Banking (No. 2) Bill [HL]

My Lords, I, too, congratulate the noble Lord, Lord Smith of Kelvin, on his maiden speech. His experience and the insight that it brings will be a welcome addition to this House. As my noble friend Lady Noakes said, we on these Benches have offered our assistance and support to ensure that the Bill is enacted in a timely fashion. I very much hope that the Minster will respond in a similar spirit of co-operation and good will by listening carefully to the comments made during this debate. It is almost inevitable that enacting a complex piece of legislation against a deadline will result in alterations being needed as the Bill progresses through Parliament and quite possibly after it has become law. Indeed, Her Majesty’s Government have already proposed changes since the Bill was first introduced. Many of the comments made today have been of a technical nature with the aim of ensuring that the legislation works properly and that future problems arising from unforeseen consequences are avoided. Therefore, it is important that the Government fully consider these points. My noble friend Lady Noakes has, as usual, made many sensible suggestions. They all merit the Minister’s attention, but in particular I draw his attention to the remarks on set-off and netting arrangements, a subject also referred to by the noble Lord, Lord Eatwell, and others. It is essential that the banking and financial services industries operate against a background of absolute certainty where the legality of their arrangements is concerned, as my noble friend Lord Northbrook mentioned. In a litigious world, it is impossible to cope with the vast amounts of money involved without there being cast-iron certainty for all legal arrangements. Without that certainty, large parts of banking business carried on in London will go elsewhere. Parliament should be assisting the proper management of the industry rather than creating difficulties. As we have all seen in the past few months, banking is difficult enough without our introducing laws that cast doubt over the conduct of normal everyday banking business. That leads on to what has been referred to as the Henry VIII clause, which other noble Lords have mentioned. It is appreciated that changes to what is now Clause 75 have already taken place. The need for Her Majesty’s Government to have the necessary flexibility to cope with unforeseen emergencies is also recognised, but for Parliament to allow the Executive to make retrospective alterations to the law is bad both in principle and in practice. There should always be certainty in the law. As I have commented, banks need certainty to manage their business. To change the law at the whim of the Executive without recourse to Parliament is the act of a totalitarian state. While I recognise that a mechanism is needed to cope with difficult situations, such draconian measures are inappropriate in a free society. I also point out that Northern Rock and Bradford & Bingley were handled without this proposed legislation being in place. I will return to this point in detail in Committee. Continuity of service to bank customers is important, as my noble friend Lord Eccles said. As he and my noble friends Lady Noakes and Lord Northbrook pointed out, banking services are a vital component of many people’s lives. It is to be hoped that the Minister will recognise the importance of continuity as regards people’s bank accounts. The failings of the tripartite authority need to be addressed, as my noble friend Lord Eccles and the noble Lord, Lord Bilimoria, pointed out. The speech of my noble friend Lord James demonstrated yet again his knowledge and expertise. He raised a number of interesting points. His comments on relinquishing the requirement for the Bank of England to account for money in circulation were striking. If this discipline has been successfully carried out by the Bank for more than 150 years, why should it be stopped now when in these uncertain times it is more important than ever that this sort of information should be available? I am sure that the House particularly looks forward to the Minister’s response to the remarks of my noble friend Lord Saatchi, which were as serious as they were entertaining. My noble friend Lady Noakes and the noble Lord, Lord Williams of Elvel, referred to the need for post-legislative scrutiny. Some aspects of the Bill may not be seen for many years, as they relate to powers that will be used only in what it is hoped will be exceptional circumstances. However, their use is significant. As such, it is only right and proper that whenever the stabilisation powers are used a full explanation should be given of why they were used and how the decision to use them was arrived at. Parts of the legislation will have immediate effects on how banking business is conducted. Given the complexity of this Bill, the speed with which it is being introduced and its massive potential impact, there will almost certainly be some unforeseen consequences. It would be irresponsible not to have a post-legislative review reasonably soon after the Bill becomes law. I am sure that, with his experience in commerce, the Minister will appreciate this point. Before sitting down, I repeat my exhortation to the Minister to give full consideration to the many constructive points that have been made during this debate.