With this it will be convenient to discuss the following:
Amendment 183, in clause 61, page 137, line 35, after ‘PRA’, insert ‘and the FCA’.
Amendment 184, in clause 61, page 137, line 42, after ‘PRA’, insert ‘and the FCA’.
Amendment 189, in clause 61, page 138, leave out lines 2 and 3.
Amendment 185, in clause 61, page 138, line 4, after ‘PRA’, insert ‘and the FCA’.
Amendment 186, in clause 61, page 138, line 9, leave out paragraph (a).
Amendment 190, in clause 61, page 138, leave out lines 13 to 17 and insert—
‘(7) The memorandum is a measure prescribed by the Treasury by order which shall not be made unless a draft of the order has been laid before and approved by resolution of each House of Parliament.’.
I am sorry that the hon. Member for West Suffolk was unable to join us in that Division. He obviously has important business relating to tomorrow’s activities ahead of him. He has been allowed to go off and get on with those important activities, so Government Members have been left holding the fort on his behalf. As we know, he is an important fellow.
In a sense, this group of amendments develops some of the arguments we have made in previous discussions. Amendments 181 to 186 would amend clause 61, which addresses the memorandum of understanding on what would happen in certain circumstances in relation to a particular crisis. The amendments would, for example, insert “and the FCA” at line 23 so that the Financial Conduct Authority would join the Treasury in drafting and preparing a crisis management memorandum for such circumstances. We began to debate that a moment ago during our consideration of clause 60.
The collaboration between the Treasury, the Bank and the regulators is exceptionally important. The Government’s earlier amendments gave me the impression that the Government were beginning to see sense, but as the clause stands, although the Treasury, the Bank and the PRA may include in the memorandum provisions on co-operation between any of them and the FCA, the FCA has been given the power only to agree or not, so the FCA will not be party to the drafting process; that is a strange scenario. Again, I do not know why that situation exists. We believe that the FCA should be an equal party to the PRA in authoring, preparing and maintaining the memorandum of understanding, rather than merely having a veto on it; otherwise, there is a chance that risks to financial stability caused by disruption in financial markets overseen by the FCA could be given insufficient weight.
In the arrangements later in the clause, it is strange that certain bodies are able to say only whether they agree with the draft that the Treasury, the Bank of England and the PRA put before them. The Minister might take the view that a committee should not draft such things and that the memorandum of understanding should be drafted by the fine narrative that only one or two, or in this case three, bodies can provide, but that does not apply in this circumstance. It would be better and wiser to involve the FCA in crisis management preparations because we just do not know what type of crisis might be round the corner.
Again, I sense that the Minister has drafted the Bill always looking backwards to the scenarios that history has taught us. Yes, learning from history is important, but it would be foolish to preclude scenarios in which market failures might prompt certain crisis arrangements. Not to have the FCA in the room helping to author how the cogs in the wheel will operate in such a crisis scenario seems an incredibly strange decision on the Government’s part.
Amendment 189 is a probing amendment that would leave out subsection (4):
“The memorandum need not make provision about the relationship between the Bank and the PRA.”
There is again the sense that the Governor or the Bank of England took exception to the Chancellor’s concession that a memorandum of understanding is necessary in order to try to provide for circumstances in which a crisis might occur. In stamping its authority at this point in the Bill, the Bank appears to have drawn a line, saying, “Don’t you dare tell us how the PRA should interact with the Bank of England. It is a matter for us entirely.” That again suggests that the PRA is a creature of the Bank of England—if any subsection ever said such a thing, this is it.
We suggest leaving out that arrangement. It would be interesting to hear the Minister explain why the Treasury should not be able to detail some of the dialogue and contributions that the PRA might have to make in crisis management scenarios, and why the Treasury should not have powers to at least negotiate some detail on how that relationship would work. It plays to our suspicion that there is somehow an attempt to gag or suppress the PRA’s voice in a crisis, so that it must always be channelled through that of the Governor, as the only voice heard by the Chancellor at such times. It is a dangerous set of circumstances, and it would be better if the PRA’s voice could be heard in those scenarios. As we have only been able to interpret subsection (4) in that way, will the Minister explain his logic for arguing that the Treasury should not be able to make provisions about that relationship? Does it not prove the subservient nature of the PRA, and why we should be careful about muzzling the PRA’s voice in that manner?
Incidentally, it would be useful if the Minister took this opportunity to set out his understanding of the replacement procedures for the PRA’s departing chief executive. I am sure that he will not want to go into too much detail on individuals, but we have read in the papers that Mr Hector Sants is departing the organisation, and it is important to get a sense of when that appointment process will be resolved. Will information be provided at a future stage of the Bill?
Amendment 190 would leave out lines 13 to 17, inserting a replacement subsection (7). So far, all the clause does is insist that the Treasury lays a copy of the MOU before Parliament and
“publish the memorandum as currently in force in such manner as they think fit”.
Having conceded the affirmative resolution procedure for a number of other points—and I welcome the Minister’s change of heart in that regard, particularly on FPC order-making powers and so on—why not give us the opportunity for proper parliamentary scrutiny of that MOU? The Bill already provides insufficient accountability to Parliament in a number of different ways, and our amendment would be far more consistent with the parliamentary control of orders as previously set out in the Bill. The Minister will understand why we feel that such a change should be made, so will he at least consider our point?
It will be during a crisis that it is proved whether this financial regulatory architecture is a success. Obviously, we cannot predict everything that might happen, but that does make these particular arrangements important. The Bill sets up a complex variety of organisations, as we have discussed at length, and splits functions that were previously within the FSA by creating different bodies, albeit all largely under the umbrella of the Bank of England. Several different organisations will have a role to play in the event of something going wrong, and getting that right is particularly important. How that is laid out, who takes the decisions and who talks to whom will be extremely important.
On Second Reading, there was debate as to whether we have a quadruple situation with several organisations of relatively equal weight advising the Treasury or whether we have what has been described as a twin peaks arrangement with the Treasury and the Bank of England, which encompasses the other organisations, and how that would work. If we simply have the two organisations—the Bank and the Treasury—there is a risk that the Bank will become much more important in the way that it relates to the Treasury. Would the Treasury have full information from all the different elements of the regulatory framework in order to understand what is happening and, most importantly, make the right decision in the event of a crisis? Much as we hope that there will be no crisis, it is essential that we get the arrangements right. Currently, the Bank of England could have internal disagreements on such matters, with the regulatory arms within it having different views on how to proceed. That will be dealt with internally by the Bank, and it will make a view known to the Treasury, but the Treasury will not necessarily—although it may do informally—have the full view of that internal debate between the different regulatory arms within the Bank.
At times during our debates, we have heard that such discussions are occurring anyway, so it does not matter whether we put them on the face of the Bill, because there will obviously be constant contact and people will know what is happening. At other times, however, such arrangements are specifically laid out. We cannot have it both ways. If it has been deemed necessary to lay down specific indications, such as in the clauses we dealt with earlier this evening, as to when notifications should be made, it is doubly important that the memorandum of understanding dealing with the most important decisions that the structure will make is outlined in full in order to avoid the risk of the Treasury not receiving the fullest possible information. The Bank may have its own internal discussions before coming to the Treasury, so the wrong decision might be made.
I will be brief. I just want to raise a couple of points, and I hope that the Minister will respond. To put them in context, I want to return to an earlier debate on what would constitute material risk. I recall the Minister saying that that would be difficult to define. However, the explanatory note to clause 61 states that
“the memorandum must address: what the Treasury and the Bank regard as a material risk for the purposes of clause 55(1)”,
so, notwithstanding that it is actually quite difficult to define, the explanatory notes make it clear that that was the intention. There is another point I want clarification on in relation to the memorandum of understanding as outlined in the explanatory notes. It states:
“For example, the memorandum could include provisions about the regulation of a financial institution which might seriously affect diplomatic relations between the United Kingdom and a foreign country.”
Why is that specifically referred to in the explanatory notes and why does it say “could”? Will the Minister give us some examples of where he thinks that might be relevant? It is in the explanatory notes, so someone must have thought about it.
Let us be clear: we want to move away from a situation where we have unclear and overlapping roles in crisis management. That was inherent in the tripartite system. The Bill sets out a new approach, which involves the Treasury being responsible for public funds and the Bank as a single point of accountability for financial stability. They are to co-ordinate together, rather than in a large committee, which was the method tried by the previous Government and which clearly failed. Our approach ensures clarity and a focus of communication.
It is clear that the FCA has no significant role in crisis management. To the extent that it needs to be involved in assessing a risk or evaluating options to resolve the risk, it can do so under the existing provisions and in the MOU. It is not a requirement for the FCA to be a full participant in the MOU. There is a risk that that would lead to it being involved in discussions and decisions where it lacked a clear role. There is a duty on the FCA and the PRA set out in new section 3P of FSMA, as inserted by clause 5, which emphasises the importance of regulators co-operating with the Bank on the Bank’s duty to notify the Treasury of risks to public funds. That ensures that, in the unlikely event of a potential risk to public funds arising solely from the FCA’s areas of responsibility, the FCA will inform the Bank, which enables the Bank to make a notification if appropriate.
The hon. Member for Nottingham East also talked about the need to have some provisions in the MOU for the co-ordination of the Bank and the PRA. I do not know where he has got this obsession from, talking about people gagging others, dominant force and brooking no dissent. I cannot imagine who he has had experience of in that role. [Laughter.] The purpose of the MOU is not to describe in detail how the Bank and the PRA will co-ordinate. It is for the Bank to determine how its various parts can co-ordinate most effectively. The MOU needs to focus on the relationship between the Treasury on the one hand and the Bank group on the other.
On parliamentary scrutiny, we have ensured that there is provision for the Treasury to lay before Parliament a copy of the MOU and any revisions to the MOU. That is a helpful way to ensure that there is accountability and scrutiny of the MOU. It will be a prerogative of the Treasury Committee, for example, to discuss the MOU and to understand how it works in practice.
The definition of material, which was raised by the hon. Member for Kilmarnock and Loudoun, is, as I have indicated, difficult. There is a requirement in the MOU to define it and that definition should be kept under revision. With that, I hope that the hon. Member for Nottingham East withdraws his amendment.
I will certainly do that, because there are quite a few amendments in this group. It would be churlish to divide the Committee on all six amendments, from 181 to 186, which would insert the proper role of the FCA from the memorandum of understanding on crisis management provisions into the Bill. We will test the Committee’s view on amendment 181, which will suffice as a way of pressing the point.
I disagree with the Minister’s view of the FCA’s role and the harm that would supposedly come if we allowed it to take part in the drafting of a memorandum of understanding. It would be entirely reasonably to allow it to be party to the drafting, rather than just having the memorandum presented to it. Okay, it has the power to veto or change things after the fact, but it is an awkward way to draft and design an MOU. Would it not be far more sensible, easier and more consensual to be party to that process in the first place? This rather convoluted provision of having organisations that get presented with the fait accompli and then have to say yes or no, but with almost no negotiation involved, is a strange way to draft a clause.
“The memorandum need not make provision about the relationship between the Bank and the PRA” is an odd one to have put in the clause. Provision can be made, but need not be made. I cannot quite see what subsection (4) brings to the party. It is an entreaty to say, “Don’t intrude too much on to our terrain.” It is a very “get your tanks off our lawn” subsection, given that that lawn is now expanding. We have heard about Threadneedle street and the vast expense of the new offices at Moorgate. One gets the sense that an empire is beginning to be built, and the manifestation of that is in subsection (4).
I disagree with the Minister’s position on use of the affirmative procedure for the MOU. He should have conceded that particular change, which would have done no harm, given the importance of the matter. He knows that there are differences of opinion and, therefore, that the threshold for scrutiny is much higher for that memorandum of understanding. I will, therefore, press amendments 181 and 190 to a vote. Reluctantly, I will not press the other amendments in the group, not because they are insubstantial or insignificant, but for the sake of brevity and to ensure that we have an efficiently run Committee stage.
‘and set out draft standing orders of an ad hoc Stability Committee’.
This is another quite important amendment in relation to the memorandum of understanding. The issue came up on Second Reading and relates, in particular, to paragraph 20 of the draft memorandum of understanding on crisis management from the Treasury—a copy of which I am sure members of the Committee will have—which states:
“During a potentially fast-moving crisis, it will become especially important to ensure close and effective co-ordination so as to maintain coherence in the overall crisis management process. At the heart of institutional coordination during a live crisis will be frequent contact between the Chancellor and the Governor. However, the Chancellor and the Governor may agree to establish ad hoc or standing committees at other levels to support this process.”
The memorandum of understanding recognises that some level of formality of a committee or sub-committee structure to work properly through a series of decisions in a crisis management scenario might be necessary. However, there is no detail of those ad hoc or standing committees throughout the rest of the document. Such matters are left opaque and dangling in the air. They are not properly resolved, and presumably will be left on a dusty shelf until such time as we have a crisis and the document has to be brought off the shelf, dusted down and on we go.
The amendment would ensure that the MOU has more particulars of the constitution of the arrangements to resolve a particular crisis. Obviously, we believe that there is a strong case for setting out the draft orders on how the ad hoc meetings would take place and what sort of arrangements would exist. Whether it were called a stability committee, as we have suggested, or however it were termed, it would be important to capture an arrangement so that in preparation for the emergency plan, we would know details of how that co-operation would be thought through before a crisis erupts rather than its being cobbled together in the heat of the situation.
If Ministers started tearing their hair out, saying, “My God, there is a crisis happening. This is dreadful. Let’s set up a series of ad hoc committees quickly,” I am sure that capable and diligent civil servants within the civil service machine would be able to supply answers readily and do so with great success. However, I worry that that might take some time, so it would be preferable if such arrangements were settled as far as possible ahead of time. It is a dusty area of the policy. While emergency planning and preparedness is not something that often hits, after the fact people will always say, “Why didn’t you think about this before the situation arose?” We should take stock now and take the opportunity to deal with such matters, or at least require the participants in the drafting of the MOU to set up more specific stability committee or ad hoc committee arrangements so that the standing orders are clearer. That is the logic of the amendment.
I do like the idea of a stability committee. It reminds me of the council for financial stability under the Financial Services Bill, prior to the general election. It could be the tripartite committee, the quadripartite committee or the bipartite committee. I wonder whether working out what the standing orders are for a committee is the best use of time. The MOU is there to facilitate how the organisations would work during a crisis. Trying to recreate failed models of the tripartite committee or the council for financial stability will not do it. We have seen how they failed under previous regimes, and we do not want to repeat those mistakes. Yes, there may be times when ad hoc groups need to get together, but let us not try to recreate the failed models of the past.
That is a wholly unsubstantial response from the Minister. He has a totally complacent attitude to what ought to be his duty as a Minister: to take preparedness properly into account, though not here in the Committee. We are just saying that in the MOU, he should ensure that the organisations think about how things would work. He infects his argument with a sort of partisan nonsense, saying that we are attempting to resurrect the old tripartite committee arrangements; not at all.
I am quite happy to accept that we have a new architecture and a new set of structures, with the PRA, the FCA and others playing their particular part. All I am saying is, rather than waste time when the proverbial difficulties hit the fan, why not at least commission the players, with all their vast capabilities ahead of time, to think about how such things are done? One could argue that that is part of the scenario planning of how such arrangements might come to pass, and I just think that it is worth doing.
I am sorry that the Minister takes such a dismissive attitude to emergency planning and preparedness; after all, I thought that that was the point of the MOU and the whole section of clauses before us. He gets us right to the brink in paragraph 20 of the MOU, and then falls short and does not detail any aspects of it. I am afraid that it is necessary to press the point. Amendment 187 is necessary.
I beg to move amendment 188, in clause 61, page 137, line 40, at end insert ‘and ensure that the Governor and all Bank of England Deputy Governors and the Chief Executive of the FCA may consult with the Treasury directly.’.
Clause 61 will make a number of changes where we believe that the voices of the Governor, the deputy governors and the chief executive of the FCA should be more explicitly and clearly heard by the Chancellor of the Exchequer. We are seeking to amend clause 61(2) to add a further point to the provisions of the memorandum. In particular, it should ensure that the Governor, all the Bank of England deputy governors and the chief executive of the FCA may consult the Treasury.
We have already voiced our concerns about the concentration of power in the hands of the Governor, so it will not surprise the Committee when I say that relying on one person’s opinion is not the best way to proceed when so much rests on it. The amendment would ensure that the deputy governors or the chief executive of the FCA can have their voice heard by the Chancellor if they have concerns. That might be especially relevant if the Governor does not share their view, and it is easy to envisage such a situation.
Such an amendment would benefit the Government of the day and the Chancellor, not Her Majesty’s Opposition. We simply seek to ensure that as many voices as possible can be heard and that there is no doubt that they will be heard clearly, particularly if there is a difference of opinion. As the Bill stands, there is a risk that the Governor might not judge it appropriate to inform the Chancellor that a deputy governor or the chief executive of the FCA, or indeed both, believes there is a material threat to stability or the use of public funds. If the Governor, for whatever reason, makes a personal judgment to dismiss their views in the belief that there is no such danger, the Chancellor will not hear those important voices. It is not beyond the wit of man to imagine such a scenario, and the amendment would address it.
In the current situation, the Chancellor hears from the head of the FSA, Adair Turner. Under the new system and the memorandum of understanding, he will hear from no one other than the Governor. I therefore have to ask again whether the Minister is not in the least concerned that the current drafting of the MOU might not only prevent the Chancellor from hearing such important voices in a crisis, but undermine important relationships and create tension between key post holders in the new regulatory architecture. Would there not be a greater likelihood of leaks if certain people felt they could not voice their concerns to the Government and that leaks were the only way to get information out? We have already seen in the Budget process that leaks often occur on financial policy, and it would be a shame if we ended up instituting a set of circumstances that made that worse.
To help ensure that the right voices are heard at the right time in a crisis, we should enshrine in the Bill a provision to ensure that the deputy governors and the chief executive of the FCA have a right to voice their concerns to the Chancellor of the Exchequer.
We come back to the hon. Gentleman’s obsession with dominant figures preventing any dissent from emerging from an organisation. Not every institution works like that. It is clear from existing dialogues between the FSA and the Treasury, and between the Bank and the Treasury, that there is quite a lot of interaction at all levels. Whether we are talking about Ministers and the Governor and deputy governors, or Bank of England officials and Treasury officials, that engagement and openness are there, so the amendment is not necessary.
The hon. Gentleman seemed to suggest that the Bank of England means the Governor, but it does not; in the Bill, the Bank of England means the Bank of England. The question whether the use of public funds is appropriate is not a matter for the Governor’s personal opinion; that is completely irrelevant, because it is for the Bank to notify the Treasury of a risk. As clause 54 clearly sets out, it is the Government’s opinion that matters. As soon as the Bank is aware of a risk of circumstances arising in which the Government might reasonably be expected to consider it appropriate to use public funds, the Bank must notify the Treasury immediately. So it is not a matter of the personal opinion of a Governor or deputy governor. It is about whether they believe the Government might be reasonably expected to consider it appropriate to use public funds.
I noticed that the hon. Member for Nottingham East did not talk about this issue much in his winding-up speech on Second Reading, but he has suddenly been gripped by new enthusiasm. Perhaps he feels the need to please his boss at the moment, who I can imagine is a dominating figure who brooks no dissent.
I have several times heard the Minister say that the Bank of England is a legal personality in its own right, which is of course the case. However, the Bank cannot be a single voice in that sense, or, if it is to be one, surely that will be in the actual person of the Governor; otherwise it is not clear how that voice will be expressed.
There is a court, the Governor, and three deputy governors. There is a range of forums in which the Bank’s view can be determined and expressed. It does not require an individual to reach that conclusion. There is an undue obsession with personalities in the debate and a failure to recognise interaction that takes place at a practical level between institutions.
Also, the reality is that the duty to make the notification is imposed on the Bank, not an individual. Hon. Members should not lose sight of that fact.
I am sorry that the Minister feels he can fudge the issue in that way, by saying that the Bank means the Bank, and therefore the Bank will do what it is going to do. Signatures are necessary on orders and decisions. Individuals and their posts in the Bank are clearly important. The Minister is the one who is creating a new deputy governor for prudential regulation. Therefore it would seem perfectly reasonable to ask whether that deputy governor will have the right to have their voice heard, even if that is in contradistinction to that of the Governor of the day. It is not clear whether that will be so. One can only hope that we will have a very relaxed Governor, who will delegate decisions and be happy to allow dissent, or differences of opinion. That is not necessarily something that we can always bank on.
On that point about the Governor and the obsession that the Minister claims the Opposition have with the Governor’s power, does my hon. Friend accept that the Treasury Committee, in its 21st report of the 2010-12 session, “Accountability of the Bank of England”, agrees with Opposition Members? It said that it wanted a stronger supervisory board, because it was concerned about the concentration of power in the hands of the Government without it. Indeed, one of the Members who called for it is a member of this Committee—the hon. Member for Hereford and South Herefordshire.
My hon. Friend is right. We tested this discussion in clauses 2, 3 and 4, and elsewhere in the Bill, and we did not manage to get a supervisory board to create that better balance of accountability and power in the Bank of England. Perhaps we shall come back to that later, but I do not think it is unreasonable to clarify the point and allow those voices to be heard. It is important that we do not just assume that the pragmatic realities of dialogue will just follow their natural course, everyone will get on swimmingly, and of course the Governor will allow dissenting voices or differences of opinion to be heard. We know that organisational structures tend sometimes not to work in that way.
I hope that that is how things will work, and the Minister may be very relaxed about the circumstances, but we will probably have a new Governor of the Bank of England by the time the measure is enforced in large part. We do not know who it will be, their character, how they are likely to govern or what sort of management systems they will put in place. We will have to keep our fingers crossed and hope that they are relaxed and collegiate, or we could ensure that that is the case by making provision for it in the Bill. That is the intention of the amendment, which it will be important to press to a Division.
It is a pleasure to serve in Committee under your chairmanship this evening, Mr Leigh.
I fully understand the arguments made by my hon. Friend the Member for Nottingham East about the deficiencies of clause 61, but I am not persuaded that the amendment will resolve them; in fact, it might create more difficulties. If the memorandum of understanding is to deal with crisis management, I am not sure that making a general provision for the Governor, all the deputy governors and the chief executive of the FCA to be able to consult the Treasury directly would necessarily make that crisis management easier. If the MOU makes such a provision, does that mean that the Treasury has to check with all the deputy governors and the head of the FCA each time that it hears from the Governor, or that the deputy governors or the chief executive of the FCA can at any time make speculative inquiries of the Treasury about what the Governor tells it? We have talked about the need for certainty during crisis management, and I am not sure that the amendment would fine-tune the process of crisis management; I think it would add to the uncertainty.
If I support the amendment, I would contradict my position on previous amendments. I backed an amendment which stated that, if there was disagreement between the Monetary Policy Committee and the Financial Policy Committee, the Governor would be charged with reporting such disagreement to the Chancellor; it also related to how that disagreement was resolved. Having supported an amendment to vest such a clear power in the Governor to communicate to the Chancellor on behalf of the Bank, it would be contradictory for me to argue that, in the dire exigencies of crisis management, there could be a free-for-all on communications with the Treasury. I am not sure that the amendment would lead to certainty. It would not help the roles of the people named in it and it would not positively improve the Treasury’s position.
Amendment proposed: 190, in clause 61, page 138, leave out lines 13 to 17 and insert—
‘(7) The memorandum is a measure prescribed by the Treasury by order which shall not be made unless a draft of the order has been laid before and approved by resolution of each House of Parliament.’.—(Chris Leslie.)
Hopefully we can find a way to cool the room down—or perhaps we can keep the door open—because the heat of our debate has given a sauna-esque feel to our proceedings. Fortunately, I like to run warm, and it is heartening to have such a sense of support from so many Committee members.
The clause relates to the crisis management MOU, which is a key concern in the Bill that was discussed at length on Second Reading. During that debate, my right hon. Friend the shadow Chancellor pressed the Chancellor several times on the danger of leaving the matter of communicating a material threat to stability and the use of public funds exclusively to the Governor’s personal judgment. The Government have given some ground through their amendments 98 to 100 by including the FCA in the list of organisations that relate to notification and when the Treasury might reasonably expect to incur expenditure. We remain concerned, however, that the Bill falls short of allowing the deputy governors to be heard, which was why we tabled amendments. These are important matters. The Government are creating new and additional regulators. They must accept that the internal wiring between regulators will be made more complex by additional numbers of such bodies. They must properly address how those bodies will interact in a crisis situation.
Opposition Members are not convinced that the memorandum of understanding, which we have seen in draft form, will be sufficient. Improvements could be made to the MOU, not least through proper scrutiny of the provisions in Parliament. The Bill would have been improved if the Minister had allowed the affirmative procedure to apply to the adoption of the memorandum. He has already dismissed the notion that there might be disagreement between the deputy governors and the Governor. He regards that as a minor point with which we should not concern ourselves, but the memorandum of understanding must deal with that properly.
Paragraph 37 of the draft MOU states:
“Treasury Ministers are responsible for keeping Parliament informed of action taken to manage a financial crisis—including action taken by the Bank without any public funds implications. The Bank will keep the Treasury informed to the degree needed for Ministers to fulfil this function.”
Is not the Minister nervous that the Bank might keep him informed only to the degree that it sees fit? Would it not be more appropriate for him to have full knowledge and facts, rather than only those that the Bank chooses to give him?
I should be grateful if the Minister would explain why the explanatory notes are out of kilter with the clause’s current drafting. There are either typos or mistakes in them; they seem to refer to clause 59 duties when I think that they should refer to clause 60 duties, for example, and they refer to section 55 notifications when I think that they should refer to section 54 notifications. [Interruption.] My hon. Friend the Member for Kilmarnock and Loudoun agrees—she has spotted similar problems. Perhaps I have misread the explanatory notes, but is the Minister willing to accept that a corrected version needs to be issued?
With respect to clause 61, we need to bear in mind that the Treasury’s engagement is when public funds are at risk. We seek to create clarity. Yes, it is important that the Bank notifies the Treasury as appropriate when it has resolved a situation without recourse to public funds but, clearly, the information required will vary between circumstances. The alternative would be to go into immense detail in the MOU about the amount of information that should be provided, and it is not clear that that is necessary.
The hon. Gentleman says that paragraph 37 of the MOU suggests that the provision of information would be based on the opinion of the Bank, but that is not right. As the Treasury reports to Parliament, the Bank needs to give the Treasury sufficient information for the Government to be accountable to Parliament. It is not about the Bank’s opinion; we need sufficient information from the Bank to enable Parliament to hold us to account so, in terms of disclosure, the obligation is on the Treasury, not the Bank.
We will look again at cross-references in the explanatory notes and, if necessary, revise them in the other place.
I am grateful to the Minister for that. The explanatory notes could have been more helpful generally throughout our consideration in Committee. Running into such typographical errors makes them difficult to navigate, but that is a minor point, and we have more general concerns.
The Minister knows that we have worries about the inadequacies of the MOU provision. Although we agree that, of course, an MOU on crisis management is necessary, it is framed in such a lax manner—without proper definition, without clarity on how the ad hoc committee arrangements in paragraph 20 will work, and without an opportunity for Parliament to approve it though a statutory instrument—that it is necessary, given that this is an early stage of the Bill’s passage, to send a message that this is a failure. We therefore cannot support clause 61.