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I note that the Bill relates only to Scottish notes, but, of course, as my hon. Friend the Member for Thurrock (Andrew Mackinlay) pointed out, there are also four commercial issuing banks in Northern Ireland. I hope that the hon. Member for Dumfriesshire, Clydesdale and Tweeddale will forgive me if my remarks cover both jurisdictions. I do not think that making a distinction between them is appropriate, as it sets up an unnecessary
two-tier system. We may have some positive effects on the practical problems that he outlined if we consider the two jurisdictions together.
This right to issue is set out in the Bank Notes (Scotland) Act 1845, the Bankers (Ireland) Act 1845 and the Bankers (Northern Ireland) Act 1928. Parts of legislation will be repealed and replaced by part 6 of the Banking Act 2009. It modernises and strengthens the regime for note issue, which is more than 160 years old.
Currency, legal tender and banknotes are specifically reserved to the UK Parliament under the Scotland Act 1998, and are excepted matters under the Northern Ireland Act 1998. They are, therefore, matters on which the UK Parliament continues to legislate after devolution.
The Bank Charter Act 1844 prohibited any new banks in England and Wales from issuing banknotes. The 1845 legislation in Scotland and Ireland makes similar provision for banks in those nations. At that time, a total of 21 banks applied to become certified to continue issuing banknotes in Scotland and Ireland. As the hon. Gentleman said, that number has reduced over time through mergers, insolvency, or by banks choosing simply to stop issuing, to a total of seven issuing banks today. As my hon. Friend the Member for Thurrock said, in Scotland they are: the Bank of Scotland, which is a subsidiary of Lloyds Banking Group; Clydesdale bank, which is a subsidiary of National Australia Bank Ltd, and the Royal Bank of Scotland. In Northern Ireland they are: the Bank of Ireland; Allied Irish Banks Group (UK); Northern bank and Ulster bank. I confirm that the Government are committed to maintaining that long-standing tradition of commercial banknote issuance in Scotland and Northern Ireland, and are not seeking to discourage those commercial issuers of banknotes from continuing that practice.
The hon. Member for Somerton and Frome mentioned retailers in Somerset and I note with interest an odd coincidence. The last private bank to issue notes in England and Wales was a Somerset bankFox, Fowler & Co., which issued its final notes in 1921. The hon. Gentleman might want to look around some of the shops in his constituency to see whether he comes across a few examples of those banknotes and to contemplate the role that Somerset has played in issuing banknotes in England.
The hon. Member for Dumfriesshire, Clydesdale and Tweeddale is seeking to address genuine issues with his Bill. When we talked before todays debate, he gave me examples of where Scottish notes had been refused. I have heard examples anecdotally from my Scottish colleagues on the Government Benches many times, and the point has been reflected in all the contributions that we have heard this afternoon. The problem manifests itself in many different forms, not all of which are addressed by the Bill. It occurs to me, both from the anecdotal evidence the hon. Gentleman has presented and from the evidence that I have come across, that the problem tends to manifest itself more often in areas where such notes are less common and are seen less frequently. The issue is unfamiliarity with the notes, as the hon. Members for Somerton and Frome and for Hammersmith and Fulham (Mr. Hands), speaking from the Opposition Front Bench, both mentioned.
There are 22 different Scottish banknotes in circulation and their designsI have pictures of them hereare beautiful, interesting and varied. Many of them are
collectors items. One can add to that the 17 different bank notes issued in Northern Ireland. That creates a plethora of notes, which can cause consternation in areas where they are not seen regularly and where people are not familiar with them, even though they are perfectly safe and backed by Bank of England deposits. That unfamiliarity is one of the problems that we must deal with.
If we are trying to deal with unfamiliarity, the web should be the first port of call. However, people have to go on it, but often small traders do not have the time, and certainly not in the shop. If something odd turns upsomething with, say, a depiction of Jack Nicklaus on itone might think that it was not a real note. Indeed, it might give one pause. However, before we resort to the legislative sledgehammer, we should think about whether we can come together to put in place a campaign that would encourage the many retailers in this country to become more familiar with the different banknotes that they may, perfectly safely, take in payment.
Scottish banknotes circulate widely in Scotland and in those areas that are close to the border with Scotland. Also, Scottish banknotes tend to be more readily accepted in other centres of significant interchange of people between England and Scotland, such as airports. Familiarity is clearly one of the keys to improving the problems that the Bill seeks to address.
It is clear from the work that we did on the Banking Act 2009 that there will no longer be any legitimate worries about backing assets that stemmed from the rather old legislationit is 160 years oldthat was brought to bear in backing both Northern Ireland and Scottish banknotes until the passage of that Act. The changes that will come into effect later this year will ensure not only that the backing arrangements for those notes will confirm that they are risk-free and that they have the same backing as Bank of England notes, but that although some might think that those issues are an excuse for not accepting such notesthere might have been a technical reason for arguing that before the passage of the 2009 Actthat will no longer be a legitimate worry. The level of protection involved will be similar to that given to holders of Bank of England notes, and, in the event of an issuing bank failing, those who end up with the notes in their possession can expect to obtain full face value. That should close any loopholes that businesses might have used as an excuse for not accepting Scottish banknotes.
A further difference between Bank of England notes and commercially issued notes relates to the fact that commercial banks have control over certain elements of their own banknotes that might be material to acceptability, and that might differ from the approach taken by the Bank of England. One of those elements is the design of the banknotes, as my hon. Friend the Member for Thurrock said in his extremely thoughtful speech. It is reasonable to assume that the more designs there are in circulation, the less familiar people will be with them. We have looked at the numbers involved, and I note that, while there are 39 Scottish and Northern Irish banknote designs in circulation, there are just five Bank of England notes. One of the Bank of England notes, the Edward Elgar £20 note, is going through a transitional period, and is in the process of being withdrawn, to be replaced by the Adam Smith £20 note.
The Bank of Englands policy is to have one current series of banknote design per denominationtwo when transitioning from one design to the nextand to withdraw old series from circulation. This has the benefit of minimising confusion among holders of the notes, because there are fewer designs to recognise and remember. It also reduces the risk of counterfeiting, because people become more familiar with the anti-counterfeiting features on the notes, which can often differ from one generation of note to the next.
None of the commercial banks in Scotland or Northern Ireland withdraws its previous series of notes from circulation, which leads to a much greater number of different designs passing around the country at any point in time and with varying anti-counterfeiting features on them. It might therefore be harder for businesses and the public at large to know exactly what a genuine Scottish banknote should look like, just because there are more variations in circulation. People should not be blamed for this; it just goes back to the question of familiarity, which has been recognised as an issue by hon. Members on both sides of the House.
The hon. Member for Dumfriesshire, Clydesdale and Tweeddale referred to the use of a fancy pen. They are good as far as they go, but it is important to stress that the anti-counterfeiting features used within a banknote often vary across issues, series and denominations. For example, the new Adam Smith £20 note includes a holographic strip not featured on its Edward Elgar predecessor. New anti-counterfeiting features are always being developed, but the rate at which they are adopted varies across issuers as they almost always increase the production cost of a note. An unfortunate consequence of this lack of uniformity means that an anti-counterfeiting check carried out by a business for one notesuch as the Adam Smith note with the holographic stripmight not be suitable for another note. This problem might also be compounded by the number of different types of notes in circulation at any given time.
There is also the question of denominations. Traditionally, all the Scottish issuing banks have chosen to issue £100 banknotes, which the public might be less willing to accept as payment. In a similar vein, the Bank of England £50 note is not commonly found in circulation, and therefore when people come across them they are often more circumspect about accepting them. All these elementsbanknote liabilities and the backing asset regime, the number of different note designs and security features in circulation, the level of educational activity undertaken, and differing policy regarding denominationsmight influence the acceptability of Bank of England notes, compared with commercially issued notes.
David Mundell: On a point of order, Mr. Deputy Speaker. It appears that the Minister will not accept my intervention so that it will not appear on the record that I was challenging her for talking my Bill out.
Angela Eagle: It is really important to recognise that a great deal can be done to achieve the hon. Gentlemans aims, which we all support, short of introducing draconian legislation. I want to work closely with him and with others
That this House welcomes the work of the United Kingdom Youth Parliament in providing young people with an opportunity to engage with the political process and bring about social change; notes that many hon. Members from all parts of the House are actively involved in the work of the UK Youth Parliament; and accordingly resolves that the UK Youth Parliament should be allowed for this year alone to hold its 2009 annual meeting in the Chamber of this House. (Helen Jones.)
Mr. Peter Bone (Wellingborough) (Con): I am extremely grateful to Mr. Speaker for granting me this Adjournment debate at such short notice. Mr. Speaker has a well deserved reputation for his concern about people losing their employment. I am extremely pleased and delighted that the Minister is in his place to answer this debate, as he is well known for his willingness to listen to constructive arguments and to enter into debates. He is also well known for being wheeled out when there is a difficult problem. I hope he is here today for the first rather than the last reason.
It is not my intention to blame the Government for what I see as a gap in the national law. If a Conservative Government were in power today, I would still rise to press this issue. It is not party political; there is a gap in the law and it needs to be put right. The issue involves 40 hard-working men and women who lost their jobs in December last year and have been out of pocket ever since through no fault of their own; they are still out of pocket.
Let me start by setting out the background to the problem. The Wellingborough constituency consists of two main towns, Wellingborough and Rushden, and a small number of smaller villages. The constituency lies in the east midlands region or at the extreme south of the east midlands located to the east of the M1. Historically, the Wellingborough constituency has been a prosperous area built around the boot and shoe industry, gaining national and international recognition for its products.
Over the past decade, however, manufacturing industry in my constituency has gone into a nosedive with shoe factory after shoe factory closing. If we take Rushden alone, we see that there were 106 shoe factories there in 1920; as late as 1973 there were still 40 shoe factories; today, we will find just five. For anyone wishing further information about the shoe trade in Rushden, I would recommend the website www.rushdenheritage.co.uk.
The decline in manufacturing has been a national disgrace. If I were to be critical of the Government in this debate, I would refer only to their over-reliance on banking and financial services at the expense of manufacturing industry, which has been a total disaster. We need think only of the billions of pounds thrown at the banking and financial sector at the most enormous cost to each man, woman and child in the country to see the folly of that policy. If only a small percentage of the taxpayers money now being thrown at the banking industry had been directed towards making the lives of manufacturing companies any easier, we would now be in a far better position and there would be no need for todays debate. I said at the start that I was not going to be political in this debate, so it would be wrong for me to make that point.
It is fair to say, however, that the economic boom bypassed Wellingborough. Unemployment in the area is now much higher than it was in 1997: at the end of January, 2,708 people were on the unemployment register, whereas in January 1997, there were only 2,144. Unemployment in my constituency has gone up by more than a quarter.
That sets the general background to the debate. Let me now talk about the specifics. Early in December last year, I began to receive complaints from constituents who had been employed by Alfred Sargent and Sons Ltd in Rushden. They had been made redundant, but had not received any redundancy payments, although the company continued to trade. Losing ones job is hard enough, but not receiving redundancy payments was very worrying for the people who had contacted me, particularly as it was just before Christmas. The situation was covered extremely well by my excellent local newspaper, the Northamptonshire Evening Telegraph, which kindly published an article reflecting my concern and suggesting that affected workers should contact me directly.
I want to make it very clear that I make no criticism whatever of Alfred Sargent and Sons Ltd, its board of directors, or any of its work force. The company was faced with an extremely difficult Catch-22, and dealt with it as best it could. At the end of the story, there is some good news: Sargents has streamlined and continued to trade, and I understand that its prospects of success are extremely good. My aim today is not to criticise the company, but to expose a loophole in the law. Nor do I intend any criticism of the Government, who may well not have been aware of the loophole.
I should also point out that Alfred Sargent and Sons Ltd was not some fly-by-night organisation that had existed for only a few years. It was founded in 1899 in Rushden, and was a family business that had passed through four generations based in Portland road. It produced high-quality footwear using traditional techniques. The view of the factory from the road has changed very little in more than 100 years. This was a traditional family business, producing high-quality goods and refusing to cut corners; but it was hit by the extraordinary recession that faces us today, and given unhelpful banks and falling demand, its position became impossible.
As someone who has run a small family business and has had to make employees redundant, I know that it is the worst thing that a boss ever has to do, but sometimes a boss is faced with the dilemma that if he does not reduce his work force, the whole company will go under. In a small family company, the bosss employees are his friends and part of his extended family, and to tell them that they have no job is extremely difficult. In the case of Alfred Sargent and Sons Ltd, it must have been even more difficult. Many of the workers had been employed by the company for many years, as many as 20 years in some cases. A boss does not make the decision to lay such people off lightly. It is heartbreaking, and extremely difficult.
Why do companies go bust? Is it because they are running at a loss? No, that is not the reason; the reason is that they run out of cash. They may be highly profitable, but if they have no cash they will go bust. Equally, they can run loss after loss, but if they have substantial cash or loans they can continue to trade.
This is the dilemma for Sargents. It has a work force of 120 people. If the company lays off 40 of them, it can save £600,000 a year in cash and continue in business. If it does not lay the staff off, that extra £600,000 will force the company to go under. Reluctantly, the boss is forced to make the employees redundant. But here is the Catch-22. As he has been a good employer and run an excellent family company, his employees have been with
him for many years, some for more than 20. The cost of redundancy, if the company had to pay it, would be a quarter of a million pounds. That would bring the whole company down, with the loss of an additional 80 jobs and, of course, one less high-quality manufacturing company.
This situation is not adequately covered by current regulations. Of course, if the company in its entirety went into liquidation, the Government would immediately pay everybody their redundancy money from Government funds. Alternatively, if a large public company lays off people to make itself more profitable, it is requiredand it should beto pay the redundancy money from its existing assets. However, for a small family company trying to soldier on under the current law, the situation is a mess.
Let me take this opportunity to read a letter I received from the Minister for Employment Relations and Postal Affairs, which sets out the current lawand I must say that it reveals the current law to be an ass.
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