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Lord Davies of Oldham: My Lords, should we have consulted the general public about a position that was derived from a banking Act of 1845 concerning the question of continued circulation? I will reply to the noble Lord in a moment on the crucial question of security that has been identified with regard to banks. On the question of whether it was a good idea, it was reasonable for Her Majesty's Government to make the presumption that in both Northern Ireland and Scotland-I am sure that my noble friend Lord Foulkes will be on his feet in a moment if I make the wrong

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presumption-there will be a continuing policy, and that there would have to be a jolly good reason why that policy should be abrogated and the power taken away from two parts of the United Kingdom. I do not think that there was consultation on that matter. The consultation was more about the details of the regulations that we are discussing.

The consultation involved putting the issues on a website, and a copy was sent to all previous respondents on the issue, so the level best job was done to try to involve those who might be defined as being interested. I say to the noble Baroness that consultation is still going on-that is the responsibility of the Bank of England as regards the penalty policy. It is consulting the authorised banks on the matter. There is no formal requirement for the Bank to consult: it is empowered to draw up policy on its own. That is what the Act says. However, it is wise that it should consult the general public, although perhaps not in the way suggested by the noble Lord, Lord Kilclooney. It should consult those who will be directly involved. Therefore I hope that it will be appreciated that the Bank is going about its business in a purposeful way, and seeking to get the best insights possible by the way in which it works to resolve issues of penalty policy.

I am not in a position to single out any specific behaviour that might trigger the maximum penalty. The noble Baroness asked me to envisage the worst case. That is always a hazardous thing when one is involved with banking behaviour, because when it comes to confidence the wish can be father to the thought if one is not careful. The Bank of England would have to consider all the relevant circumstances at the time with regard to the crucial issue of confidence. The noble Baroness cannot expect me to go into much detail on the issue, although I am always tempted by the questions that she asks and attempt to answer them as fully as I am able.

The noble Lord, Lord Newby, asked me two questions. On one I can reassure him: my noble friend Lord Myners has many responsibilities but he is not going to be signing the banknotes. His second question concerned the post. I emphasise that communication will take place through all modern media-not just the post but electronic media as well. The noble Lord knows only too well that in very serious circumstances such as this you have to have proof of notification, and one form of communication will be by post. If the bank can prove that after two days it did not receive the requisite document by post, then of course there will be an extension of time; otherwise, it will be assumed that the postal services will deliver, as they are accustomed to do. As has always been the case, the policy with regard to these issues will be that, if you are not able to substantiate that the document did not arrive by post, it will be your responsibility to respond on the assumption that you received it two days after it was posted. We will not be departing from that. I do not think that the noble Lord, Lord Newby, was really asking me to fashion a policy communication based on what we all regard as temporary difficulties with the Post Office, which we hope will return to normal fairly shortly.

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My noble friend Lord Foulkes kindly said that he did not want to ruin my day. However, he started to do that the moment he stood up, as he was all too well aware. He could have made a much better job of looking after my interests by not asking me those questions. Nevertheless, I emphasise to him that they are important questions. He asked what would happen if a bank were broken up. The issuing rights are vested in the corporate entity that was authorised to issue notes by virtue of the 1845 legislation, and a change in the share ownership of that entity would not deprive the bank of its issuing rights. However, the right to issue notes cannot be transferred to another bank by contract; it stays with the original bank, as defined under the legislation. If his anxiety was that these rights could be readily transferred and be the responsibility of others, I can reassure him that that would not be the case. I give way to my noble friend, who I see is seeking to enhance my day again.

Lord Foulkes of Cumnock: I am very grateful to my noble friend. I presume that within the Lloyds group there is currently an identifiable unit-the Bank of Scotland, as part of Lloyds. However, if it is disaggregated, as is being suggested by the European Union and domestically, is it guaranteed that there will be a new organisation or entity also called the Bank of Scotland? I do not know whether that will be the case but would it not create some problems? Therefore, arising from these obligations at the time of disaggregation should there not be an agreement that one of the units will be the Bank of Scotland, presumably with its headquarters in Edinburgh? If that were the case, I would be encouraged because it would mean that we would have some kind of guarantee during the aggregation that the Bank of Scotland would rise like a phoenix from the ashes.

Lord Davies of Oldham: That is a colourful perspective but I am not sure that I can follow my noble friend down that path. I reassure him that the rights conferred on the corporate entity cannot be transferred to anyone else-they cannot be sold to another bank by contract. Whether the existing bank will continue will depend on the circumstances of the restructuring and the security identified in terms of that restructuring. I am not in a position to give assurances on that now because none of us knows the structure that will emerge. I can only give my noble friend a negative assurance: the rights cannot be transferred to another corporate entity. Whether the corporate entity continues and enjoys the confidence to carry on its functions will depend on the Bank of England's judgment on the arrangements of the corporate entity, but my noble friend will recognise how important that is to the bank. Therefore, it is inconceivable that this will not be part of the priorities of the restructuring position. I do not think that I can comment any more fully on that.

I appreciated the comments made by the noble Lord, Lord Kilclooney, about the timeliness of the measure. It is important that we establish confidence all round in the circumstances he identified where there are some anxieties, which I would not want to exaggerate. However, he is suggesting that the cost is somewhat high, but we do not think that it is. The

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confidence of the public in the banknotes that are issued is crucial. The noble Lord has identified a dimension of the problem of others accepting the banknotes at face value because of the way in which they are inscribed and so on. I am not in a position to comment on that, but that point will be taken on board. The general issue is that confidence in the notes is critical, which is why we regard this whole process as being one in which necessary costs may be incurred, but they are part of the crucial role of the Bank of England in relation to guaranteeing the essential security behind the banknotes, which, as the noble Lord emphasised, is so important.

The noble Lord, the Earl of Montrose, also asked me about this question.

Noble Lords: Duke!

Lord Davies of Oldham: I am sorry. I apologise to the noble Duke. This is not the first time that I have made such a calamitous mistake. I want to reassure him that, with regard to costs, the position being adopted is eminently defensible. We are involved in an exercise of great importance as far as the Bank of England and other banks are concerned and the calculations are based on reasonable assumptions.

I am all too well aware that aspects of this submission are difficult for the Committee, not least because we are talking about regulations which relate to rules that the Bank of England is to draft. The rules have to be supervised, vetted and authorised by the Treasury, but they are not part of these regulations. That is because these rules go down to such elements of detail as to make them not suitable for detailed parliamentary scrutiny. We are concerned with the regulations which govern the whole process.

Baroness Noakes: I sense that the Minister is winding up his remarks, so I should like to put one point back to him.

4.13 pm

Sitting suspended for a Division in the House.

4.23 pm

Baroness Noakes: Before I was so rudely interrupted by a Division, I was about to interrupt the Minister before he sat down and escaped dealing with these regulations. I want to take him back to my point about appeals, which he did not really deal with.

Let me track back. During the passage of the Banking Act earlier this Session, we created different regimes for Part 5, which dealt with inter-bank payment systems and Part 6, which is about banknotes and which we are currently debating. Part 5 had a very clear appeals mechanism linked to the provisions of the Financial Services and Markets Act. No such provisions were made in the Bill for banknotes. The issue of appeals comes up again in the consultation, and the Government replied that it would be done in a statement of policy. I am trying to tease out whether the Government have properly allowed for an appeals mechanism in the way in which they have approached both the legislation, including the regulations and subsequent rules, and the statement of policy. There is

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no requirement in the regulations for an appeals process. The Minister's position is that the possibility of issuing a statement of policy on penalties allows but does not require the bank to make provision for an appeals process. The point that I put to the Minister was that paragraph 5 of Schedule 3 to the regulations says:

"The Bank of England must publish a statement of policy, with which it must comply, in respect of ... the process it will follow when it imposes a penalty under these Regulations".

I put the point in my earlier remarks, possibly not sufficiently clearly, that what the Government have provided for in paragraph 5 does not seem to encompass anything that could be regarded as an appeals process, because an appeals process involves organisations or appeals tribunals-it involves something other than the Bank of England. The Government have drafted paragraph 5 only in terms of things that the Bank of England must do in its policy and they have not even drafted it sufficiently comprehensively to encompass what one would need to see in terms of an appeals mechanism.

This may sound rather pernickety, and on reflection I am not clear why we did not insist on having an appeals mechanism in the Bill. It was probably because of lack of time rather late in the day in the proceedings at the end of the Bill, when we were operating an expedited process. To some extent, one takes the blame for that; but it is important now. Consultation has revealed the need for an appeals process, which I can fully see given the scale of the penalties that are potentially capable of being imposed by the Bank of England. I put to the Minister that the regulations do not adequately allow for that appeals process to be created within the legal framework of the Act and the regulations.

Lord Davies of Oldham: My Lords, the noble Baroness has made explicit her concerns, and earlier I attempted to identify how these concerns were being addressed, not perhaps in quite the way that she wished. She is absolutely right that the regulations do not make a formal requirement to consult on the penalty policy on the issue of appeal.

As I indicated earlier, the Bank of England has circulated to the issuing banks the appeals procedure that it envisages alongside the latest draft of the rules. The Treasury can only approve the rules. It does not have the power to approve the penalty policy. The Bank of England is working against the background that, on consultation, the issue with regard to the penalty policy and the right of appeal, which the noble Baroness has stressed, is important. The Bank of England is working closely with the Treasury while drafting both the rules and the penalty policy. The Bank of England remains answerable. If the policy is manifestly unreasonable, if what was created was a structure in which the right of appeal was not a significant right for anyone undergoing the penalty, the Bank could be subject to judicial review. As a public body, it is all too well aware of its responsibilities in those terms.

I am sorry that I am not able to take the issue much further than that. The noble Baroness has identified that these are the limits of the regulations regarding the appeal policy. I am stating that that is so, but

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insofar as the Bank of England wants to act fairly and justly and deal in its consultation with the issues that have arisen, the Committee can rest assured that the Bank is proceeding in a way that guarantees that it acts entirely properly in this regard.

The regulations are of the greatest importance. They ensure that holders of Scottish and Northern Ireland banknotes will be afforded the same level of protection as that afforded to the holders of Bank of England banknotes. The regulations are the first step in implementing Part 6 of the Banking Act 2009, which established the framework of the new regime after very considerable consultation. It will be recognised by the Committee that throughout the process the Treasury has worked closely with the Bank of England and with the issuing banks on the evolution of this policy, against a background where we all recognise why we needed a new banking Act and why the wider public needs every confidence to be restored with regard to a matter of such importance as banks that issue banknotes.

Motion agreed.

Ministry of Defence Police (Conduct) Regulations 2009

Ministry of Defence Police (Conduct) Regulations 2009
22nd Report Joint Committee on Statutory Instruments

Considered in Grand Committee

4.30 pm

Moved by Lord Tunnicliffe

Lord Tunnicliffe: My Lords, in moving the Ministry of Defence Police (Conduct) Regulations 2009, I shall also speak to the Ministry of Defence Police Appeals Tribunals Regulations 2009. These are defence regulations, and it would be wrong of me to say anything about the Armed Forces, especially this week and after Remembrance Sunday, without paying tribute to those who have died in recent operations and to their families and friends. We will, of course, pay tribute in the Chamber to individuals at a suitable point.

The Ministry of Defence Police Act 1987, as amended by the Criminal Justice and Immigration Act 2008, contains powers for the Secretary of State for Defence to make regulations on disciplinary matters, including the conduct of members of the Ministry of Defence Police. There are currently some 3,500 Ministry of Defence Police officers throughout the United Kingdom. The Secretary of State for Defence has the option of deploying them to any location owned or run by the MoD to maintain the safety and security of Armed Forces civilian personnel and the public.

In recent years, the role of the Ministry of Defence Police has evolved significantly and continues to do so. The force is operating in increasingly challenging and sophisticated roles that go beyond the demands of day-to-day policing in the wider community. Examples include: marine policing; firearms duty, including specialist duties using special weapons and tactics; operating

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with CBRN protective equipment; dealing with public disorder; and officers working overseas in Afghanistan. MoD police officers possess the full range of constabulary powers and the skills to interact with personnel and the general public: with a view to protecting life and property, maintaining the peace, detecting and preventing crime, and prosecuting offenders. They can work both inside and outside defence establishments.

Today, in an effort to improve further the arrangements for dealing with the misconduct of MDP officers, we are seeking to introduce two statutory instruments that will bring the MoD Police into line with their colleagues in Home Department police forces in issues of conduct and appeals. The Home Office regulations have been in place for almost a year and continue to enjoy the full support of all major stakeholders, including the Police Advisory Board for England and Wales and the Independent Police Complaints Commission.

In response to the recommendations of the Taylor review, the two statutory instruments establish a new set of procedures that govern police disciplinary matters. The Ministry of Defence Police (Conduct) Regulations 2009 establish procedures for taking action against the misconduct of police officers. The Ministry of Defence Police Appeals Tribunals Regulations 2009 provide for appeals to a police appeals tribunal against the findings and specific outcomes of the MDP conduct regulations.

The Ministry of Defence Police is a national police force. It is therefore our policy that all members of the force-whether in England, Wales, Scotland or Northern Ireland-operate under the same conduct regulations, policies and procedures wherever they serve in the United Kingdom. We have therefore kept in close contact with the devolved authorities, the Police Complaints Commissioner for Scotland and the Police Ombudsman for Northern Ireland, and informed them all of our legislative proposals on the new MDP conduct procedures and of our intention to enter into agreements with the respective ombudsmen to extend their jurisdiction over MDP officers in Scotland and Northern Ireland, as outlined in the new regulations.

It may be helpful if I set out the background to the regulations. The Taylor Review of Police Disciplinary Arrangements was a review conducted by William Taylor, CBE, OBE, QPM, a former Commissioner of the City of London Police, a former HM Inspector of Constabulary for Scotland and also a former police adviser to the MoD Police Committee. The programme board that guided and informed the Taylor review consisted of the main police stakeholders and other invited organisations-the Association of Chief Police Officers, the Police Federation of England and Wales, the Police Superintendents' Association of England and Wales, the Chief Police Officers Association, the National Black Police Association, representatives of the Special Constabulary, the Independent Police Complaints Commission, UNISON, Liberty and the Advisory, Conciliation and Arbitration Service. The MoD was also involved in the consultative process.

The Taylor report made 19 recommendations, some of which I shall highlight. They include: police officers disciplinary arrangements are most appropriately determined by Parliament after extensive consultation; a new single code should be produced to be a touchstone

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for individual behaviours and a clear indication of organisation and peer expectations; although regulated by Parliament, the new procedures should be based on the Advisory, Conciliation and Arbitration Service's code of practice on disciplinary and grievance procedures; conduct issues should be separated into two distinct groups-misconduct and gross misconduct-to promote proportional handling, clarify the available outcomes and provide a better understanding of the policing environment; and the police service must manage the disciplinary arrangements dynamically to drive through the changes to the internal culture of the organisation and promote the acceptance of responsibility at all levels. The recommendations were accepted by the programme board and the Home Office Minister. That led to the Police Advisory Board for England and Wales being asked to take forward the process for implementation.

I have a few points to emphasise about the Ministry of Defence Police (Conduct) Regulations 2009. First, the Taylor review found that the current system of dealing with police misconduct can be slow and disproportionate. It gives little or no encouragement to managers to deal swiftly and proportionately with low-level misconduct matters. Discipline hearings were seen as being more akin to criminal court hearings and even low-level misconduct matters were decided by a three-person panel of senior officers.

The new system will ensure that police managers are given the responsibility and ability to deal with misconduct fairly and proportionately at local level. Timescales are also built into the process to ensure time limits on all misconduct and gross misconduct cases. An independent member appointed by the MoD Police Committee will also sit on misconduct hearing panels to bring a public perspective to holding MDP officers to account. The Taylor report recommended a new single code, which should be the touchstone for individual behaviour, and a clear indication of organisational and peer expectation. The Home Office together with other stakeholders produced the new standard of professional behaviour for Home Department police officers that form part of their conduct regulations. These standards set out clear expectations of the behaviour that the public and colleagues expect of all police officers. The same standards will therefore form part of the Ministry of Defence Police (Conduct) Regulations and replace the existing MDP code of conduct.

The Taylor review also proposed that the new misconduct procedures should be based on the Advisory, Conciliation and Arbitration Service principles which will modernise the system and make it easier for individual officers and the police service generally to learn lessons and improve their service to the public. One of the key points to emerge was the need to shift the emphasis and culture in police misconduct from blame and punishment towards a focus on development and improvement. The review also stressed the importance of carrying out a full assessment of the alleged misconduct at an early stage with a view to implementing a proportionate response. The new procedures have incorporated the requirement for this objective assessment to take place at an early stage.

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A further recommendation by William Taylor was that the procedures for dealing with the unsatisfactory performance of a police officer should be reviewed. While new regulations on performance were therefore introduced for Home Department police forces on 1 December 2008, there are no equivalent regulations for the MDP. Instead, MoD Police officers will continue to fall under existing MoD restoring efficiency procedures in any case in which a police officer's performance or attendance falls short of the required standard.

The Ministry of Defence Appeals Tribunals Regulations 2009 provide for appeals against findings or certain outcomes relating to cases considered under the new conduct regulations. Appeals should be dealt with in a timely and proportionate manner, so timescales are built into the new regulations to ensure that this is the case. The police appeals tribunal chair will have the power to dismiss appeals at an early stage where there is no real prospect of success and no other compelling reason for the appeal to proceed.

The tribunal will have the power to overturn the findings of the original panel that considered the conduct case and to amend the sanction imposed. The composition of police appeals tribunals differs according to whether the officer is senior or non-senior and whether the officer serves in England, Wales, Scotland or Northern Ireland. The police appeals tribunal is a three-person panel for senior officers and a four-person panel for non-senior officers. For senior and non-senior officers serving in England, Wales or Northern Ireland, the chair is selected through the Judicial Appointments Commission and must have five years' legal standing. For officers serving in Scotland, the chair is selected from a list that is nominated by the Lord President of the Court of Session. The chair has the casting vote and there is no appeal against the decision of the tribunal or of the chair; the only challenge is through a judicial review.

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