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Banking Bill

Amendment 38 38: Clause 20, page 9, line 37, at end insert— ““(5) An appointment under subsection (1)(d) or (2)(d) may be made in connection with an appointment under section 164A (Remuneration committee).”” First, I should like to pass on the apologies of my noble friend Lord Wedderburn to the Committee. Unfortunately, he is ill and cannot be here, although he was looking forward to our debate on this issue. Amendment 38 is a paving amendment for Amendment 145, to which I shall also speak. The aim of new Clause 164A, which is proposed under Amendment 145, is to enable the Treasury, with the agreement of the FSA and the Bank, to have a limited power in order to intervene and prevent irresponsible remuneration being paid to the executive directors of a bank. The order would normally be made where public funds have been provided for a bank. The huge remuneration paid even to a failing bank’s top executives has been much criticised in the past. The proposed new clause adopts a mechanism to which responsible bankers can hardly object; that is, a voice on the remuneration committee which sets the levels of such rewards. The Companies Act 2006 requires a report to the shareholders’ meeting on directors’ remuneration only in the case of quoted companies. That shareholders’ vote is only advisory. The clause would enable parallel provisions to apply also to all banks, quoted or unquoted. The mechanism adopted is to enable the Treasury to appoint a member to the remuneration committee or any parallel body with suitable immunity under the Bill, but subject to the ordinary general fiduciary duties of a director—for example, to act in good faith in the interests of the bank and the community—so that the voice of the public interest can be heard in its deliberations. It may be doubted whether a responsible bank would defy that voice by paying enormous and irresponsible remuneration where that was contrary to the public interest and the interests of shareholders. The established City principle ““comply or explain”” would clearly be applicable. The new clause would enable the Treasury, with the FSA and the Bank, to act generally in this manner, but it would be expected to make clear its intention to adopt this mechanism in cases where public funds had been provided to a bank as part of the deal. The provisions of Part 1 and Part 3 are relevant to such cases. If banks are to be supported by taxpayers’ money, it is important in the current climate that there should be some sort of accountability with regard to the salaries and bonuses paid to senior executives. It is common knowledge that very large sums have been paid, even in situations when the decisions for which such executives have been responsible have resulted in catastrophe. Many ordinary employees who have been completely innocent of the decisions at senior level are now facing redundancy, often in areas where alternative work is not readily available. One can understand what resentment will arise should the senior executives who share a substantial part of the responsibility for the present crisis walk away with large sums. I am sure the Minister is aware that many completely innocent people will suffer in the crisis we face—not only are former employees facing unemployment and impoverishment, interest rates are the lowest ever and are likely to go down still further, perhaps to zero. Effectively, prudent people will have to pay for the imprudent. This is a transfer of money from savers to borrowers. Many elderly people will see their income diminished at an age when they have no chance to make good their loss. That also is bound to cause resentment if at the same time the people deemed to bear a major responsibility for the crisis are still able to secure large sums of money for themselves. The principle involved in these two amendments is simple: public money involves public accountability. I hope that that is accepted. I beg to move.