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Clause 180

Banking Bill – in a Public Bill Committee at 4:30 pm on 28th October 2008.

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Inspection: warrant

Photo of David Gauke David Gauke Shadow Minister (Treasury)

I beg to move amendment No. 39, in clause 180, page 90, line 34, at end insert ‘acting reasonably’.

Photo of Jimmy Hood Jimmy Hood Labour, Lanark and Hamilton East

With this it will be convenient to discuss the following amendments: No. 40, in clause 181, page 91, line 4, after ‘it’, insert ‘reasonably’.

No. 41, in clause 180, page 91, line 9, after ‘assist’, insert ‘substantially’.

No. 42, in clause 185, page 91, line 33, after ‘England’, insert ‘reasonably’.

No. 43, in clause 185, page 91, line 33, leave out ‘think’ and insert ‘thinks’.

No. 44, in clause 190, page 93, line 31, after ‘Bank’, insert ‘reasonably’.

No. 45, in clause 190, page 93, line 33, after ‘otherwise’, insert ‘reasonably’.

Photo of David Gauke David Gauke Shadow Minister (Treasury)

The clause deals with the circumstances in which Bank of England inspectors may apply for a warrant entitling them to enter the premises of an operator of a payment system and in which justices of the peace may issue one. A number of conditions are set out and if any one of them is fulfilled, an inspector will be permitted to seek to obtain a warrant for entry. The amendment relates to condition 4, which states that

“a person occupying or managing the premises has failed to co-operate with an inspector.”

To understand the thinking behind the amendment, it is worth looking at the other conditions. It must be remembered that it is necessary to satisfy only one of them. Conditions 1 and 2 relate to the information-gathering process set out in clause 190. Condition 3 relates to refusing to give an inspector access to premises, despite reasonable notice having been given. If an operator has not failed to provide information or access, a warrant can none the less be issued on the basis that the person occupying or managing the premises failed to co-operate with an inspector.

The point of the amendment is that only an inspector who is acting reasonably should be able to obtain a warrant. The other conditions are set at the appropriate level, but condition 4 simply allows an inspector to make requests of the occupier of premises that are part of a payment system. If he refuses to co-operate in any way, he makes himself vulnerable to a warrant from a justice of the peace. I would be grateful for the Minister’s views on that point.

If I may talk generally on the clause, it would preclude the need, from my point of view, for a stand part debate. I shall raise the usual points and I am sure that the Minister will be obliging in responding to them. Will he give an assurance that the procedure in the clause will be used only in exceptional circumstances? Does he anticipate the Bank of England looking to obtain warrants to enter premises as a routine matter? Given his comments on clause 179, I am sure that he will have no problem in giving that assurance.

Amendments Nos. 40 and 41 relate to clause 181, which sets out that the Bank of England may require the operator of an inter-bank payment system to appoint an expert to report on the operation of the system. Amendment No. 40 would insert the word “reasonably” so that the Bank may impose a requirement only if it reasonably thinks that the operator is not taking sufficient account of the published principles or the code of practice. Amendment No. 41 would insert the word “substantially” in subsection (2)(c) so that the Bank may impose a requirement only if it reasonably thinks that the report is likely for any other reason substantially to assist the Bank in the performance of its functions under this part. Both amendments attempt to be slightly  more specific, because a report might be of only marginal benefit to the Bank yet cause substantial inconvenience and costs for the payment system, so it should not be issued lightly.

Amendment No. 42 relates to clause 185, which sets out the Bank of England’s powers to close a payment system, which is clearly a draconian sanction. The amendment proposes that those powers may be applied only if the Bank reasonably thinks that the compliance failure threatens the stability of the UK financial system. It is a probing amendment, so I would be grateful for the Minister’s thoughts on it.

Amendment No. 43 also relates to clause 185 but is less of a probing amendment. Although it would not be fair to claim that it goes to the heart of the Bill, I feel quite bullish about it. The current drafting states:

“This section applies if the Bank of England think that a compliance failure threatens the stability of the UK financial system.”

The amendment would instead state that the Bank of England “thinks” that the compliance failure threatens the stability of the UK financial system. Elsewhere, the Bill states that the Bank “thinks”, so I hope that the Minister will accept the amendment.

Amendments Nos. 44 and 45 relate to clause 190, which provides that the Bank of England may request information from an operator of a payment system. Again, I propose that that should occur when the Bank “reasonably” thinks that it will help the Treasury in determining whether to make a recognition order and when it “reasonably” requires the information in connection with its functions under Part 5. I am sure that the Minister will say that the Bank of England will act reasonably in all circumstances, but I suggest that we should include the provision in the Bill.

Photo of Peter Viggers Peter Viggers Conservative, Gosport 4:45 pm, 28th October 2008

I am of course aware that the explanatory notes do not form part of the Bill and have not been endorsed by Parliament, but one nevertheless looks to them for an explanation. In relation to clause 180 they state:

“The application is to a justice of the peace, who can issue the warrant only if certain conditions are fulfilled.”

The fact that “conditions” is plural could lead one to think that all the conditions need to be fulfilled, but my reading of clause 180(1)(b) is that the warrant can be issued if

“any of the following conditions is satisfied.”

I take it from my reading of the Bill that any of the conditions laid out is sufficient to enable a warrant to be issued. The Minister is indicating assent.

With regard to the amendment moved by my hon. Friend the Member for South-West Hertfordshire, I do not think that anyone disagrees that inspectors act reasonably. That rather flows back to my point that the words

“otherwise co-operate with an inspector” in clause 179 are really quite broad. One would like to think that the mandate imposed on the inspector is that he should act reasonably, so for what it is worth, I lend my support to my hon. Friend’s amendment.

Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury

I congratulate the eagle-eyed hon. Member for South-West Hertfordshire on amendment No. 43, which changes “think” to “thinks.” It was a typographical  error and he spotted it. Either it will be corrected, or I will happily accept the amendment. However, apart from that example, the Government’s view is that the amendments are unnecessary and inappropriate.

Amendment No. 39 would amend clause 180. When determining whether to

“issue a warrant entitling an inspector or a constable to enter premises,” a justice of the peace must look at a range of issues to see whether any of the conditions are met in order to issue such a warrant. I am happy to confirm to the hon. Member for Gosport that his interpretation is right; it is any one or more of the “following conditions”. The justice of the peace will look at whether the requirements on the operator of the payment system, including the requirement to co-operate with an inspector, have been met. If they have not been met, the JP will ask why, but even if the JP considers an inspector to have acted unreasonably, or that it was reasonable in the circumstances for the operator of the payment system not to comply, a warrant will not be issued unless one of the other conditions has been met. There is, therefore, no need to amend the subsection in the manner suggested.

Amendments Nos. 40, 42 and 44 relate to different clauses in the Bill and in essence have the same purpose. As hon. Members are aware, the Bank of England is adept at balancing public and private interests. As a public body, it is expected that it will act reasonably when undertaking its functions under this part of the Bill. It would be inconsistent with existing legislation to include the word “reasonably” in relation to the conduct of a public authority. For those reasons, the proposed amendments are inappropriate.

The Bank of England’s actions might be subject to judicial review, which could provide a remedy if the Bank’s conduct was found to be unreasonable, unfair or disproportionate. That is the normal way in which legislation is passed in this House and the other House. The word “reasonably” is not used in relation to public authorities, because it is expected that public authorities will act reasonably.

Amendment No. 41 would mean that the Bank of England can require a report only if it “substantially” assists the Bank in carrying out its functions. However, it might require a report in order to acquire further information, should it feel that an operator of a recognised inter-bank payment system is failing to meet its requirements. It may, therefore, be impossible to say at the outset that such a report would “substantially” assist the Bank of England. The report might be of only partial assistance, and would need to be combined with other information to provide a full and accurate picture of the system’s operation. We feel that the amendment would unnecessarily restrict the Bank of England’s ability to require the production of such a report. I therefore ask the hon. Gentleman to withdraw the amendment, although if he wishes to press amendment No. 43—a typographical error—I shall be happy to accept it.

Photo of David Gauke David Gauke Shadow Minister (Treasury)

I express my gratitude to the Minister with regard to amendment No. 43. He has demonstrated that Ministers can be reasonable, and it would be unreasonable to object to that. When we reach clause 185, I shall press the amendment.

As for the other amendments in the group, I am pleased to learn that it is assumed that public authorities act reasonably, although we can probably all think of circumstances in which that does not apply. However, given that the Minister has assured the Committee that the provisions reflect the manner in which statutes tend to be drafted, I am prepared not to press the point today. I am slightly alarmed by his comments about “substantially”, as he may be leaving open the opportunity for the Bank of England to go on what can only be described as fishing expeditions for further information. I am not sure that the drafting of clause 181 really provides protection for operators of banking systems in such circumstances, given that an independent report could be quite expensive and other factors need to be borne in mind, such as the management time that it could impose.

If the Minister can provide an assurance that independent reports will be used only in exceptional circumstances and that he does not regard them as a matter of routine, it could prevent the need for a stand part debate on clause 181. I would be happier if the Bank of England does not use independent reports under clause 181 for the purpose of fishing expeditions but, in the circumstances, I do not intend to press amendment No. 41.

Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury

It may help the Committee if I say that we do not see clause 180 and clause 181 on the independent report as being routinely exercised. If they were required, it would be for exceptional and unusual matters. I repeat that we expect the Bank, as a public authority, to act reasonably in making requests in such areas.

Photo of David Gauke David Gauke Shadow Minister (Treasury)

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Jimmy Hood Jimmy Hood Labour, Lanark and Hamilton East

Will the Minister help the Chair? Do I take it from his response to amendment No. 43 that it was accepted as it drew attention to a typographical error?

Question proposed, That the clause stand part of the Bill.

Photo of Stewart Hosie Stewart Hosie Shadow Chief Whip (Commons), Shadow Spokesperson (Treasury)

Subsection (1) states that a

“justice of the peace may on the application of an inspector issue a warrant entitling an inspector or a constable to enter premises”.

Will the Minister confirm that he really means that that would cover a justice of the peace issuing a search warrant in Scotland, which is a different jurisdiction from England, or does he mean a sheriff in such circumstances? If so, would the legislation under which that applied be the warrants procedure under the Police and Criminal Evidence Act 1984 or would it be the equivalent Scottish legislation? In any event, does that legislation allow only for a search warrant to be issued by a justice of the peace in England? Will the hon. Gentleman explain why the normal wording that ensures what legislation evidence is treated under is not included under this part of the Bill? Usually, when legislation outlines how a search warrant is issued, it specifies at the same place in the legislation under what legislation  the evidence would be collected and treated, whether it is PACE in England or separate Scotland legislation. Will he confirm that the Government mean that a justice of the peace will issue a search warrant when that is necessary in Scotland, or should it be a sheriff, and will he say under what legislation the evidence or productions in Scotland will be treated, and how that system will work?

Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary, Department for Business, Enterprise & Regulatory Reform, Economic Secretary, HM Treasury 5:00 pm, 28th October 2008

The hon. Gentleman makes a fair point. I do not have the answer, and I do not believe that anyone else in the room does either. I refer him to clause 180(7), which mentions the Police and Criminal Evidence Act 1984, but, as that does not clearly answer his question, I shall write to him about the situation. An amendment may be required to clarify matters.

Question put and agreed to.

Clause 180 ordered to stand part of the Bill.

Clauses 181 and 182 ordered to stand part of the Bill.