Clause 167
Banking Bill
10:30 am
David Gauke (Shadow Minister, Treasury; South West Hertfordshire, Conservative)
It is a great pleasure to serve under your chairmanship, Mr. Hood. As this is my first contribution in the main part of the Committee stage, I declare an interest as a non-executive director of a deposit-taking institution—although for clarity’s sake I point out that it is not a payment system or a member of a payment system.
I am grateful to the Minister for setting out a brief introductory overview of the part of the Bill relating to inter-bank payment systems. He is right to highlight their importance. Figures produced by the Bank of England for 2003—there may be more up-to-date figures—state that the value passing through UK payment systems that year was £130 trillion, which is about 20 times the UK annual gross domestic product. That is the equivalent of almost 50 per cent. of GDP flowing through UK payment systems every business day. It is clearly an important system, consisting of high-value transfers between financial institutions but also more numerous, smaller transfers between individuals and/or companies. The Minister set out some of the circumstances, such as the payment and receipt of wages and salaries, Government benefits, direct debits and cheques and debit and credit card payments.
We recognise the potential for systemic risk. The Bank of England and the Government, too, have long recognised the potential for systemic risk from failure within the payment systems. If there is a problem with one there is likely to be a direct and rapid effect on other members. Even if there is no systemic risk, a failure in a payment system may cause considerable disruption to individuals. No politician would want to be responsible for the failure to pay wages and salaries on time.
We are broadly supportive of the provisions but it might be helpful for the Committee if I outlined some of the themes that we want to address during this part of the Bill. As the Minister says, the Bill is presented clearly and logically, which will be helpful to the Committee. We will raise specific questions as we go through each clause, but at this stage it might be helpful to highlight some of the key issues.
The first issue touches on the intervention made by my hon. Friend the Member for Wellingborough. What assessment have the Government made of the existing arrangements? As the Minister explained, the Bank of England has performed an oversight role on a non-statutory basis for some time. As the helpful Library note made clear:
“It should be stressed that, to date, there has been no evidence that existing systems have failed or are threats to future stability.”
Of course, that is not to say that we should not look to make improvements. I note the points about enforcement and so on. This may be one of those cases where the roof is being fixed while the sun is shining, to coin a phrase.