---

Banking Bill

My Lords, we have already debated this subject extensively on Report, so I shall be brief and concentrate on the amendment made in the other place in lieu of the amendment that this House agreed to on Report. That amendment inserted a new clause to provide for greater transparency in relation to the giving of financial assistance. The clause provided for more rapid detailed reporting of financial assistance to be given to banks, financial institutions and their customers. It also provided for quarterly reporting of expenditure, and of guarantees and similar commitments that might result in expenditure, met with money provided in estimates under the authority of the Consolidated Fund clause in the Bill. The clause also provided for the same reporting arrangements for loans made from the National Loans Fund. The Government have always been very appreciative of the concerns many people have about transparency and reporting. These are important issues for the whole Bill, not just in relation to public expenditure. However, it is necessary to balance the desirable objective of transparency against the need for confidentiality in a number of contexts. There will be cases where actions to tackle a financial crisis, taken under the Bill or otherwise, can only be effective if it can be kept confidential. These were precisely the concerns when the news about Northern Rock first broke. If the recipient firm were a listed company, would the provision of financial assistance by the Bank of England have to be disclosed under the FSA rules? Was it possible to work out that support had been given using the weekly Bank of England return? The clause that removes the obligation on the Bank of England to produce a weekly return was included precisely because of those concerns. Therefore, the Government have always considered that there had to be a balance between the need for transparency and the need to protect confidentiality where it is clearly in the public interest to do so. We were concerned that the amendment made in this House did not quite get the balance right. We felt that there was too big a risk that it could be possible to identify the beneficiaries of financial assistance under some schemes, or speculate on the amounts that they could receive, and that there were risks of damaging speculation about the identity of the institutions concerned, which could be bad for confidence and even lead to the kind of situation we are all trying hard to avoid. I recognise, of course, that many noble Lords were also concerned about this issue, and that was reflected in the amendment which was approved at Report. The new clause allowed the Treasury some leeway to delay the disclosure when it is in the public interest to do so, for as long as that remains the case. However, the Government foresaw a risk that we might have to rely on that provision too often, which is potentially not only bad for transparency but could itself be a cause of the destabilising and damaging speculation of the kind we want to avoid. The Government were very aware of the strength of feeling in this House on the subject of transparency. We looked very hard at how we could provide more transparency and better reporting while minimising the risks to financial stability and market confidence. As a result, my honourable friend the Economic Secretary tabled an amendment in lieu in the other place which was agreed to there yesterday and is now before us today. This amendment is different in some respects from the amendment made here at Report but I believe that it respects the spirit of this House’s amendment and meets the concerns I have explained. First, the amendment provides that the reports should be half-yearly rather than quarterly. In itself, this should significantly reduce the risk of identification since expenditure incurred or guarantees given over a longer period will be covered in only one report. Secondly, the amendment will require the Treasury to ensure that individual recipients, and the amounts they had been paid or guaranteed, cannot be identified. This will usually mean aggregation. We expect that, in practice, each scheme would be reported on separately, but that, if necessary, data on schemes could be aggregated up to the level of the sponsoring department. We believe that this is line with the intention of the amendment made here but makes improvements in clarity and technical effect. There are also some smaller points. The amendment also provides that the reports should not include the loans made from the National Loans Fund. Your Lordships will recall that the government amendment made here at Report provided for loans from the National Loans Fund, which can only be made when needed urgently to protect financial stability, subject to an ad hoc reporting procedure similar to that provided when money is taken directly from the Consolidated Fund in urgent cases. But there is no mechanism analogous to Estimates for approving loans from the National Loans Fund so there is no need to include them in any regular reports. Of course, these loans will be included in the annual accounts of the National Loans Fund in the normal way. Finally, the amendment provides for reports to be laid only before the House of Commons. When these reports are published, copies will be available to your Lordships in the normal way. I hope your Lordships will agree that this amendment strikes the right balance between the objective of transparency and the need for the appropriate level of confidentiality. Accordingly, I beg to move that this House do agree with the amendment made in the other place.