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Banking Bill

My Lords, Amendment 14 seeks to add some crucial words to Clause 9, which empowers the Treasury to take a bank into so-called temporary public ownership. Ever since their White Paper in January last year, the Government have sought to present nationalisation as an option of last resort, an issue we debated in Committee. We have always believed that it should be a last resort and the Minister in another place was commendably clear about it. He said: "““The temporary public ownership tool should be seen very much as one of last resort””.—[Official Report, Commons, Banking Bill Committee, 6/11/08; col. 355.]" But that is not what the Bill states. The Minister sought to argue that because there was a higher test for the use of public ownership in Clause 9 compared with the test for Bank of England action in Clause 8, that automatically made it an option of last resort. But that is simply not the case because it is perfectly possible for a bank to satisfy the FSA’s Clause 7 trigger conditions and then to fall both within the Bank of England’s powers within Clause 8 and the temporary public ownership power in Clause 9. The Bill does not differentiate between them. As I have said, we believe that the Bank’s powers should come into play first and temporary public ownership should come in later. In Committee, the Minister said the code of practice would deal with the issue but the draft code does not contain the words or even the substance of the meaning of ““last resort””. Temporary public ownership is presented as just another option. The only real place where it is dealt with is in paragraph 41 where it is noted that before using the option, consideration would be required of whether, "““alternative resolutions would be more appropriate””." But the emphasis is the wrong way round. In Committee, the Minister agreed to take this away and I understand that the Government’s response is in terms of Amendment 8, which we passed earlier, which says that the code of practice must now deal with, "““the choice between different options””." However, it is not a question of choice between options: there should be a hierarchy of options. You do not choose temporary public ownership as opposed to Bank of England moderated procedures. You can get to public ownership only if you cannot do the other things. We fully support the use of the Bank of England's powers. We also accept that there may be no alternative to nationalisation, but it should not be a choice to get to nationalisation: it should be an issue of prioritisation. That is not dealt with in the code, nor is it implicit in Amendment 8, which was moved earlier. I beg to move.