Clause 58 - Directions under section 57: supplementary provisions

Financial Services Bill – in a Public Bill Committee at 8:45 pm on 20th March 2012.

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Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury) 8:45 pm, 20th March 2012

I beg to move amendment 192, in clause 58, page 136, line 22, leave out from ‘Bank’ to ‘give’ and insert ‘must’.

The amendment relates to supplemental provisions, including consultation requirements in relation to the Bank of England. The Bill states:

“On being given a direction, the Bank may, if it considers it appropriate to do so, give the Treasury a report on how it is complying or intends to comply with the direction, and on such other matters relating to the direction as it considers appropriate.”

This is one of those provisions that I always feel is provocative to the Opposition: “Please come and amend this if you happen to spot it.” The Minister will not be surprised that we have tabled an amendment to leave out the ambiguity in the words

“may, if it considers it appropriate to do so”.

We feel that it is not unreasonable to provide that, in a situation where the Treasury has gone so far as to direct the Bank of England, the Bank must give the Treasury a report on how it is complying or intends to comply with the direction. I cannot see arguments for not requiring it.

I suspect that the provision is one that the Bank asked for to give it a little wiggle room in the to-ing and fro-ing in the relevant negotiations between it and the Treasury. However, as to the phrase

“if…appropriate to do so”

I do not understand why the Bill is drafted in such timid and coy terms. It seems as if the Treasury is stepping on egg shells, watching the Bank’s sensitivities and trying to spare its blushes.

It is perfectly possible for the Bank to be required to give a report on its compliance. Surely the Minister agrees about that. It would be a very strange dynamic, would it not, if the Treasury, having gone so far as to make that formal direction, had then to tease out information about whether, when and how the Bank would comply with it. It is a strange provision and it is inappropriate for it to be so vaguely drafted.

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

Would my hon. Friend suggest in what circumstances it would not be appropriate for the Bank to report on whether it was complying? The words

“if it considers it appropriate to do so” perhaps suggests that there are inappropriate circumstances.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

That is why we need to wait for the Minister’s rationale. He must tell us why that is the case. I am getting to that moment imminently, but there are another couple of points that he needs to bear in mind on the amendment. There is a problem with parliamentary accountability, in that clause 59 requires any reports from the Bank under clause 58(3) to be laid before Parliament, but if the Bank decides not to publish a report, Parliament will not be able to scrutinise it, so there are downstream consequences for us. It is not only the Treasury that will not see the reports. There should be no grey area.

I hope that the Minister will accept the spirit in which the amendment was tabled. Perhaps he put the provision in the Bill deliberately to see if we spotted it—it would be good if that were the case—and we have spotted it. Can he really say that the clause is framed in the right way?

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury

It may be immediately obvious that the Bank has done it. If the Treasury’s suggests that Bank X goes into a bridge bank, and the news headlines say, “Bank X has Gone into a Bridge Bank”, we will know that it has done it. There may be some things for which compliance with the direction is so obvious that it is hardly worth the Bank telling us, because we all know that it has happened. One has to be careful not to have an unnecessarily bureaucratic mechanism.

The hon. Gentleman does have a point on what happens if a bank does not comply. We should think about whether the provision can be tightened to ensure a more automatic reporting process, which may be a comply or explain route or using “must”, but let us think about what the appropriate mechanism is to enhance transparency.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

I like it when the Minister shows such thought and care for the amendments we table. It shows that he is occasionally a reasonable and thoughtful fellow—very rarely.

The Minister is right to say that the provision could be improved. I do not think that he needed to make the argument about things being so obvious, because I would be slightly worried if the Treasury only got its information from what it read in the tabloid newspapers or wherever. [Interruption.] That is true. My hon. Friend the Member for Islwyn said that we know what—

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

My hon. Friend said that, such is the lax attention to proper etiquette towards Parliament, we know what is in tomorrow’s Budget from what we read in the newspapers.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

Mr Leigh, I could hazard a guess that we might see changes to the top rate of tax and any number of changes to pensions tax relief, but such things are shifting around the deckchairs. It is important that we focus on the amendment before us.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

It is tempting to speculate on the Budget.

We should not rely on news headlines to be the main conduit of information to the Treasury. Even a short handwritten note from the Governor, saying that we have taken an institution into administration or whatever it happens to be, would suffice. It would be proper to have a formal route.

I accept the Minister’s comments in the spirit in which they are intended. I was going to press amendment 192 to a Division, but I sense that he wants to look again at  the issue. I am grateful to him for indicating that, so am happy to withdraw it. Let us hope that we will see something on Report. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

I have a small point to make to voice our concern over the asymmetric dynamic between the Treasury and the Bank. We talked a little about that on amendment 192, but I want to press the Minister on another issue. Subsection (8) says:

“Each of the following must be in writing…a direction…a report under subsection (3), and…a notice revoking a direction.”

Why is that wording so different from the wording in clauses 54(7) and 55(5), which simply say a notification

“must be given or confirmed in writing”?

The provisions in clause 58 seem stronger. I do not understand why the initial communication in subsection (8) would not be possible orally, with subsequent confirmation in writing. Why are there different standards in different clauses?

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury

I am not entirely sure I understand the point. Under the clause,

“a direction…a report under subsection (3), and…a notice revoking a direction” are all required to be done in writing, and the same is true of a notification under clause 55(3)—the same thing is happening.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

My point was really about the fact that there are high standards in clause 58, but lax standards in previous clauses. I was just trying to get a sense of who on earth is holding the ring for consistency in the drafting of the Bill, but I will not labour the point, because we have said enough about the clause.

Question put and agreed to.

Clause 58 accordingly ordered to stand part of the Bill.