the bank administration procedure is complex and the
existing UK insolvency regime is very sophisticated. Having the power
to make such amendments ensures that the Government have a suitably
limited power to ensure bank administration can continue to function
effectively. Any changes needed will of course, as the hon. Gentleman
notes, be subject to full parliamentary scrutiny through the
affirmative resolution
procedure. 11.30
am
Mr.
Bone: The Minister has been very generous in giving way
throughout the Committee. I understand the thrust of what he wants. We
are talking about uncharted waters so things may need to be changed,
but the problem with an affirmative statutory instrument is that it
cannot be amended—the whole thing is either accepted or
rejected. That is a problem for scrutiny. If an important issue is
raised and we want to change the primary legislation, no one can amend
it.
Ian
Pearson: I understand the hon. Gentleman’s point
and I want to reassure the Committee that a lot of work has gone into
producing part 3 of the Bill, including extensive consultation. We
believe that we have an effective piece of legislation. This is a
complex area and things change. There may need to be some minor
adjustments to ensure that the bank administration procedure continues
to be effective. In such cases, a statutory instrument is normally
appropriate. The approach for the bank administration procedure is the
same as for the bank insolvency procedure in part 2, where clause 109
provides the same powers in relation to bank insolvency
procedure. The
hon. Member for South-West Hertfordshire talked about the powers under
clause 65. Without going back to that debate, I remind him that the
power to modify legislation in clause 65 is only when it can make the
SRR powers more effective. It is a limited power and the powers in
clause 143 are certainly very limited.
Dr.
John Pugh (Southport) (LD): The Minister has mentioned
amending, modifying, altering and tweaking, but clause 143 specifically
says, “provide for an enactment”, which means that, in a
sense, novel legislation will be produced, as well as tweaking and
altering existing legislation. What does the Treasury have it in mind
to provide in the fullness of time?
Ian
Pearson: As I said, the legislation in part 3 is effective
as it stands. I do not have specific examples of where we want to
improve the legislation at the moment; if I did, I would have included
them in the Bill. When we make legislation, it is right that we have
the opportunity to amend it in the future, if circumstances require it,
without having completely new primary legislation. That is really what
clauses 143 and 109 do for bank insolvency procedures. They provide for
specific amendments to insolvency law, and the Secretary of State for
Business, Enterprise and Regulatory Reform shares the powers because of
his insolvency responsibilities. It would not
be appropriate to use clause 65 for that purpose, which is why we need
the powers in clause 143, as well as those in clause 109.
Question
put and agreed to.
Clause
143, as amended, ordered to stand part of the
Bill.
Clause
144 ordered to stand part of the
Bill.
Clause
145Building
societies Question
proposed, That the clause stand part of the
Bill.
Mr.
Gauke: The clause states:
“The
Treasury may by order provide for this Part to apply to building
societies . . . as it applies to
banks”. In
what circumstances would the Government consider it necessary to do so?
Why, as a precautionary matter, do the Government not seek to set up a
building society administrative procedure? Why not grasp the
nettle?
Ian
Pearson: The approach to building societies set out in the
clause is consistent with that taken in clause 117 for
applying the bank insolvency procedure to building
societies. Detailed
procedures for applying the provisions of the bank administration
procedure to building societies have not been put in the Bill,
principally because insolvency legislation is complex, and building
societies have unique legal and commercial features that differ from
those of banks. It will therefore be necessary to spend time ensuring
that procedures are introduced that work for building societies and are
fit for purpose.
However, it
is envisaged that the new procedures for building societies will in
practice be similar to the provision of the bank administration
procedure, and a building society administration procedure would be
used only in connection with a partial transfer of a failing building
society’s business. The Government will consult on the necessary
regulations, which will be laid before the House in due course. The
legislation will be subject to the affirmative resolution procedure,
allowing full parliamentary
scrutiny. Building
on the strength and effectiveness of the existing insolvency regime,
the procedures for building societies will also closely follow existing
UK insolvency law and practice, and will be familiar to building
societies and their professional advisers. I do not think that I need
say more. I have explained why the procedures are not in the Bill, and
have indicated the Government’s strong willingness to work with
building societies and to consult on the regulations that will be
presented to the House in due
course. Question
put and agreed
to. Clause
145 ordered to stand part of the
Bill. Clause146
ordered to stand part of the Bill.
Clause
147Rules Amendments
made: No. 175, in
clause 147, page 78, line 28, leave
out subsection (2) and
insert— ‘(2) After
subsection (1A) (inserted by section 112 above)
insert— “(1B)
Rules may also be made for the purpose of giving effect to Part 3 of
the Banking Act 2008 (bank administration); and rules for that purpose
shall be made— (a) in
relation to England and Wales, by the Lord Chancellor with the
concurrence of— (i) the
Treasury, and (ii) in the case
of rules that affect court procedure, the Lord Chief Justice,
or (b) in relation to Scotland,
by the
Treasury.”’. No.
176, in
clause 147, page 78, line 30, at
end insert— ‘(2A) In
subsection (2), after “(1A)” (inserted by section 112
above) insert “or (1B)”.’—[Ian
Pearson.] Clause
147, as amended, ordered to stand part of the
Bill. Clauses
148 to 153 ordered to stand part of the
Bill.
Clause
154Consequential
provision Amendment
made: No. 16, in
clause 154, page 80, line 25,
leave out
‘and an Act of
the Scottish Parliament’.—[Ian
Pearson.] Clause
154, as amended, ordered to stand part of the
Bill.
Clause
234Statutory
instruments Question
proposed, That the clause stand part of the
Bill.
Mr.
Gauke: I do not stand up merely to give you a rest,
Mr. Gale. I wish to ask the Minister a brief question. I
noticed the wording of subsection (2) only just before coming into the
Committee. This question may be more for you, Mr. Gale. Is
it possible for an Act to specify that a statutory instrument is not a
hybrid matter? I understand that it is for the authorities of the
House, with regard to a Bill, to determine whether it is hybrid. Is it
possible for a Bill of this sort to determine that an order made under
it is not hybrid and therefore does not involve the more complicated
and perhaps cumbersome proceedings that apply in the case of hybrid
instruments?
The
Chairman: That is probably a point of order. I am advised
that that procedure is common in the House of Commons. In the House of
Lords there is a separate procedure. I do not know if that helps the
Minister, and he may comment if he so
wishes.
Ian
Pearson: Mr. Gale, my briefing
states: “(at
present only the House of Lords has such a
procedure)”.
I am happy to stand by
your ruling on that point of
order. Question
put and agreed
to. Clause
234 ordered to stand part of the
Bill. Clauses
235 to 238 ordered to stand part of the
Bill.
Clause
239Extent
Ian
Pearson: I beg to move amendment No. 33, in clause
239, page 115, line 5, leave out
‘section 231 extends’ and insert
‘sections [Registration of charges: Scotland] and 231
extend’.
The
Chairman: With this it will be convenient to discuss
Government new clause 6— Registration of charges:
Scotland.
Ian
Pearson: New clause 6 is technical in nature and will
enable clause 230, which relates to the registration of charges, to
operate effectively in relation to Scottish floating charges. A recent
Act of the Scottish Parliament, the Bankruptcy and Diligence etc. Act
(Scotland) 2007, will undermine certain of the intended effects of
clause 230 with regard to Scottish floating charges.
Hon. Members
will recall that clause 230 provides that charges issued by a company
in favour of a central bank shall be exempt from the requirement to
register details of the charges that they grant at Companies House and
at their own offices. Although that applies generally, in practice it
will apply most often to charges granted by banks and building
societies in order to secure lending from a central bank.
Part 25 of
the Companies Act 2006 means that any company that receives liquidity
assistance from the Bank of England and offers the Bank a charge by way
of collateral has to register the fact that it has done so. The
requirement to register charges at Companies House and on the companies
register could provide untimely market visibility of the liquidity
support that banks receive, so clause 230 removes the Companies Act
requirement in the case of charges to central banks. Charges granted in
receipt of normal commercial lending by other institutions will still
have to be
registered. The
Bankruptcy and Diligence etc. Act (Scotland) 2007 will, when it comes
into force, undermine the provisions of clause 230 that relate to the
Companies Act. The 2007 Act provides that a Scottish floating charge is
not created until it has been registered on the Scottish register of
floating charges so that the act of registration itself creates the
charge. For companies whose floating charges are subject to Scottish
law, therefore, such charges would need to be registered if they are to
be regarded in law as having been created. Such registration would
undermine the intent of clause
230. There
is also a possibility of legal ambiguity occurring, should the
Government not take the steps laid out in the amendment. In particular,
the courts could determine that the provisions of clause 230, as it
stands, mean that the registration of charges shall not be possible,
even where that is legally required in order for them to be created.
That could lead to a situation in which Scottish institutions were not
able to grant floating charges at
all, and the possibility of such a legal interpretation reinforces the
need for
clarification. New
clause 6 addresses both difficulties and ensures that the provisions of
clause 230, which has been scrutinised by the Committee, can operate
throughout the United Kingdom. In consequence, Government amendment No.
33 would mean that clause 239 is laid with reference to Scotland
only. Amendment
agreed
to. Clause
239, as amended, ordered to stand part of the
Bill. Clause
240 ordered to stand part of the
Bill.
New
Clause
3“Financial
institution” ‘(1) The
Treasury may by order provide that a specified institution, or an
institution of a specified class, is or is not to be treated as a
financial institution for the purposes of section 214 or
215. (2) An
order— (a) shall be made
by statutory instrument,
and (b) shall be subject to
annulment in pursuance of a resolution of either House of
Parliament.’.—[Ian
Pearson.] Brought
up, read the First and Second time, and added to the
Bill.
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