My hon. Friend makes a good point. The use of state aid is often a response in the context of difficult circumstances. That was certainly the case in the financial crisis, and it happens in other industries as well. Five years is the standard period for these arrangements to be executed or completed, and that is the reason, anticipating an intervention from my hon. Friend, that period was chosen. I dare say, however, that that there can be reflection on that: my hon. Friend the Member for Chichester may have a different view that he may wish to share with the House later.
Government amendments 15 and 16 reflect concerns expressed both by the Commission and in Committee that the use of ring-fencing transfer schemes to restructure groups could provide unscrupulous banks with an opportunity to shirk their responsibilities, such as liability with past misconduct. The requirement for PRA approval is a substantial safeguard against that, but Government amendment 16 requires that before the PRA can consent to a ring-fencing transfer scheme it must commission an independent report to assess whether anyone other than the bank itself would be adversely affected by the transfer. Government amendment 15 requires the PRA to “have regard” to that report in deciding whether to approve a ring-fencing transfer.
The hon. Member for Nottingham East will of course have more to say about amendments tabled by the Opposition, but his first amendment was debated extensively in Committee. It requires a review of ring-fencing every two years. I am certainly not set against an independent review. Indeed, the Bill builds in future reviews, including the PRA being able to report annually on the operation of the ring fence, and being able to report every five years on whether the detailed rules it has made are still delivering the objectives of the ring fence. Requiring another review specifically to look at the case for full separation risks in many ways achieving the opposite of the Bill’s intention, which is to secure consensus, as far as that can be established, and to provide for a stable regulatory structure.
It would be paradoxical for such a review to be confined to looking at ring-fencing or full separation, but not any other remedy for deficiencies that the review might uncover. Amendment 18 is identical to an amendment that was debated in Committee. The Government’s position is clear: in the Bill, we are following the advice of the commission chaired by Sir John Vickers, which considered the case for full separation—that relates to the point made by the hon. Member for Brighton, Pavilion (Caroline Lucas)—and rejected it. It is a different policy. I know that it has some distinguished advocates, but it is a different policy. Of course, any future Government could adopt it, but they should do so properly, through thorough analysis and following parliamentary and public scrutiny.
It is worth reminding ourselves briefly of the history of the proposals before us. They were not invented during the past few weeks or months. They go right back to 2010, when the Government established the Independent Commission on Banking under the chairmanship of Sir John Vickers. The commission produced three reports, instigated two public consultations, considered 1,500 pages
of written submissions and hosted more than 300 separate meetings. The Government produced a response and a White Paper, on which they again consulted fully before coming to Parliament. At each stage there was full cost-benefit analysis. Now in Parliament each detail of the policy is being debated—and has been debated in Committee—and in many cases improved.
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The proposal for a further power is a much diminished version of the process that has been undertaken to produce this policy. It would bypass the process of meticulous consultation, consultation of experts and parliamentary scrutiny that ring-fencing will have had, certainly by the time the Bill reaches the end of its parliamentary passage.