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Banking Bill — Committee (4th Day)

Part of the debate – in the House of Lords at 3:15 pm on 20th January 2009.

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Photo of Baroness Noakes Baroness Noakes Shadow Minister, Treasury 3:15 pm, 20th January 2009

Still dealing with the continuity obligations, we now move to what the transferee has to pay for them—or, to put it the other way round, what the transferor can receive for them. I shall speak to the seven other amendments in the group as well. They concern the arrangements for remuneration in respect of the provision of continuity services. In Committee in another place, the Government moved amendments to replace the original concept of "market rate" with one of "reasonable consideration". I accept that "market rate" caused some difficulties because it might allow monopolistic pricing. Unfortunately, "reasonable consideration" has no defined meaning in commercial terms and, as drafted, leaves rather too much to the opinion of the Treasury, using its power under Clause 69, to which the Minister referred earlier, to determine what amounts to reasonable consideration. The Treasury has no natural or indeed obvious competence in the pricing of services reasonably.

My amendments address three issues: whether "reasonable consideration" is the right term; what obligations are on the Treasury and the bank to achieve reasonable consideration and other terms; and an appeal mechanism in case of disagreement as to the consideration or other terms.

Amendments 107, 109, 110 and 112 replace "reasonable consideration" with,

"such consideration as would be expected in arrangements concluded between parties dealing at arm's length".

That phrase would apply to Clauses 63, 64, 66 and 67. This formulation is used in those clauses for determining the other provisions in the arrangements for continuity services. It seems to me that if it is good enough for determining general terms and conditions, the formulation would be right and consistent for determining consideration.

Amendments 108 and 111 would delete the words,

"aim, so far as is reasonably practicable", from Clauses 64(3) and 67(3). That would require the Bank of England or the Treasury actually to achieve both "reasonable consideration" and other arm's-length terms. The question posed by these amendments is: why should there be any issue of reasonable practicability? The service providers want assurance that they will be dealt with on arm's-length terms and at a proper price. Why should the authorities have any let-out from achieving that? What, in practice, is targeted by this caveat wording of,

"so far as is reasonably practicable"?

Lastly, Amendments 113 and 114 replace the order-making power in subsection (1) of Clause 69 with a requirement for the Treasury to appoint someone independent to determine terms or price, whatever formulation is used, in the event of disagreement. I should probably have deleted subsection (2) as well, for completeness, but I do not think that that matters for the purposes of today's debate.

There is a theme running through these clauses that the residual bank and the group companies will do what they are told on the terms they are given and for monetary consideration that the Treasury determines. These residual operations, and certainly other group companies, may well be viable businesses, with their own priorities, and it is important that they are treated fairly. These amendments are intended to be a contribution to that, and I beg to move.