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I remind the Committee that with this we are taking New clause 1Objectives of the compensation scheme for depositors
(1) This section sets out the objectives for the compensation scheme for depositors.
(3) Objective 2 is to be able to make payments to depositors within seven days and to have eligibility criteria, qualification processes and information requirements which facilitate that.
(4) Objective 3 is to ensure that there are compensation arrangements for each bank brand.
(5) Objective 4 is to require that the scheme pays customers their gross balance and that any amounts due from customers are collected in the usual way..
New clause 2Compensation payable to depositors
(1) Each depositor will be entitled to receive from the manager of the scheme referred to in section [Objectives of the compensation scheme for depositors] a sum which is the lower of
(a) the deposit protection amount; and
(b) the gross balance held by the person.
(2) The deposit protection amount is £50,000.
(3) The Treasury may by order amend the figure in subsection (2).
(4) An order under this section may not be made unless a draft statutory instrument containing such an order has been laid before, and approved by a resolution of, each House of Parliament..
In addition to the points that I covered this morning, I want to emphasise that the Financial Services and Markets Act 2000 already provides a flexible and wide-ranging framework for the compensation scheme. Most of the improvements to the United Kingdoms arrangements for depositor protectiona goal to which the Government and other authorities are strongly committedcan be delivered within that framework, including the matters in objectives 3 and 4 of new clause 1, and the change in the limit in new clause 2.
Part 4 of the Bill therefore covers only the matters that cannot be dealt with under existing FSMA provisions, and the changes in this part should be considered alongside other changes being made to the legal framework of the Financial Services Compensation Scheme. The Financial Services Authority, as I said, is consulting on changes that may be made under FSMA powers, including, in the latest consultation paper on the review of limits, the compensation limits for other sorts of investment, payment of compensation by brand, dealing with temporary high balances, and changes to the way in which recoveries from a failed firm are calculated. The FSA is also considering the eligibility criteria for claimants under the scheme, information requirements for firms, and consumer awareness. So there is plenty going on at a detailed level to improve the arrangements for depositor protection in the UK. In our view, it would neither sensible nor desirable to cherry-pick some items and put them in the Bill as objectives or requirements.
Part 4 makes changes to the overall compensation framework that only primary legislation can do. If at a later time the hon. Member for Fareham wants to press new clauses 1 and 2I do not think he will, because I think he was genuinely trying to promote a worthwhile debateI would ask the Committee to reject them.
Let me summarise where we are. Members of the Committee have expressed views about various aspects of the Financial Services Compensation Scheme, with the one exception of the Minister, who has spoken about the generality of the scheme, but has not expressed a view on the Governments approach. Before the lunch break, he said that the FSA was consultingwhich it is, and the various stakeholders will respond to that consultationbut I question where the Governments intervention or input will come in the process. It is right and refreshing to hear a Minister say that we had better await the outcome of a consultation processI had not realised that it always worked like thatbut at what point will the Government say that the scheme is right, or that there is an issue? Taxpayers have ended up being the back-up in the scheme. We have talked about consultation on limits and, of course, the decision has been made about the limit, which is now £50,000, but the Government decided in connection with Northern Rock and the Icelandic bank accounts that there was no limit.
The Government will always be in a fall-back position if the scheme does not work effectively, to step in and intervene. It would be helpful to the Committee to understand how the Government will comment on the emerging consensus that will result from the FSAs consultation to ensure that taxpayers future liabilities are limited.
I want to pick up a couple of comments made by other hon. Members. The hon. Member for South-East Cornwall, who speaks from practical experience of the banking sector, raised a broader issue that is not covered by the new clausewhether the current scheme is still fit for purpose. It was designed for normal activities, such as the collapse of the odd credit union or an insurance company such as Independent Insurance, and I am not sure whether anyone had thought through the consequences for the scheme of a major bank becoming insolvent, and how those costs should be borne. We can perhaps touch on that in later sittings.
There was a broader issue about how the compensation scheme should be revisited. We never got to the bottom of the comment that my hon. Friend the Member for Wellingborough made about the current limitabout whether there is a de facto unlimited amount, or whether there is a £50,000 limit. My impression is that the Minister feels that we should wait and see, depending on the circumstances. That may be prudent, but it does not give constituents clarity as to how they should manage their affairs.
We will not come to the formal moving of new clauses until later, as you have indicated, Mr. Gale. This was a probing debate and we have covered a fair amount of territory, so I will not move the two new clauses, at the appropriate time.