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Landsbanki Freezing Order 2008

My Lords, I join the noble Baroness in welcoming the Minister both to this House and to his new job. We are particularly pleased to have a proper Treasury Minister in our midst—not that the noble Lord, Lord Davies, was in any sense improper, but at times I felt that he was dealing with our questions with one hand tied behind his back because he was not of the Treasury, as it were. We are glad that the noble Lord, Lord Myners, will be able to take our concerns back to the Treasury with even greater speed than was possible with the noble Lord, Lord Davies. I will not repeat the long list of achievements of the noble Lord in the City, but just two or three stood out for me. I note that he makes much of his Cornish upbringing. I can only assume that he has imbibed some of the liberal principles with which we associate that county and brings them to all his work in Parliament. He also mentioned contemporary art, and I see that he was chair of the trustees of the Tate Gallery. It says he that he ““is”” a trustee of Glyndebourne. I do not know whether he has been allowed to keep that on or has had to give it up as well, but I hope that the noble Baroness and I are not so assiduous that we keep him from both those enjoyments of life. I turn to the legislation. As the noble Baroness has said, a number of questions have been raised, not least by my colleagues last week in debates on the Counter-Terrorism Bill about whether it was appropriate for this action to be taken using a piece of legislation called the Anti-Terrorism, Crime and Security Act. To most people, that sounds as though it relates to anti-terrorism, crime and security, but this action does not. I accept entirely that there are powers in the Act that can justify it, but at the very least it has given the impression that the Government have pushed the boundaries of what the legislation was intended to cover. Whether or not that is the case, it has obviously created difficulties in our relations with Iceland and caused confusion more generally. I have not heard it put in quite the way the noble Baroness did; her proposal was that the section of the Act used to justify these orders would be better placed outside the anti-terrorism Act and put into a separate piece of legislation. Indeed, the provisions look as though they were parachuted into the Act from somewhere else, or added using scissors and paste. The Act does not flow, as it were, and Section 4, which was used to justify these orders, looks completely out of place. I have a more general question about the legislative route taken. At the same time as the Government were instituting these orders, they were taking powers under the Banking (Special Provisions) Act for Kaupthing. In that case, they arranged for the retail deposits of Kaupthing to be shifted across to ING Direct while putting the bank into administration. Can the Minister explain why that route was chosen with Kaupthing and its retail depositors, but a similar procedure was not adopted for Landsbanki and the Icesave depositors? The great advantage for retail depositors with the Kaupthing route is that they have had access to their accounts all the way through. Equally, why was the remainder of the Kaupthing bank put into administration under the Banking (Special Provisions) Act rather than its assets being frozen? I am not suggesting that there is anything to hide here, but they are completely different routes and it would be useful to be given an explanation for it because I have not seen any so far. The Minister spoke at some length about the licensing provision and the noble Baroness voiced perfectly understandable criticisms about the way that was brought about. I have just one question on that: have representations been made by any sector of Landsbanki account holders saying that they should have been beneficiaries of a licensing provision, but have still found their assets frozen when they feel that they should legitimately have access to them at this stage? The noble Lord said a little about the timetable and the process going forward. I accept that we are at a point where things are progressing quickly and it is difficult to be totally precise. However, can he confirm that the Government have made a commitment that individual retail depositors will get all their money back and not just £50,000? I have read a number of suggestions to that effect. On the other bodies with deposits in Landsbanki—the local authorities, charities and businesses about whom there has been much discussion—can the Minister give us any sense of the likelihood of them getting a significant proportion or the majority of their deposits back? I realise that it may be impossible at this stage, but if he were able to say something, it would reassure many people. We are not discussing the Kaupthing situation because the legislation under which the orders were made meant that they were passed using the negative resolution procedure, but as the Minister will be aware, the situation in respect of Kaupthing depositors, particularly in the Isle of Man, is causing considerable concern, not least because many of those involved were ignorant about the fact that their deposits were actually Isle of Man deposits. I shall come back to that point in a second. Other problems have also been brought to my attention. Some people transferred their money out of the Isle of Man into Kaupthing in the UK several days before the order took effect and their money—their entire life savings—has, in effect, disappeared into a black hole. I would be grateful if the Minister could signpost them and other people who are worried about their deposits in the Isle of Man to whichever body he thinks is best able to give advice at this stage. As he will be aware, there is very considerable concern about this. We shall have to return on another occasion to the whole sorry story about the collapse of the Icelandic banks because it raises broader issues. First, the relationships between the UK and Icelandic Governments were far from satisfactory; there are huge disputes about who said what to who and a childish spat has developed between the Chancellor and his opposite number in Iceland over what they were talking about. The whole thing looks an amateurish mess. It raises big issues about how depositors in banks other than domestic banks get their information and how they decide on risk when the deposits are outside the UK. Many people—not least, local authorities—have found that their money is in jeopardy yet, as the noble Lord mentioned, the IMF was issuing clear warnings about the state of the Icelandic banks before the summer. In the Times on 5 July, Patrick Hosking, in his article ““How safe is cash in a bank beyond UK regulation?””, described the depositor protection scheme in Iceland as being, "““a bit like relying on a pocket handkerchief as a safety net for an elephant””." How right he was. Yet sophisticated treasurers and relatively sophisticated investors either do not read the Times or choose to ignore this kind of advice and then, when something goes wrong, they look to the Government to sort out all their problems. This is an unsatisfactory situation. Although protecting people from their folly is something the Government will never completely achieve, we need to look at this in the context of the Icelandic banking collapse and banking collapses elsewhere and the advice and advisory structures available to enable people to be more aware of what is happening. This applies not only to the local authorities, who clearly should know better, but, as we have seen from our postbags, there is a major problem with people who took out accounts in Kaupthing, particularly in the Isle of Man, who were completely ignorant of the differences in the regulatory frameworks of the Isle of Man and the UK. No doubt people in Guernsey and Jersey who find that they have no depositor protection are learning for the first time what some of the differences between the jurisdictions are. The simplistic part of me thinks that sending a gunboat to these places and sorting out their financial arrangements to bring them into line with the UK might have a lot to recommend it. I suspect, however, that that approach will not commend itself to the Government. The large number of distraught people who, to a greater or lesser extent, either were misled or allowed themselves to suspend disbelief is a problem with which we need to grapple in the months ahead. However, the Government have acted decisively in a way that they believed protected people. It has protected people and we therefore support the orders.