Only a few days to go: We’re raising £25,000 to keep TheyWorkForYou running and make sure people across the UK can hold their elected representatives to account.

Donate to our crowdfunder

Clause 49

Banking Bill – in a Public Bill Committee at 5:30 pm on 11th November 2008.

Alert me about debates like this

Independent valuer

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

With this it will be convenient to discuss Government amendment No. 107.

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

As the Committee will be aware, the determination of compensation under a compensation scheme order or a third party compensation scheme order will constitute a determination of a civil right for  the purposes of the European convention on human rights, and the requirements of article 6 of the convention will therefore apply. In particular, the compensation must be assessed by an independent and impartial person.

Accordingly, clause 49 provides for the amount of any compensation to be determined by an independent valuer. We touched on that point in a previous debate. The clause also sets out the process for appointing and removing the independent valuer. The Bill ensures that the valuer will be seen to be independent and impartial, as required by article 6 of the ECHR.

The clause sets out an appointments process whereby an order must require an independent valuer to be appointed by a person who is, and is seen to be, fully independent, as stated in subsection (2). The independent appointing person may appoint an independent valuer either from a list of suitable candidates supplied by the Treasury or by way of an appointment made with regard to criteria specified in the order. The clause specifies a number of other safeguards on the independent valuer’s security of tenure. For example, the independent valuer may be removed from office only on grounds of incapacity or serious misconduct, and only by an independent person.

The purpose of Government amendment No. 106 is the same as that of the Government amendments to clause 44: to remove the requirement that a compensation scheme order must always make provision for the assessment of compensation by an independent valuer. To summarise the arguments briefly, in some situations—for example, a sale through auction to a private sector purchaser—the rate agreed would reflect a market rate. In those circumstances, as I outlined about half an hour ago, the Government believe that there is no need to appoint an independent valuer to determine the compensation due. The compensation scheme order should simply state the level of compensation—that is, the price agreed—rather than providing for a mechanism to determine the compensation payable.

Government amendment No. 107 makes technical changes to clause 49 so that where an independent valuer is to determine compensation under a compensation scheme order, the provisions in clause 49 regarding his appointment, resignation and dismissal, and the appointment of any replacement independent valuer also apply. Again, I remind hon. Members that there is still a means for transferors and other parties to appeal against the compensation amount decided in accordance with the order.

I hope with that explanation and the read-across to the previous debate—

Photo of John Pugh John Pugh Shadow Minister (Treasury)

I am not sure that the Minister referred to Government amendment No. 106; I only heard him refer to Government amendment No. 107. However, to return to the point made by the hon. Member for South Derbyshire about the use of the word “may”, if “must” is substituted, as the Government wish to do, within the terms of the legislation a compensation scheme could presumably provide, in theory, for the amount of any compensation payable to be determined by somebody other than the independent  valuer, or in some other way than by a method of independent valuation. Is that a correct reading of Government amendment No. 106? There is a significant change of gear from “must” to “may”.

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

As I was trying to explain, the purpose of the amendment is to reflect the circumstances if there was a sale through an auction process, because a market rate would have been determined. Once a price has been established, it seems a highly artificial exercise to have to go through the process of appointing someone. It seems odd, after the price has been decided, that an independent valuer should come to a different judgment about the price and determine the compensation due to transfers as part of the process of selling the institution.

The hon. Gentleman is encouraging me to think about whether “may” might be used in other cases that have no auction process and where there is no clearly identified price.

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

In response, the only indication why we would not want to go down the independent valuer route at the heart of the clause would be if an auction process or a similar mechanism had clearly and demonstrably provided an agreed market rate. However, there are safeguards. If people felt that there were particular problems with the route that we had adopted, they would obviously have legal remedies and a right of appeal against the compensation order.

Photo of John Pugh John Pugh Shadow Minister (Treasury)

I accept some of the Minister’s remarks. I know what he intends. However, the legislation as framed could permit other activities than the benign acceptance of the consequences of an auction. Assurances given under the clause or elsewhere in the Bill would probably not be sufficient to eradicate that possibility. It may be a slim possibility, but it still exists in legislation.

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

To conclude, I hope that I have given assurances about the Government’s intentions on how the clause, if amended, would be used. However, I shall reflect on the matter and if more needs to be done to clarify things I shall endeavour to come back at a later stage.

Photo of David Gauke David Gauke Shadow Minister (Treasury)

I want to speak about the independent valuer. My comments may be more appropriate to clause stand part, but if I raise the issue now we may not need a clause stand part debate.

The role of the independent valuer will be important. On occasion, it is possible that some political pressure may put on the valuer. I can imagine circumstances in which our constituents wrote to us to raise concerns about the valuer, so independence is clearly important, as is the perception of independence.

The Government have given some indication of how independence is to be maintained, based on the limited grounds on which an independent valuer can operate. Will the Minister give us a little guidance on the type and status of the person the Government will be looking for to fill that position? Will he give us more information about the role of the appointing person? Subsection (3)(a) refers to the Treasury making arrangements

“to identify a number of possible independent valuers, one of whom is to be selected by the appointing person”.

Will the Minister give us a little more detail about the “appointing person”?

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

I do not think it possible at this stage to debate a job description for the independent valuer. Suffice it to say that they will be people with sufficient experience to make the judgments required of them in the circumstances. As for the appointment of an independent “appointing person”, I shall check with officials but I would be surprised if it was made under anything other than the normal public appointments process, following the normal rules that the Government apply in those circumstances. Should the position be different, I will revert to the Committee.

Amendment agreed to.

Amendment made: No. 107, in clause 49, page 22, line 25, at end insert

‘; and subsections (2) to (5) apply to an order which includes provision for an independent valuer.’.—[Ian Pearson.]

Clause 49, as amended, ordered to stand part of the Bill.