Building Societies (Financial Assistance) Order 2008

I thank the Minister for introducing the order. Given the sweeping powers that the Government took in the Banking (Special Provisions) Act earlier this year, the activation of the building society powers in this order, under Section 11 of that Act, should not delay us long. However the Minister would not expect me to let anything connected with the Northern Rock debacle pass through this Grand Committee without some further comment. I start with the timing of the order. When the Banking (Special Provisions) Bill was considered by your Lordships’ House, the Treasury submitted a memorandum to the Delegated Powers and Regulatory Reform Committee in relation to Clause 11. The Treasury stated that it intended to make an order under this power ““as soon as possible”” after the passing of the Bill. It received Royal Assent on 21 February—some three months ago. Can the Minister explain why the Treasury has taken so long to do something that it asserted it would do as soon as possible? We are all accustomed to the peculiar use that the Government put to words such as ““shortly”” or ““very soon””. I venture to suggest that no ordinary person, let alone an ordinary parliamentarian, would think that three months to produce an order that was to be made ““as soon as possible”” was reasonable. That is especially the case in the context of a Bill that was passed through both Houses of Parliament using the urgent and accelerated procedure. Can the Minister explain the reason for the delay? Why has the order been produced without consultation? Once the heat of Northern Rock had passed in February, it seemed that the sense of urgency dissipated. I can understand why the Treasury would want to draw up a draft order for building societies, but I cannot understand how, given that the urgency has passed, it thought it appropriate to dispense with consultation. The Minister referred to consultation in his opening remarks, and I may have got this wrong, but paragraph 7.5 of the Explanatory Memorandum to the order states: "““There was no public consultation on the Order””." Why have the Government bypassed the normal processes of consultation? That leads me to suppose that there may be something specific—perhaps a specific building society—behind this order. Is this order being rushed through because the Treasury thinks that one or more building societies may need to rely on the provisions of the order? If that is not the case, it is clear that the Treasury should follow the normal consultation provisions. Either way, we should be told. Can the Minister comment on the contents of the banking reform Bill announced last week in the draft Queen’s Speech? The commentary on the Ministry of Justice’s website refers to that Bill as covering only banks. The Treasury’s website, as far as I could see, contained absolutely nothing about the Bill. Will it apply to building societies as well or do the Government intend for all time to rely on secondary legislation powers in the Banking (Special Provisions) Act or perhaps the banking reform Bill? It will take a lot to persuade us that relying on secondary legislation as the long-term way of legislating for building societies is the correct way to proceed. Finally, will the Minister update noble Lords on the implementation of the Building Societies (Funding) and Mutual Societies (Transfers) Act 2007? It allows, inter alia, for the proportion of wholesale finance that building societies can accept on a routine basis—not the Bank of England facilities but ordinary facilities, to rise from 50 per cent to 75 per cent. In a sense, this is intimately related to the order. I am sure that the Minister will recall the passage of that Act. It originated as a Private Member’s Bill introduced in another place by my honourable friend Sir John Butterfill and was passed at a time of turmoil in the credit markets, so much so that the Minister made a quite extraordinary statement from the Dispatch Box on the debate on Bill do now Pass on 12 October 2007. Perhaps I may remind him that he said: "““The Bill allows flexibility for the future in relation to wholesale funding as the Treasury would be able to use the power in Clause 1 to increase by order the maximum level which building societies can borrow from wholesale markets to 75 per cent. Clearly, in the light of recent events in the wider financial markets, we will want to consider carefully whether such a power should be used””.—[Official Report, 12/10/07; col. 457.]" As I understand it, there has been no implementation yet of that Act. It remains in limbo waiting to be brought to life by the Government. What is the Government’s thinking on this? Will the Act be activated, and if not, why not?