Previous Section Index Home Page

Jim Cousins: I did have some idea about that, but I am grateful to the right hon. Gentleman for pointing it out, because it brings me to my next point. Through British taxpayers’ support for the RBS balance sheet, we are supporting a very large stock of United States car loans. The British taxpayer is standing behind those loans. Does the House not find it peculiarly ironic that the Government are wrestling with schemes to underpin the UK car industry when we are already guaranteeing car loans in the United States, through RBS’s exposure? I do not blame the Government for that situation. It follows inescapably from the support that RBS has been
10 Feb 2009 : Column 1295
given. However, it does mean that the Government have to report to Parliament on all this at a very early date. These matters cannot be left until October.

Ian Pearson: I shall focus on three main areas in response to hon. Members’ comments on the Lords amendments. The first is the widening of the extension of statutory cover for expenditure incurred by the Treasury or other Government Departments; the second is the parliamentary accountability mechanisms ordinarily in place; and the third is the Government motion to disagree with Lords amendment 83, which has been much debated.

In passing, however, I would first like to deal with the accusation that the Government delayed taking action to support Northern Rock. I completely refute that: the Government took timely action— [Interruption]—and let me point out that the official Opposition would have let Northern Rock fail, which would have created a crisis for savers in this country. We were entirely right in what we did.

6 pm

The role of the media, which the right hon. Member for Wokingham (Mr. Redwood) and the hon. Member for South-East Cornwall (Mr. Breed) mentioned, is another important issue to deal with in passing. It is true to say that we live in a 24-hour news culture in the UK. In that environment, it is not possible to have the sort of cosy relationship that might have existed in the past between the Bank of England and other banks or to justify the expectation that cosy deals can be done and kept secret. Extensive scrutiny takes place through the media. On the whole it is helpful, but the right hon. Member for Wokingham was right to point out that, on some occasions, media speculation has resulted in damaging activity—damaging to markets and damaging to companies’ reputations.

Mr. Redwood: Does the Minister accept that many big mergers and fundings in the private sector, which involve large numbers of people, are done with complete confidentiality? It is then preserved until a formal announcement is made because people know that they could face a criminal charge if they do not respect it.

Ian Pearson: I agree with the right hon. Gentleman’s point. I would like to see those proprieties respected much more frequently, but it does not seem to happen that way.

Mr. Bone: The Minister is being his usual generous self in giving way. The point he seems to be making is that because the Government were worried about misinformed speculation getting to the markets, they decided they would use one particular BBC media person to present the Government’s case. Is that the reason all the stories came from the same BBC man nightly on our news screens?

Ian Pearson: That was not the point I was making at all. I was responding to comments from right hon. and hon. Members about the role of the media, and I was pointing out that that role could be both good and bad. It can be good in respect of the level of scrutiny brought to proceedings, but it can sometimes be bad and damaging if unwarranted speculation creates problems in the economy.

10 Feb 2009 : Column 1296

Let me move on to the three main areas that I outlined earlier. First, I shall deal with the extension of statutory cover to expenditure on schemes—principally the Department for Communities and Local Government scheme to support home owners’ mortgages and the Department for Business, Enterprise and Regulatory Reform’s working capital scheme. Members are right to point out that amendments 75 to 80 cover the authority to spend in those areas.

We think it right not only that we recapitalise the banks, but that other action be taken to help to support the economy in these difficult times. That is why it is important to support home owners who are facing difficulty paying their mortgages and why it is fundamentally right to ensure that UK companies maintain good levels of working capital. What we are trying to achieve through the working capital scheme is to agree a portfolio of companies with each of the major banks that are UK-based and for which we will provide a 50 per cent. guarantee of credit, which will stimulate the further credit lending that the UK economy needs at this time.

The hon. Member for Fareham (Mr. Hoban) asked a specific question about amendment 79, particularly about widening the scope. Let us be clear: the amendment allows Departments other than the Treasury to run schemes that can benefit banks’ customers, but there must be some connection with banks or financial institutions. It is thus wider, but it cannot support schemes that are purely for non-financial institutions; in that respect, it is limited, but it allows home owners’ mortgage support and the working capital scheme. That is the intention behind the provisions.

Mr. Hoban: On that point, I specifically referred to the scrappage allowance that was floated by Lord Mandelson last week. Would that scrappage allowance fall outside the scope of amendment 79?

Ian Pearson: As I have indicated, there has to be connection with banks or financial institutions, so whether a scrappage scheme falls under amendment 79 would depend on how it was designed. Such a scheme might fall within the powers granted to DBERR under current industry legislation.

Let me move on to amendment 81, about which the hon. Member for Fareham also asked some questions. The purpose—and the effect—of the amendment is to ensure that the financial assistance clause provides statutory cover for drawing money directly from the Consolidated Fund without waiting for estimates to be approved in cases where payments need to be made urgently in order to honour guarantees, indemnities or other commitments given as part of providing financial assistance to financial institutions. We debated that specific issue earlier.

The hon. Gentleman asked about the Government’s preference. He recognised the occasional need for Governments to act urgently, and I think the best answer I can give him is that clearly we cannot rely on financial crises happening only at the most convenient point in the estimates timetable or only when Parliament is sitting. That is one reason why clause 81(4) is necessary, but we will not use it unless we have to.

That brings me on to the second area—the general process of financial accountability and reporting to Parliament. First, I want to say that we have some of the best processes for financial reporting, accounting
10 Feb 2009 : Column 1297
and transparency of any equivalent Parliament in the world. I do not start from the position that what we have now is defective—far from it. I think our system of having money resolutions that provide cover for expenditure, and of having estimates and votes—indeed, the whole supplementary estimates process—is a robust one. Our process of accountability through Select Committees and the reports regularly presented by them to Parliament is similarly an example of where the UK Government leads many others.

I recognise that the exceptional actions taken by the Government in recent months require some additional response, and—given circumstances that are also exceptional—I think it right for Members to issue a challenge by asking what measures Parliament needs to introduce in addition to the normal accountability and reporting arrangements that it has established. That, essentially, is the debate that took place in the House of Lords. It revolved around a recognition that, in view of the strong public interest and the amounts of money involved, greater accountability and transparency were needed in addition to our existing mechanisms. I think it was also recognised that a balance must be struck between the need for that accountability and transparency, and the need to ensure commercial confidentiality and not to damage institutions.

Our amendment in lieu of Lords amendment 83 is intended to explain the Government’s reason for striking the balance that did. I explained that in my introductory remarks, but let me now say briefly that we consider a period of six rather than three months more likely to ensure that financial institutions are not identified, given that such identification could cause damaging problems. However, there is no lack of willingness on our part to be accountable for our actions and decisions, and to report them in a timely fashion.

This House would rightly be the first to criticise the Government if they attempted to introduce legislation without sufficient consideration and consultation. We have devoted a significant amount of time to the production of the Bill, we have listened throughout to the comments that have been made, and we have introduced many improvements. I should like to think that the amendments made in the Lords have strengthened the Bill further, which is why we support all of them except Lords amendment 83, on which we beg to differ with the Lords while wishing to retain the spirit of what they had to say.

Mr. Newmark: I acknowledge the sensitivity with which the Minister is trying to approach the issue, and I agree that in normal times semi-annual reporting would probably make sense, but these are extraordinary times. I almost agree with my hon. Friend the Member for Sevenoaks (Mr. Fallon) that there should be monthly reporting, but given the fast-moving times and the vast amount of taxpayers’ money put at risk, I feel that quarterly reporting represents a fair compromise. Surely it makes sense. Six months is a huge amount of time, given the dynamics of the financial markets today.

Ian Pearson: I think the hon. Gentleman was in the Chamber to hear my opening remarks, when I outlined the Government’s reasons for reaching their view on the six-month period. I have not changed my mind during the course of this short debate—I still think that six
10 Feb 2009 : Column 1298
months is appropriate—but we have taken on board the spirit of the Lords amendment. We have always sought to adopt a general spirit of bipartisanship and compromise—

Stewart Hosie rose—

Ian Pearson: —which I am sure the hon. Member for Dundee, East is not intending to rail against.

Stewart Hosie: The hon. Member for Dundee, East is going to repeat the question that he has already asked. The Minister has said three times that the Government wanted to retain the spirit of the Lords amendment. I repeat my last question to him: does that mean that the Government’s intention is to report sufficiently to enable us, and the public, to understand the actual and potential liabilities?

6.15 pm

Ian Pearson: I was about to respond to the hon. Gentleman’s question, before making a couple of further comments to the right hon. Member for Wokingham. We want to be as open and transparent as possible in reporting Government spending and Government liabilities, and we will seek to be so. We also consider it important for sufficient information to be provided by the Bank of England about its activities.

The right hon. Member for Wokingham asked about the removal of the requirement for the Bank to produce a weekly return. That does not mean that the Bank can provide financial assistance without any reporting. As my noble Friend Lord Myners said in the other place, the Bank will consult on what form of reporting will replace the weekly return. The aim of this provision and others like it in the Bill is to provide for a limited delay for disclosure of assistance to allow enough time for that assistance to be effective. That is similar to what we are saying about Government transparency.

The right hon. Gentleman also described a number of important processes for the Government to undertake when injecting share capital into a bank. We are very familiar with those processes, which we followed to the letter in the recapitalisations of the Royal Bank of Scotland, HBOS and Lloyds TSB. I fundamentally disagree with the right hon. Gentleman if he is suggesting that he did not consider recapitalisation to be necessary at that time.

We welcome the acknowledgement by the hon. Member for Fareham that the Government have been listening both in Committee in the Commons and in the Lords. Transparency is important, and we consider that our amendment strikes the appropriate balance. I hope that the House will support it, and all the Lords amendments except Lords amendment 83.

Lords amendment 83 disagreed to.

Government amendment made in lieu of Lords amendment 83.

Clause 4

Special resolution objectives

Ian Pearson: I beg to move, That this House agrees with Lords amendment 1.

10 Feb 2009 : Column 1299

Mr. Deputy Speaker (Sir Michael Lord): With this it will be convenient to take Lords amendments 2 to 6.

Ian Pearson: The amendments deal with some of the introductory clauses in the Bill on special resolution regime objectives, the content of the code of practice and the banking liaison panel. I believe that they reflect the Government’s constructive response to concerns expressed in all parts of both Houses on elements of the SRR framework.

Lords amendment 1 deals explicitly with the concept of continuity of banking services within the SRR objectives as set out in clause 4. The Bill already includes, at its heart, provisions that are aimed at ensuring continuity of services. The very purpose of the stabilisation tools of the special resolution regime is to ensure that banks do not fail completely, thereby maintaining full continuity of banking services. This is already reflected in both the objectives set out in clause 4 and the draft code of practice under clause 5 that explains them. However, for the avoidance of doubt, this amendment seeks to make it clear that the SRR objectives include the concept of continuity of banking services. Hon. Members will note that this is included as part of objective 1, to protect and enhance the stability of the financial systems in the UK. To be absolutely clear, this drafting is entirely consistent with the fact that this concept also relates to the objectives to protect and enhance confidence in the banking systems and to protect depositors. I would also like to make it clear that continuity of banking services is not the only element to be considered under objective 1. The amendment therefore does not limit the scope of that objective in any way, but it now makes it explicit in the Bill that this concept is at least one of the elements that must be considered.

Government amendments 2, 3 and 4, which were brought forward from another place, add to the list of matters that the code of practice may address and the concessions that were agreed in the other place. Members in another place requested further clarification on a number of matters or expressed a desire that the code of practice should include further information, and I recall that similar expressions of interest and concern were also made in Committee in this House.

Clause 5, and in particular subsection (1), sets a broad remit for the code of practice. In response to points made in debates here and in another place, the Government have agreed that further information should be added to the code and that it is appropriate to signal that in clause 5. These amendments therefore achieve the following. First, they signal that the code can provide information about how the SRR objectives are to be understood. That follows on from an Opposition amendment in another place, but the Government’s amendment goes further by explicitly signalling in the Bill that the code can include information on how the terms within all the SRR objectives are to be understood. Secondly, the amendments expressly state that the code can provide further guidance on the choice between the stabilisation options. Questions were raised in both Houses about the factors that will determine the choice of one tool over another, and the truth is that these decisions will be made on a case-by-case basis. Consequently, the code is the right place to provide significant additional information on this matter. The draft code already lists factors to be taken into account
10 Feb 2009 : Column 1300
when deciding between different options and the Government believe it could include more information on that point.

The final two Government amendments in the group add further to the list of areas about which the code can give guidance: continuity obligations and compensation arrangements. Those additions were a response to two parts of the debate in Committee in another place. As I have stated during other stages of the Bill’s passage, I believe that the code provides a useful addition to the architecture of the new special resolution regime. The Government have listened carefully to the points made in debates and the representations we have received, and we believe that these amendments will help provide reassurances that further information can, and should, be provided on a number of important elements of the SRR. These amendments were welcomed in the other place, and I commend them to the House.

In Committee in the House of Lords, Lady Noakes proposed an amendment to widen the remit of the banking liaison panel. As Members will know, I was keen that we set up an expert liaison panel to provide advice and assistance and to help us co-produce some of the secondary legislation. The Government agreed with the main thrust of Lady Noakes’s proposal. The Government’s position, which has not so far been controversial, is that it would not be appropriate for the banking liaison panel to provide advice to the Treasury on the operation of the SRR powers. For example, it would not be appropriate for the panel to advise on the drafting and placing of a transfer or associated instrument. However, I believe that we have come to a consensus that the panel’s remit should include the effectiveness of the policy and the powers in general of the SRR. One concern raised in another place was to ensure that the panel will have a role in monitoring the market for unintended consequences of those new powers. The Government, therefore, tabled these amendments to meet those concerns.

Lords amendment 5 provides the panel with a broadly defined purpose to advise the Treasury on the effect of the SRR on both the banks that are potentially subject to it and the wider financial services markets. In addition to this broad purpose, Lords amendment 6 also provides the panel with a statutory remit to advise the Treasury on the code of practice. It also provides that the banking liaison panel should advise the Treasury on the exercise of the power to change law under clause 75—on which we had considerable debate in the Committee stages—with the exception of cases where the exercise is carried out in connection with, or to facilitate, a particular use of a stabilisation power.

The Government’s decision to establish the expert liaison group has been welcomed by interested parties, and the group has already provided invaluable advice. I hope that when it is re-constituted as the banking liaison panel, it will continue with this good work. The Government amendments proposed today will ensure that this work is given a firm and broad statutory basis, and I commend them to the House.

Mr. Hoban: The Minister said in his concluding remarks on the previous group of amendments that the Government were prepared to listen, but sometimes they do not listen immediately and it can take a while
10 Feb 2009 : Column 1301
for the message to sink in. I was struck by Lords amendment 1, proposed by Lord Myners, which would add a reference to

Next Section Index Home Page