Clause 156
Banking Bill
2:45 pm
Mark Hoban (Shadow Minister, Treasury; Fareham, Conservative)
We have had a useful debate. There are strong views on either side. The Minister needs to be very careful. He framed the debate in the context of banks consuming their own smoke and paying the cost of failure. I would agree that banks need to pay the cost of their failure; no one disputes that. The point at issue is how and when they do so. But the clause is not just about banks. It is not just about a pre-funding scheme for banks, and banks themselves paying for it; it affects the whole of the financial services sector as covered by the Financial Services Compensation Scheme.
The Post Office, for example, sells financial services products. Will it be covered by the scheme? Will we be asking the Post Office to pay up front into this scheme? The Minister has not talked about the Post Office, but I wonder whether it will end up having to contribute. We are asked to approve today a clause that might be used, which might cover banks and which might ask others beyond banks to contribute. It might be risk-weighted. It might be restricted to non-negligible billions, to use the Governor’s phrase. It might ask for just a token contribution. It might be built up over three years or 20 years. It is all very vague and insubstantial.
The Minister has not set out clearly how the scheme would work, if it were ever to be introduced. That is one of the failings. Setting aside the argument about principle—we disagree with the principle of pre-funding—even as it stands the clause lacks definition. It lacks a clear sense of where the limits are. The words that the Minister used do not necessarily reflect the full breadth of the potential scheme as set out in the clause. The risk is that the Government are embarking on a scheme and have no idea where they will end up. In supporting this, the Committee would have no idea where the scheme might end up in future years. I do not think that legislation should be made in this way.
If it is the Government’s view that pre-funding is needed, they should set out a far clearer idea of the nature of the scheme than they have laid before the Committee this afternoon. Whether members of the Committee have a fundamental disagreement of principle about whether pre-funding is right—I believe it is not right and Members on the other side of the room believe that it is right—we have not been given the detail that we need to determine whether it is a power that the Government should have. That is why I oppose the clause.