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Banking Bill

As the noble Baroness has faithfully reflected, we debated ““temporary”” in Committee, when the Government were somewhat unfairly accused of spinning that word. The noble Baroness nods at ““spinning””. I see that she still believes that and that I have not got very far in convincing her of the straightforwardness of the Government in this respect. We are being straightforward. Even if it does not have a specific time limit attached to it, ““temporary”” clearly demonstrates our intentions with respect to the option of public ownership—namely, that it should be time limited. ““Temporary”” illustrates that it is not the Government’s intention to take a bank into public ownership because they believe that they can run banks more successfully than their managers; rather, that action will be taken only when it is necessary for the purposes set out in Clause 9. I think that we were reasonably explicit about that in Committee. I should love to think that we were convincing. I hope that I am convincing about it today. Moreover, however imprecise and open to interpretation ““temporary”” may be, it signals that the Government’s intention is not to keep banks in public ownership permanently. In Committee, we also debated the benefit of setting an arbitrary date or time limit on how long a bank could remain in public ownership. This amendment would allow the Treasury to set a time limit for each transfer on a case-by-case basis. But even if this were determined flexibly on a case-by-case basis, any time limit would be arbitrary in the absence of a clairvoyant ability to anticipate accurately how long a successful resolution procedure to take a bank back into the private sector might take. As I said, factors other than the meeting of an arbitrary set deadline should determine when a bank is returned to the private sector. Temporary public ownership should come to an end when the objectives of the special resolution have been achieved. It should not end before they have been achieved. The noble Baroness may ask what harm the amendment could do, as it calls only for the Treasury to estimate the relevant period. However, if it seeks only an estimate from the Treasury, what on earth is its benefit? It would be an exercise in arbitrary assessment. Having reflected on this question, I believe that the benefit of the Government’s position is twofold. First, it signals an expectation of debate in Parliament. Parliamentary scrutiny is a great benefit. The amendment that we have brought forward for an annual reporting on banks in public ownership will allow that debate to take place. Further, as the transfer order will be made through the negative procedure in Parliament, Parliament may call for a debate in respect of the order. This would provide the opportunity for Parliament to question the expected time limit. For the reasons that I set out, the authorities will, first and foremost, seek to pursue a strategy to return banks to the private sector and will do so in a way that best meets the special resolution objectives. They will not pay too much regard to inevitably arbitrary deadlines. Although transparency is undoubtedly important, as the noble Baroness emphasised repeatedly, it may ultimately be less than helpful to force the Government to signal an intention that they may be obliged to change. I realise that this argument may lead to anxiety that the Government will act to take a bank into public ownership before an exit strategy has been planned in detail. That may be the case, but the authorities may have to act very quickly to stabilise a failing bank whose failure would threaten financial stability. In such cases, detailed planning of an exit strategy may be impossible. It is certain, however, that the period of public ownership will end; that is why the word ““temporary”” is used in the legislation. That is the fundamental principle, which the market and public will legitimately expect to be achieved and in respect of which Parliament can call the Government to account. That is the basis of the Government’s position. I hope that the noble Baroness is sufficiently convinced of our genuine intentions with regard to ““temporary”” to be able to withdraw her amendment.