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Banking Bill

My Lords, perhaps I may start with a very small point. The name of the company to which the Minister referred is not Layman Brothers but Lehman Brothers. I am in a position to know that because I am a member of the Lehman family. I have not declared an interest because my family ceased to have any involvement in Lehman Brothers some 25 or 30 years ago. I can move on now to the serious business. It is a matter for the Delegated Powers Committee to advise your Lordships’ House on matters such as the question whether certain material should be on the face of the Bill rather than in the form of regulations. The Government are proposing here a potentially fundamental change in the law of insolvency as it relates to investment banks, and investment banks are a very important feature of our financial system. We could end up with investment banks being subject solely to regulations made by the Government—with parliamentary involvement, in the form of affirmative resolutions, but with no chance to amend them or seriously to debate them—while the whole of the rest of the economy will be subject to the very detailed provisions of the Insolvency Act. The changes that the Government could make are, therefore, potentially fundamental; and not only are they fundamental, they are of a totally uncertain kind. I repeat the quote from ““King Lear”” which I gave at Report stage. The Government’s position is much the same as his when he said: "““I shall do such things … what they are yet I know not, but they shall be the terrors of the earth””." It would certainly be normal practice to put legislation of this kind, in relation to investment banks, on to the face of the Bill. We accepted in Committee that there was a possibility that when a Government were in a position to decide what they wanted to do, they should be able to do it very quickly. We therefore accepted that there could well be a necessity for regulations to take effect quickly. But we saw no reason why this should be anything other than a temporary arrangement, and we considered that the regulations should be replaced as soon as possible by primary legislation which could, of course, be in exactly the same form as the regulations. There would be no question of any additional uncertainty arising from this. Indeed, the uncertainty would be weakened rather than strengthened because the potential existence of a sunset clause would not affect any bank that became insolvent before the sunset clause came into effect. That is our view; we did not quite understand why such provision should be necessary. As it is, there will be a great deal of uncertainty anyway over the two-year stretch. The Government will be at liberty at any time to change the regulations with the benefit of an affirmative resolution. That would be substantially easier than changing primary legislation and could—and probably would and should—urgently introduce the necessary regulations and then follow them with primary legislation which would put the regulations on to the face of a statute. We believe that that would strengthen the certainty of the matter rather than weaken it, and that it would have been a much more effective way of dealing with this than what the Government now propose. Therefore, in the circumstances, the committee had total agreement on the point. I still believe that it would have been more appropriate to accept what the noble Baroness, Lady Noakes, proposed: a totally unconditional sunset clause which came into effect in two years, but not requiring it to be left until the end of that two-year period; and either in the mean time or at the end of that period for the Government then to bring forward primary legislation that could have had a proper debate and would have ended up with the rules governing investment being in primary legislation in the same way as all other insolvencies are in legislation. That would have been better. I am not in a position to move any amendments but I want to say, as I still believe, that it would have been better had the Government accepted the recommendations of the Delegated Powers Committee.