Activities indemnified by Treasury

Bank of England and Financial Services Bill [Lords] – in a Public Bill Committee at 2:15 pm on 9 February 2016.

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Photo of Richard Burgon Richard Burgon Shadow Minister (Treasury) 2:15, 9 February 2016

I beg to move amendment 15, in clause 10, page 7, line 37, at end insert—

“(6A) The Treasury must lay before Parliament a copy of any report it receives under subsection (5) within one calendar month of receipt.”

As the Bill reads, clause 10 applies where the Treasury gives an indemnity or guarantee to the Bank in respect of an activity or series of activities that it undertakes. Our amendment 15 simply seeks to maximise transparency and accountability with regard to this by requiring the Treasury to publish a copy of such a report within a reasonable timeframe. We hope that the Government will accept this amendment.

Photo of Harriett Baldwin Harriett Baldwin The Economic Secretary to the Treasury

If I may, I will speak to clause 10 at the same time as speaking to amendment 15. Clause 10 obviously defines the process which will deliver greater oversight of activities undertaken by the Bank or a company of the Bank, where that activity has been indemnified by the Treasury. In such circumstances, the Treasury takes on the risk of the activity and will bear any associated losses. It is right that the Bill allows for full NAO oversight of these activities.

The occasions on which the Treasury grants an explicit indemnity to the Bank of England are very rare. Examples include the provision of emergency liquidity during the financial crisis and, more recently, the asset purchase facility, which is the vehicle by which the Bank of England has purchased £375 billion of Government bonds to deliver the Monetary Policy Committee’s quantitative easing policy. Clearly, these are very different examples. The former relates to an operation undertaken on the Bank’s balance sheet to provide assistance to an institution in distress. The latter case is an example of an activity undertaken by a subsidiary company of the Bank. Given the Bank’s varied role, it is difficult to predict every circumstance in which an indemnity of a Bank activity might be considered necessary in the future. Clause 10 allows for discretion to be applied to each case of indemnified activity. In some circumstances a financial audit may not be required. However, the objective of this clause is clear. It will facilitate greater accountability of indemnified activities where this is appropriate.

Amendment 15 would require the Treasury to lay a report on activity indemnified by the Treasury before Parliament one calendar month after receiving it from the Bank. Let me say first that Treasury indemnities of specific Bank activities are very rare. I have cited a couple of examples. In the example of the provision of emergency liquidity during the financial crisis, clearly the information being shared between the Bank and the Treasury would have been extremely sensitive. It would have included commercially confidential material and potentially information that put at risk the stability of the wider financial sector. It is clear from just that one example that publishing a report of this kind could really work against the public interest in the future, especially if the Treasury were bound by a specific statutory deadline. The Treasury must retain that flexibility over whether and when such reports should be published. I urge the hon. Gentleman to think hard about that and withdraw the amendment, while urging the Committee to agree that clause 10 stand part of the Bill.

Photo of Richard Burgon Richard Burgon Shadow Minister (Treasury)

I mentioned earlier the possibility of compromise on the part of the Government when it comes to balancing the protection of information they believe needs to be confidential because of financial risk with the requirement for transparency. I mentioned the practice of having some matters under the line and some over the line in local authorities and on boards of school governors. I encourage the Government to think further about that possibility in relation to the areas where transparency has been requested. We reserve the right to return to the matter on Report but I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 10 ordered to stand part of the Bill.

Clause 11