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Clause 193

Part of Banking Bill – in a Public Bill Committee at 6:00 pm on 28th October 2008.

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Photo of Angela Eagle Angela Eagle The Exchequer Secretary, Member, Labour Party National Executive Committee 6:00 pm, 28th October 2008

I wish to spend a little time setting out the broad structure and intent of part 6 of the Bill, and then I will not make a habit of leaping up to speak on clause stand part debates unless I have to.

Clause 193 provides an overview of part 6, which repeals and replaces certain provisions regarding the commercial issuance of banknotes in Scotland and Northern Ireland. Before we discuss the details of clauses in part 6, it might help the Committee if I set out the background. The issuance of national banknotes is usually a function undertaken by the central bank, which in the UK is the Bank of England. With the exception of Hong Kong, the UK is highly unusual in allowing a number of commercial banks to issue their own banknotes. The right to issue is set out in the Bank Notes (Scotland) Act 1845, the Bankers (Ireland) Act 1845 and the Bankers (Northern Ireland) Act 1928—for ease I shall refer to them in future discussions on part 6 as “the current legislation”. Although 1845 might not seem all that current, we are in the process of updating it in part 6 of the Bill.

The provisions in part 6 update, modernise and strengthen the current regime for note issue, which dates back, as I just said, more than 160 years. Clearly, the world today is a very different place from when the legislation was first enacted, so I should like to take the opportunity to discuss some of the history of banknote issuance in the UK, to ensure that our future debates are informed of the context.

The Bank Charter Act 1844 prohibited any new banks in England and Wales from issuing banknotes and barred existing note-issuing banks from expanding their issue. The 1845 legislation in Scotland and Ireland made similar provisions in respect of banks in those nations. At the time, 21 banks applied to become certified to continue issuing banknotes in Scotland and Northern Ireland. That number has decreased over time through mergers, insolvency or by banks choosing to stop issuing, so a total of seven issuing banks remain. Those seven banks are currently authorised to issue banknotes and will continue to be authorised to do so with the commencement of part 6, provided that they abide by the requirements placed on them under the provisions of this part.