Clause 60 is crucial to the Bill. It places a duty on the Treasury on the one hand and the Bank and the PRA on the other, to co-ordinate the discharge of their functions. Again, it is a shame that the Bank of England and the PRA have been lumped together. It does suggest that there is always the overruling power of the Bank of England over the functions and activities of the PRA, so the co-ordination responsibilities have been framed in that way.
Will the Minister explain why there is not also a requirement to co-ordinate with the FCA? That seems the glaring anomaly in the clause. If the FCA is, as is believed, a slightly more independent entity, surely it is more necessary for that body to have a duty to co-ordinate, rather than leaving co-ordination to the Bank and the PRA. The Government amendments agreed earlier suggest that the Government were willing to look at involving the FCA a bit more thoroughly in the process of co-ordination when it came to the memorandum of understanding. However, they have not done so in clause 60. Will the Minister say why it was appropriate in earlier clauses but not this one? It is an important principle and I do not quite see the logic. As a result I am concerned about the clause.
One assumes that these bodies will automatically co-operate. However, the Joint Committee recommended having a clause in the Bill that required the Bank of England group, which includes the PRA, and the Treasury to co-ordinate during a crisis. If there is a crisis, significant responsibility will rest particularly with the Bank and the Treasury. That is why the clause is drafted as it is.
We talked earlier about the FCA, as a micro-prudential regulator of small deposit takers—not as a matter of course—potentially having powers. That would be only for small institutions, whereas here we are talking about a major crisis. It is unlikely that the FCA would have a role in a major crisis, even if it were to take on some additional micro-prudential responsibilities. This situation is very much related to crisis. The section on crisis management responds specifically to a pre-legislative scrutiny Committee recommendation, which is why we have drafted it in that way.
Except that clause 60 does not specifically say that. It refers to the duties of those organisations
“to co-ordinate…as they…affect the public interest."
Of course, there is the overriding paragraph about the stability of the financial system, but the Minister has already accepted the principle that the FCA would be relevant in some circumstances. I do not see the harm in including the FCA in those duties to co-ordinate. What would be the harm in including the FCA?
The problem is that the hon. Gentleman, as he demonstrated with his earlier amendments, does not get to grips with this issue. He thinks that in a crisis the FCA should be involved regardless, in the same way as he thought the FPC should be involved regardless. There is a clear limitation here. Subsection (2) talks about “public funds notification”. This is a very narrowly defined duty to co-ordinate.
I do not think that it is necessary to include the FCA, where there is an issue about the stability of the UK financial system arising from a widespread financial crisis. We have future-proofed the Bill elsewhere to take account of relatively minor situations where the FCA may have some micro-prudential responsibility for small institutions. It is unlikely that its powers will be relevant when a large bank or insurance company is under threat.
It is fair to respond to the comments of the pre-legislative scrutiny Committee. I have done so in the clause, and I think the right balance has been achieved. The hon. Gentleman would accuse me of being churlish if I did not accept that Committee’s recommendations from time to time. He needs to reflect on the fact that the FCA is not currently tasked with the safety and soundness of deposit takers and insurers. The big difference between us on the matter is that our future proofing takes into account a situation in which the FCA might be a micro-prudential regulator for banks or insurers—it is not—whereas the hon. Gentleman thinks that the FCA should be involved regardless.
It is a question of ensuring that the right people are party to the conversations so that they can contribute whatever benefits they might bring to the discussions. What harm would come from allowing the FCA to sit around the table in the co-ordination and discharge of these functions? I accept that it would not necessarily be a primary player in some of those considerations, but the Bill tasks it with responsibility for the efficient and effective functioning of markets, which is a pretty big responsibility that will have an impact on the public interest and might have an indirect impact on the stability of the UK financial system. Why keep the FCA outside in the hallway instead of allowing it in the room to discuss the matter?
The Government’s approach seems stubborn. The Minister has included the duty to co-ordinate in response to a recommendation from the pre-legislative scrutiny Committee, and it is an important concession. The clause could have been improved further, however, and perhaps we should have tabled an amendment to it. I assumed there would be some logical reason for the provisions, but there does not appear to be.
Does my hon. Friend see some inconsistency in clause 60(2), which emphasises
“the importance of co-ordination in circumstances where the Bank has given, or is considering the giving of, a public funds notification”?
That is another angle to the reason why we need to pause and look at the clause. Although the duty to co-ordinate is important, it would be wrong to let the clause pass with its current deficiencies. It is a question of the glass being half full or half empty, and unfortunately the glass is a little bit empty because the FCA is left out in the cold.
I do not see that any harm would result from the arrangement that I have suggested. The Minister justifies the rejection of that arrangement by saying that clause 60(2) specifically mentions the importance of co-ordination as a function of “public funds notifications”, but only the Treasury, the Bank and the PRA must have regard to it in such circumstances. The clause does not exclude circumstances where there might be a question of market function. I feel that the clause needs improvement, and I am not happy to see it stand part in its present form.