Clause 56 - Circumstances in which Treasury power of direction exercisable

Part of Financial Services Bill – in a Public Bill Committee at 8:30 pm on 20th March 2012.

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Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury) 8:30 pm, 20th March 2012

We have discussed matters relating to the meaning of the word “Bank”, so we do not need to run through that discussion—[Hon. Members: “Hear, hear.”] Perhaps we do need to run through it again. If I have not convinced hon. Members, the power of my oratory is obviously as not as strong as it might be at this hour.

I find it strange that the Financial Policy Committee is missing from the list of organisations with particular responsibilities in subsection (5)(b). The clause is a prelude to the main Treasury power of direction, which the Treasury Committee was keen to see in the Bill. It provides a set of preconditions under which Her Majesty’s Treasury may exercise power and direction over the Bank of England. That is fair enough—I suppose it makes sense to try to define such circumstances and, essentially, fetter the Treasury, so that it cannot direct the Bank more frequently.

The Minister has set out in the clause three specific scenarios or circumstances in which the power of direction might be used. I want him to assure us that he genuinely believes that the provision has been drafted with sufficient breadth to capture hypothetical future scenarios. He  has cast back and considered the circumstances of the most recent crisis and has imagined when such a power might have been necessary. In terms of the Banking Act and the implications for the FSCS, will the Minister reassure us that there is enough flexibility and breadth to capture future crises, in which the Treasury might need to have a power of direction, not least to safeguard public funds? The power could be in relation to any number of various crises that might occur. Is it wise to be as specific as he has been in the legislation?

I accept that the balance is difficult to find, because one has to ensure that there is some sort of check on the Executive’s ability to interfere with the workings of the Bank of England, but on occasion it may be necessary to interfere. That is my main question to the Minister, and I would be grateful if he could elaborate on that.