Banking Bill

The hon. Gentleman is slightly confusing the attack point that he wants to make; he is roping in my hon. Friend the Member for Chichester (Mr. Tyrie), and that has not been the main line that No. 10 has taken—this does not apply to the Treasury, to be fair—in briefing against me for the past week while we have been trying to offer some cross-party support for what the Prime Minister has been doing. [Interruption.] Let me make it absolutely clear to the hon. Gentleman: I did not, and neither did my colleagues on the Front Bench, take any private briefing from the Bank of England and repeat it on any television programme or in any newspaper article. The issue of recapitalisation, or the possibility of it, had been discussed openly in the press for some time; Martin Wolf had written a fairly convincing piece about it in the Financial Times the previous week. More to the point, Dominique Strauss-Kahn, the head of the International Monetary Fund, had said, also in the Financial Times, that recapitalisation was the approach that European Governments should be considering, rather than the TARP—troubled assets relief programme—approach put forward by the United States. I know that the Prime Minister now casts himself in the roles of Churchill and Roosevelt in dealing with this crisis, but the idea that somehow recapitalisation was not being discussed across the world is somewhat bizarre. By the way, I met all the different members of the tripartite committee that week; the idea that I took a private briefing and repeated it is simply not true. I give the hon. Gentleman and the House that assurance—not, I suspect, that that will stop the Prime Minister's boot boys from doing their job. Before I move on, I want to touch on one point about the special resolution regime—the trigger. As the Chancellor said when I intervened on him, I do not intend to insist on this point, but I draw the House's attention to who exactly pulls the trigger. No one doubts that the FSA should pull it, but there is some disagreement about whether the Bank of England should also have access to the trigger. The Governor of the Bank of England told the Treasury Committee that he felt that he should have that power. We were convinced by his arguments to the Committee. We have spoken to regulators and central bank governors in other countries and we know that they can see an argument for a central bank having such a trigger. All I say to the Chancellor is that although we will not insist on the point—we will not try to get the House of Lords to insert it into the Bill—we reserve the right to return to the issue later. Although between its first report in January and its second report in September, the Treasury Committee amended its view on whether the Bank of England should have the explicit trigger, it said that the Bank should have explicit powers in primary legislation to recommend the pulling of the trigger to the FSA; such a provision, however, is not in the Bill. Moving on to part 4 of the Bill, I welcome the increase in the deposit protection limit to £50,000, and we are glad that the Government have agreed to it. It would be interesting to hear whether there are any further proposals on that, given that some Governments around the world are still increasing their deposit protection limits and issuing general guarantees. The key thing is that people have rapid access to their money, and it will be interesting to know when the FSA will introduce its proposals. Although it is not directly relevant to the Bill, with your indulgence, Madam Deputy Speaker, I ask the Chancellor—or whoever from the Treasury will reply in this debate—to tell us how he intends to deal with Equitable Life, which is another compensation issue that arose from a failure of regulation. We have the parliamentary ombudsman's report and we are awaiting the Government's reply. Most people would regard it as somewhat bizarre that the Government can compensate people—quite rightly—for losses in foreign banks because of regulatory failures in Iceland, but cannot compensate people for losses caused by regulatory failures in the UK in relation to Equitable Life. It would be interesting to know when the Government propose to deal with that. I shall touch briefly on clause 156 and pre-funded compensation schemes. I know that the Government are giving themselves the power to have a pre-funded scheme, but the Chancellor knows, as he acknowledged, that the industry is nervous about that. The Association of British Insurers says that it would impose a heavy cost on the financial services industry that is undesirable given the current economic weakness. In what circumstances would the Chancellor consider introducing a pre-funded scheme? Would there be some test about how strong the industry had become? Such a test is not likely to be passed for a considerable period. On the new structures and procedures for the Bank of England, more than two years ago, we proposed that appointments to the Monetary Policy Committee should be more transparent and made in the way that other Government appointments are. I am glad that there has been some movement in that direction, but we could do more to entrench the independence of the Bank. Recent events have shown that there is no shortage of politicians who are willing to jump up when times get difficult and call for the Bank's independence to be suspended—indeed, the hon. Member for Twickenham (Dr. Cable) was one of them—but it would be more serious if the Chancellor or Prime Minister of the day was tempted to use the power to reappoint the Governor for political purposes. Whether it was intentional or not—we have our own views on that—we have been through the reappointment of Eddie George and Mervyn King, and in both cases the decision became somewhat charged. Our proposal is that, rather like the European Central Bank and other central banks, we should move the Governor to a single, non-renewable term so that there is no question of independence being challenged by a reappointment.