I beg to move, That this House
agrees with Lords amendment 17.
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The Government brought forward Lords amendments 17 and 31 in direct response to amendments proposed in Committee in the other place by Baroness Noakes. Her amendments proposed that when a share or property transfer instrument is made by the Bank of England, the Treasury should lay it before Parliament. The Government reflected carefully on that, and the additions to clauses 24 and 41 are the result of that reflection. Under the amendments, if the Bank of England makes a share or property transfer instrument, the Treasury would be required to lay a copy of it before Parliament, thereby allowing Parliament direct access to the instrument. The amendments respond directly to concerns raised by the Opposition, and they reflect our constructive response to the recommendation of the Delegated Powers and Regulatory Reform Committee that the House should reflect on the degree to which the instruments are subject to parliamentary accountability.
Hon. Members, especially those who were members of the Public Bill Committee, may recall that misgivings were expressed in this House about the term "subserviate", and those misgivings were shared by Members in another place. The Government therefore brought forward an amendment to replace the term "subserviate" with a new subsection to clause 58. I have no problem with the word. Technically, one could say that the Prime Minister subserviated me to the Chancellor of the Exchequer and the Secretary of State for Business, Enterprise and Regulatory Reform. It is clear what we mean by the term.
However, for the avoidance of doubt, and to reflect concerns raised in the Commons and the other place during the Bill's passage, Lords amendment 48 states in plain language our intention, which is that the management should have a duty to manage a bridge bank, or bank in temporary public ownership, in a manner that maximises the proceeds available in a bank resolution fund only so far as the duty is compatible with the special resolution objectives and the code of practice. I hope that the amendments satisfy both Houses' concerns on that point; again, the amendments demonstrate our willingness to respond helpfully on such matters, even though in this case we are talking about a linguistic change, rather than a detailed policy change.
Government amendment 58 requires the Treasury every year to lay before Parliament a report on the activities of any bank in temporary public ownership. That is a direct response to concerns, expressed here and in anther place, that there were insufficient reporting requirements placed on banks taken into temporary public ownership. There are numerous ways in which the Government are accountable to Parliament for their role with regard to banks in temporary public ownership. Parliament can already request Treasury Ministers to report on the activities of a bank in temporary public ownership whenever it wishes, including, should it so desire, more frequently than once a year. Furthermore, all the usual accounting and reporting requirements under the Companies Act 2006 will apply to banks in temporary public ownership. However, having reflected on the matter, the Government are persuaded that it would be helpful to include an express requirement to produce a report on the activities of a bank in temporary public ownership. That is why I commend Lords amendment 58, and the other amendments in the group, to the House.
I shall deal first with Lords amendment 58, which requires the Treasury to publish annually a report on banks that have been nationalised under clause 13(2). As the Minister said, the amendment was tabled in response to concerns expressed in the other place. My noble Friend Baroness Noakes tabled a much more extensive amendment, which specified the information to be published. It referred not just to those banks that are nationalised or taken into temporary public ownership under this Bill, but to those that were nationalised under the Banking (Special Provisions) Act 2008. That Act expires later this month, and the Bill will replace it.
My noble Friend's amendment was much more specific than the Government amendment, in that it required the Government to publish a report covering the financial position of a nationalised bank and its plans and prospects, and any guarantees in respect of a bank that might need to call on Government funds. It also had a catch-all provision that required the Government to publish anything else that they thought was relevant. Where amendment 58 falls down is that it does not give much information on the type of report that we should expect the Treasury to lay before Parliament.
Will the Minister be more explicit about what we will see in the annual report? I assume that it will be more than just the report and accounts that all companies are required to publish under the Companies Act 2006. Will it include a statement on the bank's business plan, and how it measures up against that plan? Will the Government commit to publishing the objectives that they set management, and what progress is made on them? Will the report deal with the impact that a nationalised bank has on competition in the financial sector? We touched on that point in Committee. A bank in temporary public ownership may be seen to have an advantage over banks that are free of Government control. The Government responded to the concerns that were expressed at the time about the way that Northern Rock could take advantage of the savings market. If comparable situations arise in the future, will the Government, under this requirement, produce a report setting out the impact that a nationalised bank has had on the market?
The Minister said that reports can be produced on a more regular basis. That is indeed important. In that respect, Northern Rock is probably a better example because not only does it publish its annual report, but it produces a half-yearly statement, as well as quarterly trading updates. It therefore exceeds the minimum set out in amendment 58 and offers a template for the level of transparency that would be expected from a bank in state control.
A similar level of transparency has not applied to Bradford & Bingley, however. We have heard nothing about its financial condition since it was nationalised at the end of September. There has been no quarterly statement or update about its trading, and nothing about the level of arrears on its mortgage portfolio. That was touched on in the earlier debate about the buy-to-let properties that form part of its portfolio. We see a distinct contrast between the transparency applied in the approach to Northern Rock, and the different standard applied to Bradford & Bingley.
The hon. Gentleman is making the perfectly fair point that the content of the report ought to be spelled out in a little more detail than is provided for by the legislation. Does he agree that when a bank is apparently getting towards the end of its period of temporary public ownership, or some similar change is about to occur, it should be incumbent on the bank to report on the prospects for what is being widely discussed—in the case of building societies that were privatised into banks and then collapsed, people are looking at the prospects of their being remutualised on return to the private sector? Something of that kind is a possibility in a report some years down the line, is it not?
The hon. Gentleman raises an interesting point. He is an ardent advocate of the remutualisation of those building societies that became banks and are now in state control. The amendment tabled by my noble Friend Baroness Noakes provided for a report about the prospects. I can envisage that in a report with that level of detail, the prospects could include some statement about the exit strategy—how the bank emerges from the period of temporary public ownership.
Clearly, one of the debates that needs to take place, for which my noble Friend's amendment created a vehicle, is how the Government intend those banks to exit the period of temporary public ownership. I recognise the points that the hon. Gentleman makes. A little more transparency about the exit strategy would be helpful for all of us when thinking about the future of both Bradford & Bingley and Northern Rock.
A problem emerges from the lack of transparency that we have seen in the context of, say, Bradford & Bingley, and in the way that the Government's stake in the nationalised banks has been managed. There is very little transparency about the activities of United Kingdom Financial Investments Ltd. I asked the Chancellor of the Exchequer for details of the budget of UKFI. The Minister stonewalled that question in a parliamentary answer, and it is unsurprising that there is then press speculation about the arrangements for UKFI.
It is important that the Government are open and transparent about the activities of the nationalised banks. It was a feature of the debate that we had a year ago on the Banking (Special Provisions) Act 2008, particularly in connection with Northern Rock. Although we welcome the fact that the Government have listened again to proposals made in the House of Lords to increase transparency, greater detail about the type of report that we would expect to see would be welcomed in the House this evening.
I turn now to amendments 17 and 31. Of the three stabilisation options available to the authorities, two require transfer instruments to be made by the Bank of England. Those are the options relating to a private sector purchaser and a bridge bank. In the case of a bridge bank, a bank can be broken up and property transferred to a new owner, as happened with Bradford & Bingley and Banco Santander towards the end of September last year. If the Bill had been in place then, the Bank of England could have used a property transfer instrument to transfer Bradford & Bingley's branch network to Santander. Of course, there would have been remaining elements of the bank in temporary public ownership until a resolution or exit strategy had been found.
Within the bridge bank mechanism there are elements that are similar to nationalisation or temporary public ownership. However, the transfer powers—this was the issue raised in the other place not just by my noble Friend, but by the Delegated Powers and Regulatory Reform Committee—are exercised by the Bank of England without parliamentary approval. The Delegated Powers and Regulatory Reform Committee, when considering those powers, argued that because they were similar to taking a bank into temporary public ownership, their use should be subject to parliamentary approval. In effect, because the original owners are deprived of their property rights, Parliament should approve that. It should not be an action that the Bank can take without scrutiny by Parliament.
There was a vigorous debate on that in the other place. The outcome, as reflected in amendments 17 and 31, probably achieves the right balance. A copy of the share or property transfer instrument made by the Bank of England will be laid before Parliament. That will help to increase parliamentary scrutiny.
My final remarks relate to amendments 46 to 48 and the use of the word "subserviate" in legislation. The Minister seemed to think the word was used in everyday parlance. Perhaps it is used quite often in his constituency, but it is not a word that I had heard until the Bill was presented to me. I checked yesterday whether there was widespread use of the word and Googled "subserviate". The first two results referred to an online dictionary, and—surprise, surprise—the next two references were to debates in this House and the other place.
Clearly, "subserviate" is not a word that is widely understood. When the Minister gave his example earlier, I was not entirely sure it would have been clear in a press release what his relationship was to the Chancellor or to the Prime Minister, but perhaps the Minister does not use such language in the "Dudley Star" or whatever the local paper is in his constituency.
I welcome the fact that the amendments have been made. The Minister ought to have a word with his noble Friend the Financial Services Secretary about how to concede the point gracefully. I read the debate in the Lords Hansard, where Lord Myners said:
"I do not think that the meaning of 'subserviate' is opaque or confusing. However, concern was also expressed in the other place, where the standards of learning are perhaps not as exceptional as in this House"—[O fficial Report, House of Lords,
I do not know what it is about Lord Myners, but if there is a Treasury course on tact and diplomacy in dealing with Members of this place, he ought to be the first in the queue. None the less, I am pleased that he listened to the concerns that my hon. Friend Mr. Gauke expressed in Committee. We shall not oppose this group of amendments.
It is a hiatus valde deflendus in the learning of Mr. Hoban that he is not instantly familiar with the word "subserviate". That lacuna in his knowledge has now been addressed, and I hope that the word can be used in future legislation.
The hon. Gentleman said that we had reached the right point with amendments 17 and 31, so I need not explain them any further. I will just say that we reflected on Baroness Noakes's amendments and that I appreciate the hon. Gentleman's support and his agreement that we have the balance right at the moment.
The hon. Gentleman did some probing about what we could expect to see in the report introduced by Government amendment 58. We have had numerous debates about what should rightly be in a Bill and what should be done through codes of practice, secondary legislation or the normal course of Government reporting. We do not believe that the Bill should list the specifics of what should be included in every report. The bounds of commercial confidentiality need to be respected; we have to bear it in mind that banks in this situation will still be commercial bodies undertaking commercial transactions, and that there is rightly a duty of commercial confidentiality. However, while respecting that, we should still be as open and transparent as possible in respect of the information that we provide.
I hear what the hon. Gentleman said about Bradford & Bingley. My understanding is that it will publish a version of the business plan on which it has been working. The hon. Gentleman will be aware of the reporting with regard to Northern Rock. As I outlined earlier, there are other opportunities, in addition to the annual report, for hon. Members to probe Ministers on banks in temporary public ownership.
I am grateful to the Minister for his comment about the publication of the Bradford & Bingley business plan, but when will we see the first set of accounts of Bradford & Bingley under public ownership? Will there be a quarterly update shortly, or will we have to wait for full-year results?
I do not have that information to hand. I expect that Bradford & Bingley will publish a version of its business plan, although naturally there will be some commercially confidential matters. If I get further information on that issue, I shall be happy to transmit it to the hon. Gentleman.
The amendments have cross-party support; they come from the other place and they strengthen the Bill.
Lords amendment 17 agreed to.
Lords amendments 18 and 19 agreed to.