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Lord Myners: My Lords, I do not think the market movement in sterling has an effect on the value of deposits. Many factors do, but that is not one within a domestic economy. Nor do I think that we are
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Baroness Noakes: My Lords, when asked about the Governments exchange rate policy, the Exchequer Secretary said in another place last year:
By maintaining sound public finances and low inflation the Government contribute to exchange rate stability. This is consistent with their objective of a stable and competitive pound.[Official Report, 21/4/08; col. 1674W.]
We do not have sound public finances and we do not have a stable pound. What is the Governments policy now?
Lord Myners: My Lords, we are in a period of extraordinary economic challenge throughout the world. That is reflected in the likewise extraordinary volatility of exchange rates, stock markets and commodity prices. Our long-term commitment is to a competitive currency, which will be a consequence of our inflation targeting. Given that we have a stable inflation-rate target, that should be reflected over the long term in a stable exchange rate against other currencies. It is, however, a medium to long-term objective and not one that assures valuation on a minute-by-minute or day-by-day basis.
To ask Her Majestys Government how they propose to monitor the use of passports of more than one country by British citizens.
Lord Brett: My Lords, as the UK Border Agencys e-borders system is rolled out, it will provide additional capability to reconcile electronically where an individual travels using different documents, so that passengers with dual nationality can be identified. The e-borders system analyses passenger data against watch lists prior to travel. Records of all passenger movements are retained, with a facility to search those data.
Lord Marlesford: My Lords, I thank the Minister for that Answer, but what steps will the Government take to ensure that, as of now, British immigration officials can know when somebody travelling on a UK passport also holds the passport of another country? Has he been made aware, as I have, of the serious concern that the lack of this information at present makes it extremely difficult to track those who are suspected of sympathising with or engaging in terrorism? Is it not astonishing that his noble friend Lord West had to answer my Question of 8 January, when I asked how many British passport holders also hold the passports of other countries, by saying that the information ... is not available?
Lord Brett: My Lords, it is not astonishing at all. It is not part of the nationality Act for us to have knowledge of passports held in different countries. What we have to do is protect our borders, which is precisely what the rolling-out of the e-borders programme
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Lord Brett: My Lords, it is clear that your Lordships want this information. By the end of 2008, 78,114,231 passengers were screened, 33,000 alerts were made and 2,700 people were arrested. That is the information that I thought your Lordships were looking for.
Lord Dholakia: My Lords, is the Minister aware that, when a nationality is renounced, the passport has to be surrendered and a record is kept? Why is it not possible in this day and age of biometric passports to ensure that records of dual nationality are kept? How can we have adequate immigration statistics if someone uses one passport for entry and a different one for exit?
Lord Brett: My Lords, the noble Lord raises an important question, which the whole e-borders project is an attempta successful one, I believeto counter. Getting to the point of having the technology and 100 per cent coverage will take time, but we are moving in that direction. In the mean time, we have watch lists and the security agencies and others keep a close watch on suspected areas of concern, so the situation is not as simple as is suggested. We do not have complete coverage, but we will have in due course.
Baroness Gardner of Parkes: My Lords, when did these passport changes occur? My experience is as someone who holds only an Australian passport. I never applied for a British passport because the Home Office would automatically notify the Australian Government when someone made an application and the Australian Government would then revoke their Australian citizenship. That law has now changed, but I am too old to be bothered to apply
Baroness Gardner of Parkes: My Lords, this country has been very good to me, so I cannot complain. At what stage did the law change? Previously, the Home Office was very aware of people having two passports.
Lord Brett: My Lords, I can only say to the noble Baroness that her presence in our country for many years has borne fruit and she certainly does not look old enough not to take advantage of changes to the passport system. The Australians of course require visas for the United Kingdom. The British Government do not have the same requirement that dual passport
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Lord Stewartby: My Lords, the Minister gave quite a long Answer to the Question, but I understood from what he said that he was justifying the present situation on the basis of it being compatible with the British Nationality Act 1981. A lot has changed since the early 1980s, especially the need to be vigilant against links with terrorists. Does it remain a matter of unconcern to Her Majesty's Government that we do not have the information for which my noble friend Lord Marlesford asked?
Lord Brett: My Lords, my apologies if my previous answers have seemed to be too long; I actually average about eight answers in seven and a half minutes. I was reminded on my first occasion appearing here that I should give short answers. The truth is that there has been more legislation; a Bill is coming forward to this House very shortly. Of course the Government are concerned and we are taking action. It ill behoves those who suggest that we are not.
Baroness Hanham: My Lords, I refer the Minister back to my noble friend Lord Marlesford's original Question. We have soldiers dying in Afghanistan at the moment to protect us against terrorism. One of the bases of terrorism is Pakistan. What action are we taking to ensure that people do not travel from this country as UK citizens on Pakistani passports that we do not know about?
Lord Brett: My Lords, I have explained why the system at the moment does not provide for that information to be available wholesale. I am sure that there are those selectively looking at those who may be suspected of going to Pakistan from this country for nefarious purposes. I also explained the timescale by which the system will be complete. In the mean time, I do not doubt that the authorities are looking very closely at the question that the noble Baroness raises.
Lord Bassam of Brighton: My Lords, with the leave of the House, we will have two Statements repeated today. To avoid breaking up today's Committee debate on the Banking Bill, my noble friend Lord Myners will repeat the Statement on financial markets at a convenient point at about 6 pm, followed by my noble friend Lord Malloch-Brown repeating the Statement on Gaza.
Bill Main Page
Copy of the Bill
DPCommittee: 1st Report
Clause 42 : Supplemental instruments
77: Clause 42, page 19, line 34, at end insert
(c) provides for property, rights or liabilities specified in the original instrument not to be transferred from the transferor.
Baroness Noakes: I can be brief on Amendment 77, which adds a new paragraph (c) to Clause 42(3), which deals with supplemental property transfers. Under subsection (3), a supplemental property transfer is one that provides for property being transferred from the transferor under the initial instrument and makes any other provision that an original property instrument could make. That is set out in paragraphs (a) and (b) of subsection (3).
What happens if the original transfer tried to transfer things that cannot in fact be transferred? Problems may not generally arise under UK law, but they possibly could under foreign lawfor example, if the property has been confiscated under foreign law or there is some other legal obstacle to the transfer. What provision allows the original transfer instrument to be amended in those circumstances? It is not a reverse transfer under Clause 44, because no initial transfer has in fact taken place; and it does not appear to be within the scope of Clause 42, because of the wording of subsection (3), to which I referred. Perhaps the Minister can explain. I beg to move.
Lord Davies of Oldham: I am grateful to the noble Baroness for the way in which she expressed her amendment. We were somewhat uncertain about its nature, because it looked like a fairly minor drafting amendment. We do not believe that the addition of the word any changes the meaning of the clause. The current drafting already provides the law to make specific provision of any sort, so we do not think that any clarification is necessary. I hope the noble Baroness will understand that we think the clause as drafted is quite clear about the issues which she raises.
Baroness Noakes: The Minister says that the clause deals with the case where the original instrument provides for the transfer of property which is not in fact capable of being transferred. Is he saying that Clause 42 allows for that? I could not read that.
Lord Davies of Oldham: As I indicated, we were not quite sure about the nature of the noble Baronesss amendment. The Bank of England makes supplemental property transfer instruments following the transfer of property to a private sector purchaser or bridge bank. These provide particularly valuable flexibility for property transfers. Not only do the powers provide the Bank of
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We think that there is merit in the clause as it stands. The noble Baroness mentioned the foreign law issue. Clause 35 makes clear that a property transfer instrument may seek to transfer property located outside the United Kingdom and rights and liabilities governed by foreign jurisdiction. The Government understand that such a transfer may not always be effective, and the other place recognised it as a difficulty. As there are limits to what we can guarantee in these terms, we have included Clause 39, which provides that a transferor or transferee are under obligation to take any necessary steps to make the transfer of property effective. This enhances the likelihood of a successful transfer. What happens if the transfer cannot be made under foreign law? You could use a reverse transfer for the purpose of bridging the transfer back into alignment with foreign law. A reverse transfer under domestic law would certainly be possible and we might have recourse to that.
The noble Baroness has identified an area of difficulty which we debated in the previous Committee sitting. None of us doubts that there are difficulties with property transfer when foreign jurisdictions are involved. It is not possible for us to give absolute guarantees in every single case. What the noble Baroness can rightly expect is that the Bill is drafted in such a way that the authorities are concerned to ensure that an effective transfer takes place wherever this is possible. That is what the existing drafting of the legislation is designed to do.
Baroness Noakes: I thank the Minister for that long explanation, in the middle of which I think I heard the answer to my question. I shall read Hansard carefully to ensure that I heard correctly that a reverse transfer could be made if it were necessary to amend the terms of an original property transfer instrument. I beg leave to withdraw the amendment.
Clause 47 : Restriction of partial transfers
78: Clause 47, page 22, line 35, at end insert
( ) The Treasury shall by order restrict the making of partial property transfers so no partial property transfer can have an effect on contracts or other arrangements which are relevant for regulatory capital purposes.
( ) No order made under this section or under section 48 shall have the effect of altering contracts or any other arrangements which are relevant for regulatory capital purposes.
Baroness Noakes: We move to rather more complicated territory. Amendment 78 adds two new subsections to Clause 47. This is in the difficult area of partial transfers, which is potentially one of the most significant areas of the Bill for the banking community.
For todays Committee, these are probing amendments, but the Minister should be in no doubt that the issues underlying them are of huge significance to the banking community. I know that the Government have been working constructively with the banking industry for some time, but there is unfinished business in this area and I hope that the Minister will at least give an update on the Governments position following the completion of the consultation on the November White Paper on partial transfers. Indeed, I hope that he will be able to return to this issue generally on Report with a finally agreed solution. If the Government are unable or unwilling to do so, I shall feel obliged to return with an amendment at that stage.
My amendment seeks to ensure that the Treasury will not allow partial transfers to alter the effect of arrangements for regulatory capital purposes. The Government made this commitment in paragraph 2.16 of the November consultation paper on the special resolution regime. Industry players have been dismayed that, despite the unequivocal terms of paragraph 2.16, the Government have subsequently made it plain, both in Committee in another place and in the expert liaison group, that they have no intention of enshrining that commitment in primary legislation.
My amendment seeks to do two things. First, the first proposed new subsection would require the Treasury to ensure that partial transfers have no effect on contracts that are relevant for regulatory capital purposes. Secondly, the second proposed new subsection tries to ensure that any secondary legislation made under either Clause 47 or Clause 48 would alter contracts that are relevant for regulatory capital purposes. I do not pretend that the wording of the proposed new subsections is perfect, and I have already indicated that I shall not divide the Committee on them today, but I hope that the Minister will look to their underlying purpose and respond in that light.
Before getting to the meat of the amendment, I understand that the draft secondary legislation, which is being consulted on, will be made under Clause 48. There is a more general power in Clause 47, but I could find no reference to the purpose to which the Government intend to put it. I have drafted my amendment to cover both Clauses 47 and 48 on a belt-and-braces basis, but it would be helpful if the Minister set out the Governments intentions behind Clause 47.
At the heart of the issues with which the amendment seeks to deal is the Governments basic approach to partial transfers. The Government wish to include as much as possible in secondary legislation and place as little as possible in the Bill. That, of course, is the customary government position in the name of flexibility. As I understand it, the banking community was initially prepared to go along with the Governments view on
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My amendment seeks to deal with one important aspect, but while regulatory capital is an important issue, the concerns run wider. If there is any uncertainty about how the secondary legislation will affect contracts, it is that it will affect the overall attractiveness of London as a financial centre. It is likely that it would increase the cost of capital for UK banks, which will do nothing for their international competitiveness, and it will drive business out of London markets in favour of other jurisdictions where there is greater certainty.
If there is any uncertainty about the legal position, it will be impossible to get clean legal opinions on contracts of set-off and similar contracts. That will certainly mean that they will not be effective for regulatory capital purposes both in the UK and in other countries. As I said, it will also make London an extremely unattractive place in which to do financial business, because, if the counterparties cannot get legal certainty, transactions simply will not happen. The lack of watertight set-off and netting arrangements also affects the non-bank counterparties and could disrupt conventional Treasury cash management techniques. It could also have an impact on what goes into the annual accounts not only of banks but of ordinary commercial businesses.
My amendment today is based on regulatory capital on the basis that, if we can solve the issues for regulatory capital, the other problems will also be avoided. However, they may not be. Amendment 80, which is in the name of the noble Lord, Lord Eatwell, and is in this group of amendments, seeks to tackle the problem from a different direction, and I look forward to him speaking to it.
There is a very real problem which will emerge as soon as the Bill receives Royal Assent. I understand that some banks are already involved in contingency plans in case the final version of the Bill leaves any doubts about the effectiveness of instruments for regulatory capital purposes. That contingency planning involves massive rewriting of contracts, and possibly things being taken out of the London market.
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