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Bank of England and Financial Services Bill [Lords]

Volume 608: debated on Tuesday 19 April 2016

Consideration of Bill, as amended in the Public Bill Committee

New Clause 12

Appointment of Financial Conduct authority chief executive

“In Schedule 1ZA to the Financial Services and Markets Act 2000 (the Financial Conduct Authority), after paragraph 2 insert—

2A (1) The term of office of a person appointed as chief executive under paragraph 2(2)(b) must not begin before—

(a) the person has, in connection with the appointment, appeared before the Treasury Committee of the House of Commons, or

(b) (if earlier) the end of the period of 3 months beginning with the day on which the appointment is made.

(2) Sub-paragraph (1) does not apply if the person is appointed as chief executive on an acting basis, pending a further appointment being made.

(3) The reference to the Treasury Committee of the House of Commons—

(a) if the name of that Committee is changed, is a reference to that Committee by its new name, and

(b) if the functions of that Committee (or substantially corresponding functions) become functions of a different Committee of the House of Commons, is to be treated as a reference to the Committee by which the functions are exercisable.

(4) Any question arising under sub-paragraph (3) is to be determined by the Speaker of the House of Commons.”—(Harriett Baldwin.)

This new clause provides that the term of office of a person appointed as chief executive of the Financial Conduct Authority (otherwise than on a temporary basis) must not begin before that person has appeared before the Treasury Committee of the House of Commons or, if earlier, three months from the date of his or her appointment.

Brought up, and read the First time.

With this it will be convenient to discuss the following:

Amendment (a) to new clause 12, after paragraph 2A(1)(b) insert—

“(1A) If, before the term of office has begun, the Treasury Committee reports to the House that the appointment should not be confirmed, the Treasury shall not continue with the appointment unless the House of Commons resolves that the appointment should be confirmed.”

Amendment (b) to new clause 12, at end insert—

“In Schedule 1ZA to the Financial Services and Markets Act 2000, in paragraph 3(1), at the end insert “, except in the case of the chief executive of the FCA, who shall be appointed for a reappointable term of five years”.”

New clause 1—Chief Executive of the Financial Conduct Authority

‘(1) Schedule 1ZA of the Financial Services and Markets Act 2000 is amended as follows.

(2) After paragraph 2(2) insert—

“(2A) The Treasury shall not appoint a chief executive without the consent of the Treasury Committee of the House of Commons.”

(3) After paragraph 4(1) insert—

“(1A) But a chief executive appointed under paragraph 2(2)(b) is not to be removed from office without the consent of the Treasury Committee of the House of Commons.”

(4) After paragraph 27 insert—

“References to Treasury Committee

28 (1) Any reference in this Schedule to the Treasury Committee of the House of Commons—

(a) if the name of that Committee is changed, is to be treated as a reference to that Committee by its new name, and

(b) if the functions of that Committee (or substantially corresponding functions) become functions of a different Committee of the House of Commons, is to be treated as a reference to the Committee by which those functions are exercisable.

(2) Any question arising under sub-paragraph (1) is to be determined by the Speaker of the House of Commons.””

New clause 2—Composition of the Court of Directors of the Bank of England—

“In making nominations to the Court of Directors of the Bank of England, the Chancellor of the Exchequer must have regard to the importance of ensuring a balanced representation from the nations and regions of the United Kingdom.”

New clause 3—Change in title of the Bank of England—

“The Bank of England shall be known as the Bank of England, Scotland, Wales and Northern Ireland; and any reference in any enactment to the Bank of England shall be taken as a reference to the Bank of England, Scotland, Wales and Northern Ireland.”

New clause 5—Sterling Central Bank—

“The Bank of England is renamed the Sterling Central Bank.”

This new clause would change the name of the Bank of England to reflect its position as the UK central bank and the UK’s shared currency.

New clause 6—Membership of the Monetary Policy Committee of the Bank of England—

“(1) Section 13 of the Bank of England Act 1998 is amended as follows.

(2) At the end of subsection 2(c), add “of whom one each must be nominated by the Scottish Government, the Welsh Assembly Government and the Northern Ireland Executive.”

This new clause seeks to ensure representation of the four nations of the United Kingdom on the Monetary Policy Committee.

New clause 7—Objectives of the Monetary Policy Committee—

“After subsection 11(a) of the Bank of England Act 1998 there is inserted—

“(b) maximum employment, and.””

This new clause would expand the mandated objectives of the Monetary Policy Committee to include maximum employment.

New clause 8—Bank of England Accountability and Devolved Legislatures—

“Within three months of the passing of this Act, the Chancellor of the Exchequer shall lay a report before both Houses of Parliament on the merits of ensuring that the members of the policy committees of the Bank of England, including the Governor, appear before the respective economy committees of the devolved legislatures of the UK at least once a year.”

New clause 13—Freedom of Information—

“(1) Schedule 1, Part VI to the Freedom of Information Act 2000 is amended as follows.

(2) In the entry relating to the Bank of England, leave out all the words after “England.””

Amendment 6, in clause 9, page 7, line 19, at end insert—

‘(6A) The Comptroller may enquire into the Bank’s success in achieving its stated policy objectives but shall not enquire into the desirability of such objectives having been set.

(6B) The Comptroller shall submit reports arising from the exercise of his powers under subsection (6A) to the Treasury Committee of the House of Commons (or any successor committee exercising the same or equivalent functions).

(6C) The Comptroller shall lay before Parliament, and publish, each report arising under subsection (6B) promptly unless, in the opinion of the Treasury Committee, publication of a particular report would be likely materially adversely to affect the stability or functioning of the UK’s financial or banking system.”

Amendment 7, in clause 11, page 12, line 2, at beginning insert

“Subject to section 7ZA(6A) of the Bank of England Act 1998,”

Government amendment 3.

I would like to start by emphasising that the Treasury Committee is an esteemed Committee of this House and provides exceptional scrutiny of the Government and their regulators. Through its programme of pre-commencement hearings, it questions appointees to several posts before they start work. After appointees have started, they can expect to appear regularly before the Committee, and the public can expect the Committee to hold appointees firmly to account.

The Government welcome that scrutiny of appointees—it is a critical democratic function. That is why we have tabled new clause 12 to ensure in statute that the Committee always has the chance to scrutinise a new Financial Conduct Authority chief executive before they start work.

Will this be setting a bit of a trend? For which other important posts—there will be a number of other important posts at not just regulators but other City institutions—does my hon. Friend think it would be appropriate for the Treasury Committee to have a similar approval process?

I am speaking very narrowly to new clause 12. I am sure the Treasury Committee and other Committees will look at the issue again. I expect it to be part of the ongoing discussions between Parliament and the Executive. However, I am speaking to the very narrow characteristics of new clause 12.

Since we tabled our new clause, there have been further discussions with the Chair of the Treasury Committee over its role in the appointment of FCA chief executives. I am pleased to announce that we have found a means of reinforcing its scrutiny role that goes further than the context of this Bill. Indeed, today the Chancellor has written to the Chair of the Treasury Committee, agreeing that the Government will make appointments to the role of chief executive of the FCA in such a way as to ensure that the Committee is able to hold a hearing before the appointment is formalised.

The letter is in my binder and I would be happy to read it out, provided that the Chair of the Committee does not object. I will ensure that a copy is put in the House of Commons Library, if that has not already happened. I am sure that the Chair of the hon. Lady’s Committee will be more than happy to share it with her. Would she like me to read the letter out in full?

By popular demand, this is what the letter states:

“Dear Andrew,

During the passage of the Bank of England and Financial Services Bill, we have considered the role of the Treasury Select Committee (TSC) in scrutinising the appointment of the Chief Executive of the Financial Conduct Authority (FCA).

This scrutiny is important and welcome. I will therefore ensure that appointments to the Chief Executive of the FCA are made in such a way to ensure the TSC is able to hold a hearing, after the appointment is announced but before it is formalised. Should the TSC recommend”—

this is more exciting news—

“in its report that the appointment be put as a motion to the whole House, the government will make time for this motion and respect the decision of the House.


it does not stop there—

“I will seek, in a future Bill, to make a change to the legislation governing appointments to the FCA CEO to make the appointee subject to a fixed, renewable 5-year term. This would not apply to Andrew Bailey, who I recently announced as the new head of the FCA, but would first apply to his successor.

I believe that these changes will reinforce the Treasury Committee’s important scrutiny role.”

It would be helpful if the Economic Secretary could assure the House that that future Bill will be introduced sooner rather than later.

I am sure that the shadow Chancellor welcomes Government new clause 12 and the news that we will carefully consider the earliest possible opportunity for doing that, following today’s debate.

As the letter states, should the Treasury Committee follow the pre-commencement hearing with a report recommending that the appointment be put as a motion to the whole House, the Government will make time for that motion and, should it result in a vote, they will respect the decision of the House. We will also seek an opportunity to alter the legislation governing appointments to the FCA chief executive officer, to make the appointee subject to a fixed, renewable, five-year term. I can confirm that Andrew Bailey, the new CEO of the FCA, has been appointed to a five-year term that can be renewed, so the agreed process will first apply to his successor. The agreement is the right way to reinforce the crucial scrutiny role of the Treasury Committee.

I am grateful to the Economic Secretary, who is being extremely generous with her time. What she has said is extremely welcome and a significant step forward. Will she explain why the Chancellor thought it better not to insert it in the Bill, but to make the arrangement through an exchange of letters?

We tabled our new clause on Thursday and, as I have said, there have been further discussions with the Chair of the Treasury Committee. I am delighted to be able to announce the result of those discussions today.

I also want to take a moment to address the question of dismissals of the FCA chief executive. I can confirm that the Government do not have the power, except in very limited circumstances, to dismiss the chief executive of the FCA during his or her term of office. I refer the House to paragraph 4 of schedule 1ZA to the Financial Services and Markets Act 2000, which applies to the chair and the external members, as well as to the CEO, and states:

“The Treasury may remove an appointed member from office…on the grounds of incapacity or serious misconduct, or…on the grounds that in all the circumstances the member’s financial or other interests are such as to have a material effect on the extent of the functions as member that it would be proper for the person to discharge.”

The lawyers are clear that the only reasons the Treasury can dismiss an FCA chief executive are incapacity, serious misconduct and conflicts of interest. I hope that offers the House considerable reassurance.

It is worth saying a little about what happened in relation to Martin Wheatley. Although he was not technically dismissed, his term was not renewed. The situation was straightforward. In July 2015, it was announced that his term would not be renewed in March 2016. As a result, he left his office six months early. I accept that that may have been a mutual decision between the Treasury and Mr Wheatley, but it certainly gave the impression, at least, that, even if it was not a fully fledged dismissal, it was a non-renewal, and, ultimately, the exit from office came six months before the end of a fixed term.

My right hon. Friend has stated the facts about the term of office to which Martin Wheatley was appointed and the fact that the Government chose not to renew it. It is appropriate to pay what I hope is a cross-party tribute to the excellent work of the acting chief executive, Tracey McDermott, who stepped into the role at that time. She has carried out the role for almost a full year in an absolutely exemplary fashion.

Unless there any further questions on the new clause, I am going to move on to the amendments relating to devolution. I am inviting interventions, but there are none.

The next set of amendments, which stand in the names of the hon. Members for East Lothian (George Kerevan), for Carmarthen East and Dinefwr (Jonathan Edwards) and for Kirkcaldy and Cowdenbeath (Roger Mullin), force us to ask exactly who the Bank works for. The answer must be the entire United Kingdom. Indeed, that is emphasised in the Bank’s mission statement,

“to promote the good of the people of the United Kingdom by maintaining monetary and financial stability.”

To fulfil that mandate, the Bank of England goes to great lengths to ensure that it has a comprehensive understanding of the economic and financial situation across all corners of the United Kingdom. The Bank has a network of 12 agencies, which are located across Scotland, Wales, Northern Ireland and the regions of England. Each year, those agents undertake some 5,500 company visits and participate in panel discussions with approximately a further 3,500 businesses. In that context, imposing a requirement to have regard to regional representation on the court is unnecessary. A comprehensive framework for regional information-gathering already exists.

Will the Economic Secretary inform me who the Welsh representative is, because I have absolutely no idea who represents Welsh interests at the Bank of England and I am Plaid Cymru’s Treasury spokesperson?

I will make sure that that person makes him or herself known to the hon. Gentleman with the greatest of speed. It is important to point out that the agents do not engage with us as politicians. The agent for the west midlands and Worcestershire is very engaged with my local businesses, but I as a politician have never had a meeting with them. That is how it should work.

I realise that the Economic Secretary is trying to be helpful, but does she not recognise that there is a strategic difference between the process of information-gathering through the agents and that of policy-making through the bodies of the Bank itself? That is where we are asking for representation.

I will get to that point later in my remarks. As always, I seek to be helpful to the hon. Gentleman, so I hope that he will enjoy those remarks when I get to them.

We believe that it is unnecessary to impose the requirement in new clause 2 to have regard to regional representation on the court, which is effectively the board of directors of the Bank of England, because of the comprehensive framework for regional information gathering that already exists. In addition, if we found a candidate with the perfect profile to serve on the court, but we insisted on downgrading them because they lived in an over-represented part of the country, that would not be the best way to produce an effective court.

I have been clear that in setting both monetary and financial stability policy, the Bank must take into account economic conditions in, and the impact of policy decisions on, every part of the UK. Monetary and financial stability policy must be set on a UK-wide basis. None of the 65 million people whom this House represents would be well served if, for example, different capital requirements applied to banks in different parts of the UK. Of course, monetary policy must be consistent. It is completely impossible to set different interest rates in different regions, so monetary and financial stability are, rightly, reserved policy areas.

The men and women who make up the Bank’s policy committees must have their decisions scrutinised, but since policy must be set UK-wide, this Parliament must hold them to account. This Parliament holds power over reserved matters, which these issues rightly are, and the Members of this Parliament represent people from every part of the country on an equal basis. Likewise, Ministers, who are accountable to the House and who hold their positions with the support of a majority of the House of Commons, must be responsible for making the external appointments to the Monetary Policy Committee, each member of which is responsible for considering the impact of their policy decisions on all 65 million people in the UK.

We also return to the question of the Bank’s 300-year-old name. It is important to recognise the reputation associated with a name built up over such a long period. During that time, the Bank has come to be globally renowned as a strong, independent central bank. We should not underestimate the importance of that. International confidence in the Bank of England helps to support international confidence in our economy and currency.

I turn to the monetary framework. The Government amendment in this group is modest. The Bill reduces the minimum frequency of Monetary Policy Committee meetings from monthly to at least eight times in every calendar year, and our amendment adjusts the reporting requirements of the Monetary Policy Committee to match.

The Minister moved on very quickly from the matter of the name. I just want to clarify whether the Government have a view on changing the name of the Bank of England to reflect the fact that it is the Bank for all the nations of the United Kingdom. Notwithstanding the fact that in normal, everyday parlance it will, I am sure, still be referred to as the Bank of England, its long and proper title surely should reflect all the nations of the United Kingdom.

I respect and pay tribute to the fact that the Bank of England was founded by someone from Scotland, so the hon. Gentleman is absolutely right to draw attention to the fact that this is an historical anomaly. I would be the first to accept that the monetary policy of the Bank of England is set for the whole United Kingdom. That does not mean to say that we will accept the new clauses that would change the name of the Bank of England, because we think that its name has been well established over 300 years.

I think that the Treasury is right, in this instance, not to change the name. The Bank of England has a brand. I do not need to give a history lesson to the nationalist Members, but the Bank of England was founded in 1694, which was before the 1707 and 1800 Acts of Union that might—for two of the three other parts of the United Kingdom, at least—otherwise have had an impact on its initial name. Its brand is important, and I hope that those from the other parts of the United Kingdom will not feel as though their interests are being downgraded simply because they do not appear in the headline name, not least for the reasons that have been set out. It is important that we recognise that the Bank acts for the entirety of the United Kingdom, and that it therefore pays great attention to the voices of those in all parts of the United Kingdom, not just England.

Yes, and on that point I hope that the support of the hon. Member for Edinburgh East (Tommy Sheppard) for the united nature of our kingdom means that the Scottish National party has moved on from the discussions of last year in which it wanted to break up the United Kingdom. I hope that the party will accept the settled will of the Scottish people to continue to benefit from monetary policy that applies right across the country.

Further to the points made by the Minister and the right hon. Member for Cities of London and Westminster (Mark Field), the new clause tabled by my colleague the hon. Member for East Lothian (George Kerevan) will address the issue that they spoke about. As a keen cricketer, I know that the official title of the governing body is the England and Wales Cricket Board, but it is named “England” for all promotional purposes. Even if we accept the well-intentioned new clause tabled by my colleague from the Scottish National party, the Bank of England will still be known, in promotional terms, as the Bank of England.

The hon. Gentleman tries to tempt me down the path of comparisons with sports teams, but I decline to be tempted. The Government amendment is modest: the Bill reduces the frequency of MPC meetings from monthly to at least eight times in every calendar year, and the amendment will simply adjust the reporting requirements of the MPC to match.

New clause 6, tabled by the hon. Member for Carmarthen East and Dinefwr, suggests that we give the MPC a second primary objective of maximising employment. We conducted a comprehensive review of the monetary policy framework in 2013 and concluded that a flexible inflation targeting framework offered the best approach. Employment is already explicitly part of the MPC’s objectives. Its secondary objective is

“to support the economic policy of Her Majesty’s Government, including its objectives for growth and employment.”

The most recent MPC remit letter summarised the Government’s economic policy as being

“to achieve strong, sustainable and balanced growth that is more evenly shared across the country and between industries”.

I thank the Minister for her forbearance in giving way again. She is taking refuge in the Bank of England’s existing mandate, a mandate that all Members, on both sides of the House, know has long since become redundant. The inflation target has been dead in the water for years and years, because inflation is nowhere near 2% and is not likely to be for a long time. Implicit in the new clause is the fact that we are questing about for other policy measures to replace the 2% inflation target. Will the Minister address the question of what future targets the Bank of England should have to address the needs of a deflationary era, rather than the inflationary era of the last 20 years?

The hon. Gentleman asks an important question. There are many opportunities in Parliament, in the scrutiny of the Bank of England by the Committee of which he is a member, to ask those important questions. The Government choose to use the mechanism of the letter process and the remit. The hon. Gentleman and I are both old enough to know how inflation has changed over the years—[Hon. Members: “Surely not!”] I know; surely we are not. We should all welcome the significant lowering of inflation expectations, and we should all remember how important it is that we continue to ask the Bank of England to keep inflation under control, so that we never return to the kinds of impoverishing inflationary policies that so harmed people—particularly the poorest and oldest in society—during the 1970s.

Price stability must have primacy, because we judge that having a single lever aimed primarily at a single objective is the best way to make sure that the inflation target is credible. That, in turn, anchors all-important inflation expectations and helps us to keep inflation under control. Our system has shown that it produces good labour market outcomes. Despite global uncertainty, we have record numbers of people in work, an unemployment rate that is at its lowest in a decade, and a claimant count that has not been lower for more than 40 years. Moreover, targeting low inflation ensures that hard-earned wages are not eroded by inflation.

I must confess that I entirely agree with what the Minister is saying about inflation. I, too, am old enough to remember what inflation was like, particularly in the 1970s. However, it seems to me that the Bank of England’s sole monetary policy lever is to say that we must keep the inflation rate down. Surely we must recognise that inflation has now been well below the 2% target for a long time. I accept that we should never believe that inflation, and all the distortions it makes in our economy, has been entirely vanquished, but should there be a different inflation target, or a different set of remits for the Bank of England, to recognise that it should pay attention to other aspects of the economy in its monetary policy?

My right hon. Friend, who is an extremely wise and knowledgeable person—I will not refer in any way to his age—highlights an important point. He also emphasises the behavioural characteristic of the recency effect. Inflation is well below the 2% target today, but only during the lifetime of the last Parliament it was above 5%. Even during the six years that I have been a Member, we have tested the parameters of the inflation target. I do not think there is any need for us to make any changes to that target this afternoon.

I will conclude by speaking briefly to amendments 6 and 7 and new clause 13. The first part of amendment 6 states:

“The Comptroller may enquire into the Bank’s success in achieving its stated policy objectives but shall not enquire into the desirability of such objectives having been set.”

The Bill, as drafted, will already have that exact effect.

The second part of amendment 6 directs how the Comptroller and Auditor General should submit his reports. Parliament has delegated to the Comptroller discretion over the content of National Audit Office reports and the timing of their publication, and it is important that this independent officer of Parliament is able to use his judgment on how Parliament and the public are best served. The National Audit Act 1983 provides that the Comptroller

“may report to the House of Commons the results of any examination”.

Once he has reported to the House, it is open to any Committee of this House to inquire into matters on which he has reported. There is an in-built incentive for prompt publication as it mitigates the risk of the report’s conclusions being overtaken by events.

Amendment 7 would disapply restrictions in the Financial Services and Markets Act 2000 on the disclosure of specially protected information in relation to reports by the Comptroller and Auditor General. Information is specially protected under these rules if it is held by the Bank for the purposes of monetary policy, for financial operations supporting financial institutions in maintaining financial stability, or for private banking purposes. Similarly, new clause 13, in the name of the hon. Member for Bishop Auckland (Helen Goodman), would remove three corresponding exclusions in the Freedom of Information Act 2000. I hope I can persuade the House that each of the three categories of protected information is entirely sensible.

The first category applies to the Bank’s monetary policy functions. How we communicate monetary policy is extremely important. It moves markets in substantial ways and every detail of the published minutes is scrutinised for predictions of future changes. Managing disclosure while making sure information is presented in a timely way is vital. That is why the original legislation creating the Monetary Policy Committee in 1998 set out the full range of disclosure requirements, including publication of the minutes and of a quarterly inflation report. Since then, the Bank has implemented the recommendations of Governor Warsh’s review of MPC transparency. Through the Bill, we are supporting full implementation of the recommendations of that review.

The second exclusion applies to

“financial operations intended to support financial institutions for the purposes of maintaining stability”.

Hon. Members will understand that if the Bank has to extend emergency liquidity assistance, very careful communication is a critical element of preserving stability. Any covert assistance will be reported privately to the Chairs of the Treasury and Public Accounts Committees, while broader liquidity schemes for institutions, such as the special liquidity scheme and the discount window facility, may be announced to the markets.

Finally, the Bank’s very limited private banking services are excluded from FOI requests. We often forget that the Bank of England also provides private banking to customers. As I am sure hon. Members will agree, it would be entirely inappropriate to subject ordinary bank customer information to disclosure.

I rise to speak to amendments 6 and 7 in my name and that of my hon. Friends, but I first want to turn to new clause 1 and Government new clause 12 on the appointment of the FCA chief executive.

I came to the House ready to speak in support of new clause 1, which seeks to give the Treasury Committee a formal role in the appointment of the chief executive of the FCA. In my view, new clause 1 is better placed to guarantee the competence and independence of the regulator than the new clause in the name of the Chancellor, which in our original reading of it did too little to change the status quo. New clause 12 was tabled in response to the new clause tabled by the Chair of the Treasury Committee, the right hon. Member for Chichester (Mr Tyrie). We had a similar debate in Committee on an amendment about the appointment process for the chief executive of the Prudential Regulation Authority.

Since 2008, Select Committees have routinely held pre-appointment hearings for a number of public appointments, and some candidates have not been approved. The coalition Government developed the scrutiny agenda when the Chancellor agreed in 2010 to the Treasury Committee having a power of veto over appointments to the Office for Budget Responsibility. The Public Accounts Committee has a veto over the appointment of the Comptroller and Auditor General. Appointments to the Monetary Policy Committee and the Financial Policy Committee of the Bank of England are made by the Chancellor of the Exchequer, and are then subject to a confirmation hearing by the Treasury Committee. The Treasury Committee has powers over the chair and board members of the Office for Budget Responsibility, an arrangement that the Chancellor told the Treasury Committee he would put in place

“because I want there to be absolutely no doubt that this is an independent body”.

The Minister will be aware that, when it examined the proposals for the future FCA in 2013, the Treasury Committee made a number of recommendations on the accountability of the new body to Parliament, including that the legislation should provide that the chief executive of the FCA be subject to pre-appointment scrutiny by the Treasury Committee. I recall that the Treasury Committee was disappointed by the Government response, particularly in view of the deficiencies in the accountability mechanisms for the Financial Services Authority.

As we have heard, the view of the Treasury Committee was set out in the Treasury Committee Chair’s letter to the Chancellor of the Exchequer on 26 January, following the appointment of the current PRA chief executive, Andrew Bailey, to be the next leader of the FCA. In that letter, the right hon. Gentleman set out his Committee’s view that it should have a veto over the appointment and dismissal of the chief executives of both the FCA and the PRA. Indeed, the letter said that the FCA’s chair, John Griffith-Jones, told the Committee, when he met its members on 20 January, that there was merit in that proposal.

In Committee, I flagged up this matter and said it would be helpful to know whether the Chancellor had shared his thinking on such calls to extend pre-appointment hearings and the power of veto to those two positions. Now we have had his reply. It was in the Minister’s ring binder. As she said, it was “exciting” to hear the contents of it, and we got a fantastic insight into the fireside exchanges within the Government. Labour Members believe that the Treasury Committee should have greater authority over the future of financial regulation in this country.

On Government new clause 12, it is unclear what would happen in the period between the appointment of the chief executive and him or her appearing before the Committee. Would they be left in limbo, or would they in fact be settling into their new post? Would we be disappointed—in practice, would it simply be business as usual, with the Treasury Committee not given the power that we all believe it deserves? We do not believe that simply requiring any new chief of the FCA to appear before the Committee within three months of appointment delivers anything particularly new. It is reasonable to expect that any new postholder would appear before the Committee within that timeframe in any event, whether or not that appearance was codified.

With regard to new clause 12, however, I am pleased to note the exciting news—the Minister herself has called it that, as have I—that by means of the Chancellor’s letter the Government have communicated that they accept the broad thrust of the proposals put forward by the Chair of the Treasury Committee. I also note and welcome the Minister’s commitment today to introduce the relevant legislation, in her own words, sooner rather than later. I politely suggest that the changes be introduced in the Finance Bill shortly—that is an opportunity not to be missed.

I turn to Labour’s amendments 6 and 7, containing measures that we have retabled after they were discussed in Committee, and new clause 13, in the name of my hon. Friend the Member for Bishop Auckland (Helen Goodman). Each of those measures, in its own way, addresses the crucial issue of the need for transparency and openness in the Bank of England. The National Audit Office’s power to investigate the Bank has been subject to discussion at each stage of the Bill in both this House and the other place. The Comptroller and Auditor General was clearly concerned about proposals in the Bill that would have allowed the court of directors a veto over the new powers for the NAO. I am pleased to say that there has been clear progress on the issue as the Bill has proceeded through both Houses; in particular, the veto was removed in the other place. As hon. Members will recall, in response the Government proposed a memorandum of understanding between the Bank and the National Audit Office; I understand the draft of that has been welcomed by both sides.

Opposition amendments 6 and 7 seek to extend and clarify the powers of the comptroller to inquire into the Bank’s success in achieving its policy objectives. We believe that that does not encroach beyond the boundaries of questioning the merits of policy decisions, but would assist the National Audit Office in ascertaining whether the Bank is delivering value for money.

I have a brief question on amendment 6. Although I accept that transparency and openness are the spirit of the age and we cannot necessarily move entirely against that—[Laughter.] We do our level best some of the time. I am sure that the Treasury will be at the vanguard of this. Does the hon. Gentleman accept that, at times of great difficulty, when there are issues about the stability or functioning of the UK’s financial banking system, it would be appropriate not just for the Treasury Committee but for the Treasury itself to have some say in suggesting when openness should not be fully fledged? The safeguards that he has put in place in the amendment refer only to the Treasury Committee; does he not see that there might be instances when Ministers rightly have concerns about issues of stability that should be protected from open transparency at least for a time, although there could then be a move to make the minutes and other things more open at some future point, once the particular threat had passed?

I thank the right hon. Gentleman for his intervention. It may be that transparency is the spirit not just of the age but of the future—we shall see. I draw his attention to the wording in the amendment:

“The Comptroller shall submit reports arising from the exercise of his powers under subsection (6A)”.

It is not a completely open-book policy.

On new clause 2, which is in the name of the hon. Member for East Lothian (George Kerevan), Labour sees merit in the proposal for wider geographical representation on the board. In Committee, we tabled an amendment making the case for amending the composition of the court to ensure that different stakeholders were represented, including having dedicated places for customers and practitioners.

Similarly, we support new clause 13 tabled by my hon. Friend the Member for Bishop Auckland. She has a long track record in campaigning for greater transparency in financial services, and her new clause sits well with our amendments, as it seeks to empower the National Audit Office further by making the case for greater powers for freedom of information requests.

I now turn to new clauses 3 and 5, put forward by the Scottish National party and Plaid Cymru respectively. Both new clauses would change the name of the Bank of England. In fact the SNP was so keen to discuss its proposal that it tabled it twice. We discussed that measure in Committee and it is before us again. It seeks specifically to have the name of Scotland, as well as those of Wales and Northern Ireland, as part of the title of the Bank. The SNP has now been joined by the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards), who has taken a different tack and removed all national names; his new clause would mean that the name of the Bank referred solely to the currency—for the avoidance of doubt, that is sterling, not Stirling. We were happy to support the SNP’s proposal in Committee, recognising as it does the unifying role of the Bank—that has been expressed again today—as one which services all parts of the United Kingdom, and we will support it again.

New clauses 6, 7 and 8 and Government amendment 3 have a number of merits. New clause 7, in the name of the hon. Member for Carmarthen East and Dinefwr, sets out a new mandated objective for the Monetary Policy Committee to include maximum employment. New clause 6 proposes the nomination of representatives on the MPC from the devolved authorities of Scotland, Wales and Northern Ireland, and new clause 8 argues that the Bank should be more accountable for its decisions to those same bodies.

The Labour party has established a review into the mandate of the Monetary Policy Committee under former MPC member David Blanchflower. We have said previously that we will look at a wide range of ideas, including what can be learned from the US Federal Reserve. That will include considering the importance of growth, employment and earnings in the MPC’s deliberations. Indeed, on new clause 7, David Blanchflower has himself written in City A.M.—the favourite publication of the Labour Front-Bench team—that he will consider the issue of maximising employment in his review. He is also looking at the structure, size and, crucially, gender balance of the MPC, optimal policy rules, asymmetrical targeting and the relationship with fiscal policy, as well as the frequency of the MPC’s meetings.

Therefore, although we welcome the proposal for the Bank to report to the devolved authorities, we will not support the new clauses on the MPC today. We see merit in them as part of an ongoing debate, but look forward to considering and sharing the results of David Blanchflower’s review in due course. With that, I draw my comments on this group of measures to a conclusion.

First of all, that was a very good speech. I congratulate the hon. Member for Leeds East (Richard Burgon) on covering quite a lot of ground in a good deal of detail—and with a sense of humour, which I enjoyed. I was also pleased that he got in one or two points—it saves me the trouble—about the OBR and its importance as a precedent for what we are discussing today.

I will also say—although only in a sentence, otherwise I am sure that I will get told to be quiet by you, Madam Deputy Speaker—that this is a very good Bill. In many respects, it implements a good number of the wider objectives for Bank of England scrutiny and accountability for which the Treasury Committee has for many years been pushing. I thank members of the Treasury Committee in the previous Parliament and in this one who have pressed for these measures vigorously. It shows that things can be achieved if one persists.

I am grateful to the Minister for her assistance over a number of days, and to the Chancellor of the Exchequer, who followed up a telephone conversation last night with an exchange of letters. We have now reached an agreement on how to proceed, so I will not need to press new clause 1 to a Division.

Following the exchange of letters, most of the objectives that we sought through new clause 1 are provided for, and it is worth going through the key points, which the Minister effectively clarified by reading out the Chancellor’s letter. First, appointments will be made in a way that ensures that the Treasury Committee can hold a hearing in good time. Before the appointment is formalised, the question of whether there is a pre-commencement or pre-appointment hearing is, in my view, a distinction without a difference. Secondly, if the Committee disagrees with the appointment, it will report that to the House, and if they choose, the Government must find time for a debate on the Treasury Committee’s report. That debate will be on a motion to accept the conclusion of the Committee. The Government will then have to vote it down. The Government further agree that they will respect the decision of the House once that vote has been taken.

Thirdly—this point has already been raised—at the earliest opportunity, the Government will amend legislation to ensure that future appointments of the chief executive of the FCA are made on a fixed renewable five-year term. I expect that legislative change to take place in the next parliamentary Session. I am not sure that the provision would satisfy the long title of a Finance Bill but, if it does, I would expect the Government to include it in that Bill. I also recognise that the Chancellor could not fully commit over the phone that the change would take place in the next Session, since he will have had no opportunity to secure an agreement on the legislative time from his Cabinet colleagues. I expect, however, that he will do that as soon as possible. It will be a pretty small, self-contained Bill. The fourth point, which has not been mentioned so far, is that it is the Chancellor’s clear view—I am not in any way misrepresenting him—that the arrangements that are being put in place should be the permanent method of appointment, rather than something that will just disappear with this Chancellor or, indeed, the helpful Minister at the Dispatch Box, however supportive she may be of the proposals.

Why has the Treasury Committee devoted so much time to this issue? I have a specific and a general answer to that. On the specifics, there have been widespread concerns that the independence of the FCA has been compromised by the circumstances of Martin Wheatley’s departure, and by other apparent interference in the FCA’s work by senior Treasury officials, and perhaps Ministers. We explored those circumstances through cross-examination in Committee and found no such evidence. However, my right hon. Friend the Member for Cities of London and Westminster (Mark Field) got right to the point when he said that the appearance or perception of interference none the less remains. That perception makes it harder for regulators to do their job, so it had to be addressed. Bolstering the perceived independence of this key appointment, and ensuring that the individual cannot easily be removed by the Treasury, seemed crucial to the Committee.

For the record, I do not think there was any undue interference from the Treasury, and I am happy that Andrew Bailey is taking over—he will be a good chief executive. None the less, there was that perception within the square mile and we must hold that fairly close to our hearts.

May I also say how much I approve of the Treasury accepting the guts of new clauses 1 and 9? It is greatly to its credit that we have not had to go through the House of Lords, because it does a discourtesy to this House when such changes are made through amendments in the House of Lords, rather than being part and parcel of discussions in advance of Report.

One other issue is the apparent statutory protection against dismissal, which came into question as a result of Martin Wheatley’s departure. Whatever the reality, the current statutory protection appeared inadequate, which was perhaps because he was appointed only for a three-year term. Five years—a goodly and longer term—will provide more protection. To put it even more simply, the changes rectify in another way the risk of arbitrary dismissal. For example, if the Treasury Committee strongly supports keeping the incumbent after four and a half years, it can make that abundantly clear in a report and recommend to the House of Commons that any other candidate is voted down. So in practice, with the letter, we already have the protection that we wanted.

The FCA needs a strong and demonstrably independent chief executive, accountable to Parliament. It endured a difficult birth and struggled to emerge from the rubble of the failed FSA. Some of its best staff have been poached by the Prudential Regulation Authority, the Bank and the private sector, and it has been hitting the headlines for all the wrong reasons, not least with the breach of its own listing rules, which wiped 20% off the share value of the life assurance sector. With what will amount to a requirement for parliamentary approval of future appointments or dismissals of the FCA chief executive, the incumbent will now be in a strong position to resist pressure from Ministers and officials, and their authority will be bolstered.

The fact that this is a non-statutory change—unlike new clause 1, which would have been in the Bill—does not perturb me a great deal. Any attempt by the current or future Chancellor to circumvent these arrangements is likely to lead to a complete collapse of trust between the Treasury Committee and the Government, and I do not foresee that happening.

Does my right hon. Friend have some small concern that if a measure is not included in the Bill, no precedent will be set? To return to an earlier exchange that I tried to have with the Minister, that might give the Treasury licence to take this as a sui generis case, rather than recognising that the Treasury Committee should perhaps have a more important role in approving the appointments of a number of senior figures in the financial services firmament.

That argument can be turned on its head. One can argue that this sets a precedent that is more easily rolled out, without the need for statutory change, to other bodies. In the Treasury field, we now have a statutory double lock for the appointment and dismissal of the head of the Office for Budget Responsibility, which was recently found to be of some use following controversy about alleged interference in the production of the forecast—again, we did not find any evidence of that, but the perception of it might have weakened the OBR. We have a requirement for a resolution of the House prior to the appointment of the chairman of the Office for National Statistics, and now we also have these arrangements. So we have a battery of different arrangements on which to draw.

I congratulate my right hon. Friend on achieving this great success for parliamentary scrutiny, and I suggest that it is better to proceed in a non-statutory way. Bringing statute into the proceedings of the House always presents longer term problems, and setting a non-statutory precedent has lots of advantages.

I always like listening to my hon. Friend, who is a member of the Treasury Committee and, of course, a constitutional expert. It is certainly true in this place that a good deal of quasi-constitutional change, which is what we have here, tends to take place gradually and often due to the development of informal arrangements. I think that that is all to the good, which is what I think my hon. Friend is saying.

Everyone is trying to pile in, whereas I am trying to get to the end of my speech. I was almost there a minute ago, but I give way.

Does the right hon. Gentleman not feel the slightest hint of disappointment in the intervention by the hon. Member for North East Somerset (Mr Rees-Mogg) because it was surely a historic first that he signed a new clause to amend the British constitution?

Of course my hon. Friend the Member for North East Somerset (Mr Rees-Mogg), as a great and learned constitutional expert, will explain this apparent contradiction to the House in, I hope, a lengthy disquisition in a few minutes’ time.

I really am trying to conclude, but I have just one more point. It is essential in a 21st-century democracy that appointees to an increasing number of quango positions—this was the general point I said I would refer to earlier—should be forced to explain their actions before Parliament and also should feel accountable to Parliament. To achieve that, the means of their appointment and their protection from dismissal are relevant, and that is why a change such as this can offer us something.

Over decades, successive Governments have offloaded their responsibilities to quangos, leaving the public with the sense that nobody is ultimately democratically accountable for anything. I believe that accountability for decisions that were formerly taken directly by Ministers, but now sit with unelected appointees in quangos, needs thorough scrutiny and cross-examination, and that is what we have been trying to do in the Treasury Committee over the past few years.

The agreement with the Chancellor is a sizeable step in the right direction. Of course, in an ideal world, I would like access to the statute book to write exactly what, on behalf of the Treasury Committee, I feel should be on it. However, we live in the real world, and I am very happy with this exchange of letters and grateful to Ministers for their agreement. I shall not press new clause 1 to a Division today.

I agree with the right hon. Member for Chichester (Mr Tyrie) that there is a lot to be commended in the Bill, although some of the good things, as with new clause 12, were pushed on the Government. I also think that there are still some negative aspects to the Bill, which brings me to a conclusion—[Interruption.] As usual, it will be quite a long conclusion!

The Bill began as a tidying-up operation, which is why it was launched in the House of Lords. It was seen to be about just tidying up a few things, making a few additions and changes to the Financial Services Act 2012. As the Bill proceeded through its various stages, however, the more it became apparent that it exposed a whole series of issues in the financial regulatory system that were not fit for purpose.

We have convinced ourselves—or at least the Government have convinced themselves—that bar a little tidying up, all has been done to resolve the crisis of 2007, but that is not true. What we discovered time and again as the Bill proceeded were issues with the operation of the Bank of England and issues with the functioning of the regulatory bodies and how fit for purpose they are. Furthermore, new issues have emerged only in the last few weeks regarding tax havens. All those problems have appeared. I do not see this Bill putting the problems away and putting the issues to bed. Rather, we are seeing the start of a whole series of pieces of legislation coming into force until we get it right. Far from it being a tidying-up operation, we have started something new.

I am speaking to new clauses 2 and 3, which stand in my name and those of my SNP colleagues. I believe they get to the nub of the issues we are facing as a result of what has been uncovered. In the last 20 years, and more particularly in the last 10, the Bank of England has acquired an extraordinary range of new powers. I do not mean just forecasting or supervising powers over banks, because fundamental policy levers for running the whole economy have been transferred from this House and the Executive to the Bank of England itself. This began with the transfer of powers over interest rates to the Bank of England in 1997, along with the power to set the exchange rates, which no one seemed to notice at the time. This gave the Bank de facto control over our external sector. More recently, of course, with quantitative easing, the Bank has forced interest rates down to the zero band. If monetary policy cannot be manipulated, what else can be done? Gradually, the Bank has been given powers over large swathes of fiscal policy.

Nowadays, the Bank of England even operates our housing policy, as housing determines the whole direction of economic growth. In recent weeks, the Bank has been deciding between buy for let or buy for homeowners. Micro-decisions have been transferred, and my worry is that we have crossed a line of accountability with respect to the Bank of England. This is not a criticism of individuals working for it or indeed of the Governor of the Bank of England, for whom I have high regard. Gradually, however, we have allowed it to take over from this House far too much of the operational policy that directs the economy.

That is why I am happy to support new clause 12 as a step forward in beginning to redress the balance of accountability. New clause 12 and the Government’s acceptance of the general line of march from the Treasury Select Committee means that we are beginning to move to the point where key members of the regulatory regime can be confirmed in their appointments by this House.

We now have two precedents in that direction, with the Treasury Committee as a servant of the House confirming the appointment of the director of the Office for Budget Responsibility and now the head of the Financial Conduct Authority. That is the line of march, but I want to put on record, however, that SNP Members view this as a down payment. We are moving in a direction where the Governor of the Bank of England and all the key members of the regulatory agencies have to be confirmed by this House. I know that will take a long time and that there is always a struggle—sometimes gentle, sometimes not—between the Executive and the House over who has the real say. What we are seeing is a move towards more democratic accountability being held by the House, which I welcome.

Let me move on briefly to new clause 2, which takes this process a little further. Given the policy direction and powers that now lie with the Bank of England, we have to make sure that its committees and, above all, its ruling court of directors are democratically accountable. That is why we tabled this simple new clause, stating:

“In making nominations to the Court of Directors of the Bank of England, the Chancellor of the Exchequer must have regard to the importance of ensuring a balanced representation from the nations and regions of the United Kingdom.”

That new clause was carefully written. There is no suggestion that the court should be a federal body. Our suggestion is that in the balance of its make-up, there should be representation for the whole nation. Rightly or wrongly—much more rightly than wrongly in my opinion—there is a perception that the City of London and its major banks and financial institutions have historically had too big a sway over the court and the Bank.

The hon. Gentleman is making a powerful point. Does he agree that it must be significant that the economic performance of the peripheral areas of these nations is also peripheral?

I could not agree more. In fact, if we look at the long history of the regions and nations of the United Kingdom—Scotland, Wales, the north of England and Northern Ireland—we see that they have suffered a deflationary cycle since the second world war, because from 1945 onwards, by and large, interest rates were set to control inflation that was triggered by the City of London and over-lending by the City of London. As a result, the north-south divide became a deflationary line, with the nations of the north, and the regions of the north of England, suffering high interest rates. Although those rates were not germane to their economic problems, for most of the post-war period UK interest rates have, on average, been set at a higher level than those in the rest of Europe, simply in order to control and curb over-lending by the City of London, which has resulted in deflation in the industrial regions.

I consider that that might have been mitigated to some extent if there had been broader representation of the nations and their industries on the leading bodies of the Bank of England, and, although I know that the Executive will challenge my proposal, I think we need to move in that direction. I remind Members that the court of directors is not the institution of the Bank that actually makes monetary or fiscal policy. It has oversight over the whole of the Bank’s operations, in the sense of giving value for money, and, above all, ensuring that there is no group-think between the different committees that make operational policy. I therefore think that, at that level, we need to begin the process. At that level, we need wider representation on the court.

Surprisingly—and I raised this in Committee—such representation already exists to a small degree. Since world war 2, traditionally, there has always been a trade union representative on the court of the Bank of England, and there still is, to this day. Even the Government—indeed, successive Governments—have recognised that there can be wider representation on the court, including wider social representation. However, when I asked Ministers whether, if they were rejecting the notion of a court with a wider representation of the economy and the community, they were going to remove trade union representation, there was a deafening silence, and that is why I am putting the question again today. Those who accept the principle that there should be trade union representation—and there should—ought to widen that principle, and that is what I am asking for now.

We tabled the new clause carefully in order not to suggest that the court should be federal or too detailed, with someone representing this and someone else representing that, but simply to suggest that a balance was needed. As anyone who has sat on the board of a company will know, the first thing that one must do when creating a board is ensure that there is some representation of different skills and different interests, so that the board’s members can act as a collective. My point is that the court, and to some extent, I think, the new policy committees of the Bank of England, do not act as collectives. They are in danger of adopting silo thinking, and, ultimately—because of the power that we have given to the Bank of England—they are also in danger of beginning to act with the kind of hubris that central banks begin to wield when they are given too much power. They begin to think that they know everything when they do not. We need democratic accountability in the Bank of England, and we need it not in the sense in which the Bank understands it, but in the sense in which the nation, and the nations of the UK, understand it. That is why I will press the new clause to a vote later on.

We have made some progress with the Bill. I fear that that progress has consisted mostly of discovering more about what we need to do to improve the regulatory structures of the economy, but at least more is out in the open, and the debate is more open. Where do we go next? Where we go next is towards more accountability. The Bill makes a down payment on that accountability, but it does not finally deliver it. That is where we go next.

Obviously, in the new landscape of the City, the head of the Financial Conduct Authority holds an extremely important post, and the question of who fills that post is therefore vital. I am extremely pleased about the change that was agreed this afternoon and announced by the Minister at the Dispatch Box. It opens up the process, it gives the Treasury Committee a proper role, and it will, we hope, reinforce the independence of the person concerned.

Another person with considerable independence is, of course, the Comptroller and Auditor General. I am pleased, too, that we have moved away from the idea that the court should decide which part of the Bank’s homework the Comptroller and Auditor General should be allowed to mark. There is clearly a parallel with the CAG’s role in respect of the BBC. On Second Reading, we asked Treasury Ministers to publish the memorandum of understanding. They have now published it, and it is an extremely useful document, which sets out, in advance, an agreed framework for the CAG’s remit. That will prevent ad hockery, and will also prevent both the reality and the possible perception of political interference, or inappropriate avoidance of scrutiny of certain areas of the Bank’s work.

New clause 13, which stands in my name, would make the Bank of England subject to the Freedom of Information Act 2000. It seems to me that, as the Bank is a public authority which is fulfilling public policy purposes, the case for covering it does not really need to be made; it is the case against its being covered that needs to be made. The Minister made some important points about why she was not minded to accept the new clause, and I want to respond to what she said. She singled out three areas in particular: monetary policy, financial operations, and private banking.

I am not entirely sure of all the details of the 2000 Act, but we all know that local authorities are FOI-able. Equally, we all know that when we submit freedom of information requests to local authorities, we are not able to see the personal reports on individual members of staff in those authorities. The Act does not give access to that kind of personal information, and I should have thought that the same approach would exempt the private banking work of the Bank of England.

As for monetary policy and financial operations, I do not believe that my new clause would run into those parts of the Bank’s work, because they would still be protected by section 29(1) of the Act. That section states:

“Information is exempt information if its disclosure under this Act would, or would be likely to, prejudice…the economic interests of the United Kingdom or any part of the United Kingdom, or…the financial interests of any administration in the United Kingdom, as defined”,

blah blah blah. I should have thought that as long as we were not amending section 29, we would be able to protect the areas about which the Minister was particularly concerned.

I was alerted to this matter by a letter from the Governor, which the Minister herself waved at us in the Chamber last June, about the sale of shares in the Royal Bank of Scotland. I am sure that the Minister remembers the occasion well. In his letter, the Governor said that

“it is in the public interest for the government to begin now to return RBS to private ownership”.

Writing that letter was not part of the Governor’s role on monetary policy, financial policy or prudential policy; it was an intervention in Government policy at the Chancellor’s request on the issue of a share sale.

When the Governor appeared before the Treasury Committee, I asked him whether he would share the analysis that underlay the letter that he had written. He refused point blank to do so. I am not going to read out the full exchange that I had with the Governor on that occasion, because I went into the matter in detail on Second Reading and it has now been placed on the record twice. However, I really feel that in refusing to provide that underlying analysis, the Governor is evading public scrutiny of what is a perfectly proper matter for the public to understand.

The Governor also said in his letter that

“a phased return of RBS to private ownership would promote financial stability, a more competitive banking sector, and the interests of the wider economy.”

In fact, none of that is true. It will not promote a more competitive banking sector. We are hoping that the Comptroller and Auditor General will, in his separate audit of the RBS share sale, secure that analysis. However, there should be a more straightforward way of dealing with this. The share sale is a particular issue and the Comptroller and Auditor General always looks into share sales, so we might get at the truth on this one occasion, but I am sure that there will be other similar loopholes.

The topicality of seeing this analysis was further underlined last week by the interview in the Financial Times given by Sir Nicholas Macpherson on the occasion of his retirement from the Treasury, in which he described the sale of more RBS shares as “tricky”. He went on to say that there was a judgment to be made over whether to sell further shares below the 2008 purchase price. These are not straightforward matters; they do not fall within the normal remit of the Bank of England and they are of public policy significance. They are but one example of why it is appropriate for the Bank of England to be subject to the Freedom of Information Act.

I rise to speak to new clauses 5 to 8 in this group, which are in my name. Madam Deputy Speaker, you will be glad to hear that I will be as brief as possible, because I am desperate to get to the third grouping so that we can have a vote on those amendments.

My new clauses aim to achieve two things: first, to secure justice for my country in the formulation of monetary policy; secondly, to help monetary policy formulation better to reflect the fiscal reality of the evolving UK. They are probing amendments, and I wish to draw the Government’s attention to them again as these are important points that the Government should go away and look at before possibly coming back with their own proposals, given the relatively light legislative programme before the House these days. I was glad to hear that Labour was holding a review into these issues, and I look forward to reading its findings, although it would have been handy if the review had been prepared in advance. We could then have discussed those issues in this debate on the legislation.

The first of my new clauses proposes a change to the name of the central bank. We in Plaid Cymru believe that the Bank of England’s name should be changed. It is the UK’s central bank, and it is time that was reflected to a greater degree, not only in its name but in its structures and practices. It is an undoubtedly contentious issue for me as a proud Welshman that the central bank that decides monetary policy in Wales is named after another country. The Bank of England was created in 1694, before the present British state was constructed. Wales was annexed in 1536, Scotland in 1707 and Ireland in 1801. The central bank was therefore created to serve a political entity that consisted only of Wales and England. I suppose the fact that Wales was omitted from its title reflects the inferior status that my country enjoyed in 1694.

Many of those present will have heard my schoolboy hero Sir Ian Botham on “The Daily Politics” yesterday, saying of the EU referendum:

“England is an island and we should be proud”.

I was going to say “If only”, but I thought I might get into trouble. That dubious geographical knowledge reflects an error continually suffered by the other nations of the UK at the hands of those who use “England” to mean a larger entity. It is an injustice that persists in cricket, Wales being denied a national team in its own right. Similarly, the other nations of the UK are denied recognition when it comes to the central bank. If the British state is a partnership of equals, all its institutions must reflect that reality, including perhaps the most important institution underpinning its financial system: the central bank.

My suggestion is that our central bank be called the “Sterling Central Bank”. This would reflect the fiscal and political reality we live in, and it would show that those in this place genuinely believe in the respect agenda and a partnership of equals. I notice that the hon. Member for East Lothian (George Kerevan) has tabled a similar amendment to the same effect, and I will of course vote in favour of it, if he is minded to press it to a Division.

New clause 6, in my name, seeks to ensure representation of the four nations of the United Kingdom on the Monetary Policy Committee. Measures relating to major fiscal levers flow from the Treasury in London to the devolved countries—measures relating to corporation tax being devolved in its entirety to Northern Ireland, to full income tax devolution to Scotland, and to partial income tax devolution to Wales. Even though I believe that we should have a symmetric devolution of powers, the trajectory is clear none the less.

Fiscal responsibility, when combined with a genuine no-detriment fiscal framework, increases the political accountability of the devolved Governments to their respective electorates and, critically, incentivises those Governments to boost economic performance in order to invest in public services. The co-ordination of monetary and fiscal policy is vital in any economic policy. Obviously the central bank is independent, but there is undoubtedly co-ordination with the Treasury, as would be expected. Similar protocols and links need to be developed with the Welsh, Scottish and Northern Irish Exchequers. The national Parliaments should nominate a member to serve on the MPC to ensure that those involved in interest rate setting have an understanding of economic conditions and events in Wales, Scotland and Northern Ireland.

Is the hon. Gentleman aware that in the United States, the central bank is called the Federal Reserve for the very simple reason that it is appointed federally, and the interest rate setting committee is a federal committee? The principle is therefore well established in other jurisdictions.

I fully agree with my hon. Friend on that point. I also agree with the points he made earlier about the north-south divide and the impact that monetary policy has had on that reality. It is no surprise that the UK is the most grotesquely unequal state in the EU in terms of geographical wealth, and one of the main reasons for that is that for far too long monetary policy has been determined in the interests of a very small part of it—namely, the square mile just down the Thames.

All current MPC members are either Bank staff or in one of the four positions nominated by the Treasury. Fittingly, there are four countries in the UK, which makes the MPC ripe for modification to ensure that all nations are represented when it comes to the highly important task of deciding interest rates. I am also interested in the emerging debate on changing the MPC’s remit with regard to setting interest rates. New clause 7 seeks to expand the mandated objectives of the MPC to include maximum employment. It is already specifically charged with keeping to an inflation target of 2%. Other central banks, such as the US Federal Reserve, to which reference was made in my exchange with the hon. Member for East Lothian, have a dual mandate that goes beyond inflation. In 1977, the US Congress amended the Federal Reserve Act 1913 and mandated the Federal Reserve to target long-term moderate interest rates and, critically, maximum employment. I heard with interest the Minister’s point that the Bank does consider the Government’s employment target, but there is a difference between that and a mandate for maximum or full employment.

New clause 8 seeks to improve the Bank’s accountability to Wales and the other devolved Governments. The British state is changing rapidly as powers and responsibility flow from Westminster to the devolved Administrations, although the pace is perhaps not as quick as those like me would want. We are not privy to the meetings between Treasury Ministers and the Governor and his senior team, but we can safely assume that they are frequent. On top of that, the Governor and his team meet the Treasury Committee at least five times a year. As I mentioned a moment ago, fiscal powers already exist in the devolved nations, with more planned, so I hope that the Bank and the Treasury agree that it is in their interests to strengthen relations with the devolved Governments and Parliaments. I am not aware of any formal structures for meetings between the Governor and Ministers of the devolved Governments, or for scrutiny of the Bank by the devolved Parliaments. In the interest of mutual respect, those structures need to be formalised.

I thought that I would come along to listen this afternoon, but I was stung into action by the Minister’s peroration, in particular her comments on new clauses 2 and 3.

Does my hon. Friend share my sense of regret and bewilderment that the Government can so casually dismiss the proposal to amend the long name of the Bank of England? Does he agree that it is disingenuous of the Conservative Government to talk about a respect agenda that embraces the contributions of all the United Kingdom’s nations when they refuse to recognise those contributions at the first opportunity, and state that only England should be in the name of this most significant institution?

I agree entirely with my hon. Friend. Indeed, it is particularly apposite that he makes that point now, because as my hon. Friend the Member for East Lothian (George Kerevan) pointed out, the Bank of England is a very different kind of bank from a few short years ago. It has a much more political role than it did, and it makes decisions that have a wider impact than before. Its name surely now needs to reflect the impact of its decision making.

The second reason why my hon. Friend the Member for Edinburgh East (Tommy Sheppard) is entirely correct is because of the changed political climate in the UK. The hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) made similar points about the need to recognise the role of Wales. This is important. It is not a flimsy point; it is fundamental for people who want to see an important central institution that has proper regard for all the nations that it seeks to serve. A short while ago, I was looking at a list of the court of directors of the Bank of England. Looking at the representation provided by its 11 members, one would be inclined to rename it “the Bank of the City of London”, because there is little proper representation for the UK’s nations and regions.

I enjoyed the analogy the hon. Member for Carmarthen East and Dinefwr made with cricket. It is not a subject in which I can claim particular expertise. [Interruption.] Or interest? No, I have some interest in it. The hon. Gentleman pointed out that there is the England and Wales Cricket Board. One Mike Denness, born not far from where I was born in Scotland, was the captain of the English cricket team some years ago; again, I am showing my vintage.

We must have proper regard to all the nations represented in the United Kingdom. I was stung by the Minister’s comment that the Bank of England represents the whole of the United Kingdom, the implication being that it had always done so, but I do not think that is at all true, in terms of its policy making. The hon. Member for Bishop Auckland (Helen Goodman) and my hon. Friend the Member for East Lothian made the telling point that the Bank has had undue regard for one part of the UK. Many commentators would say that the interest rate setting policy of the Bank of England pre-2008 paid undue regard to the City of London and surrounding areas, and too little regard to the north of England, the Scottish economy, the Northern Ireland economy and the like.

That leads me nicely on to new clause 2 and why there should be representation for the nations and regions that make up the UK on the Bank of England’s court of directors. A short time ago, I had a quick look on the internet to see who these esteemed figures are, and unless I am proven to be incorrect—or the internet is incorrect—one is also a non-executive director of the Financial Conduct Authority. Such interlocking directorships do not serve economic policy and the financial sector well. Do we have such a tiny pool of appointable people that bodies with such an important relationship to one another have to be represented by the same directors? That is not a sign of strength in our appointing arrangements, but a position of extreme weakness.

Why are these things important? My hon. Friend the Member for East Lothian mentioned a word that has cropped up many times in Committee discussions: he talked about the importance of avoiding group-think. Many studies show it to have been part and parcel of the flawed decision making that contributed to the crash in 2008. If we want to avoid group-think, we need people who are willing to think differently and to ask the critical questions, and we need a chairman willing to seek out those with alternative views. I do not see that happening today.

Some years ago, I was sitting within the confines of a company that was considering a large proposal. A paper was presented, and the chairman quickly went around all the directors asking for their thoughts. Every single person around the table immediately said, “I think this is a really great paper and we should go with its suggestion.” The chairman, being extraordinarily wise, said, “I am extremely uncomfortable that we have an immediate consensus, so I am going to postpone this discussion until our next meeting. I want you to go away and generate some alternative, critical views.” That is the wise course of action; it is about not being sucked into group-think. For all those reasons, new clause 2 deserves the support of all those who do not want to replicate the mistakes of the past.

Like many others in the Chamber and, as is clear, in the Treasury Committee, I welcome the progress made on the Bill but have serious concerns about it and, in particular, its role in the systematic gradual compromising of the independence of the two key regulators, the FCA and the Prudential Regulation Authority. Further to the Minister’s announcements in her opening remarks, which were touched on by many in this House, including my hon. Friend the Member for East Lothian (George Kerevan), I welcome the Government’s determination that more oversight is needed on the appointment of the chief executive of the FCA by the Chancellor. However, I have concerns about the new procedures, as announced. Until this legislation is in place, this is very much open for debate and I sincerely hope we will debate it thoroughly, in the way described by my hon. Friend the Member for Kirkcaldy and Cowdenbeath (Roger Mullin).

Another consideration is this: if the Treasury Committee recommends the appointment to be put forward as a motion to the House, the Government could simply whip votes to approve the Chancellor’s appointment. Select Committees provide substantially more apolitical deliberation of key specialised issues. For that reason, a direct Treasury Committee veto of the appointment needs to be considered.

Issues around Treasury Committee approval are even more pertinent given the controversy surrounding the appointment of the newest chief executive of the Financial Conduct Authority, Andrew Bailey, which was touched on by the right hon. Member for Chichester (Mr Tyrie). Before his appointment, Mr Bailey was the deputy governor of the Prudential Regulation Authority. Mr Bailey’s move between the two regulators, at the recommendation of the Chancellor, raises questions over whether a revolving door policy may exist. As many in this Chamber learnt in the wake of the 2007-08 financial crisis, separation of Church and state is of paramount importance when it comes to regulation of the banks. I fear that the current Conservative Government are ignoring that critical point.

One may wonder about the motivation of the appointment of Mr Bailey as chief executive of the FCA, given that his predecessor, Martin Wheatley, was allegedly forced out of the job by the Chancellor for reportedly being perceived as too tough on financial institutions. A lighter-touch approach to regulation could mean that selling Government shares in Lloyds Banking Group and Royal Bank of Scotland would be, shall we suggest, less troublesome for the Chancellor, particularly given the recent capping on losses from the mis-selling of the pay protection scandal.

As I have previously said in this Chamber, the Chancellor stated in the 2016 Budget that he expects the Government to be able to sell their share in RBS for £25 billion, despite the fact that the bank arranged £9.3 billion in high-yield energy loans between 2011 and 2014 alone and the fact that its share price currently stands at roughly half of what was paid for it by the taxpayer in 2008. Clearly, the Chancellor faces serious challenges.

Two clauses in the Bill as outlined are particularly detrimental to the maintenance of the independence of regulators from Government influence, which is well covered by Members in this House. In part 2, clause 18 states that the Treasury is required to make recommendations for the FCA regarding economic policy as it pertains to the advancement of the objectives of the regulator at least once per year. Similarly, in part 1, clause 13 states that the Treasury can at any time—although it is required to do so at least once per year—make recommendations to the Prudential Regulation Committee regarding economic policy as it pertains to the objective of the PRA, which is the maintenance of stability within the financial sector.

Although those recommendations made by the Treasury to the regulators are not binding, it is clear that they increase the level of political involvement in the function of the regulators, which at their inception were intended to be independent of political influence. Given recent speculation that the FCA bowed to political pressure when it abandoned a probe into banking culture in the UK at the end of 2015, these two clauses, and the greater political influence on the independent regulators they entail, are concerning to say the least. In particular, the requirement in clause 13 that the Treasury make recommendations at least once a year to the PRC creates a greater onus of responsibility on the Treasury to remain aware of systemic risks in the financial system. I fear that, given the track record of this Government, they may well be asleep at the wheel when it comes to management of systemic risk.

As I have mentioned previously in this Chamber, during the debate on the 2016 Budget, this UK Government have thus far failed to address a source of substantial systemic risk inherent in the financial system and the wider economy—that of leveraged lending to the oil and gas sector by British banks and US banks active in the UK market, and the slice and dice repackaging of these loans into derivative products, such as collateralised loan obligations, which are then sold to investors.

Numerous publications have warned that, with the stagnating price of oil at the moment, that structure poses serious risk, with the Financial Times reporting in December 2014 that

“there is a stark parallel with the US property market collapse that heralded the start of the 2008 global financial crisis and upended banks along the way.”

There are already signs that the first dominoes may be falling, as default rates on these high-yield loans are rising at a startling rate. Wells Fargo announced just this month that 57% of the loans in its energy portfolio were categorised as at risk of default. As Wells’ energy exposure stands at $42 billion, $24 billion, based on that figure, is at risk of default. UBS analysts have since put a sell notice on Wells’ stock.

Notably, it is reported by Lynn Adler at Reuters that in the United States the Federal Reserve has stepped up its review into lending which could lead to systemic risk, due to concerns about leveraged lending in the oil and gas sector. The systemic risk involved in such lending has been ignored by the Conservative Government here, however.

Political influence on the regulators was a key factor, as mentioned by my hon. Friend the Member for Kirkcaldy and Cowdenbeath earlier, in the failure of the regime to protect the financial sector and the wider economy from the systemic risk that led to the 2007-08 financial crisis. The Government have already demonstrated that they are unable even to acknowledge systemic risks that are apparent to so many in the industry today.

In a final point on the composition of the court of directors of the Bank of England, if the Government truly believe in one nation Conservatism, new clause 2, as tabled by my hon. Friend the Member for East Lothian, should be incorporated into the Bill. Finally, the Bill, as outlined, has serious potential to weaken the UK regulatory regime and compromise the independence of the regulators, bringing us back to a system wherein banks are seen as too big to fail—otherwise known as business as usual.

In responding to the debate, I will perhaps leave aside the comments of the hon. Member for Coatbridge, Chryston and Bellshill (Philip Boswell), as I do not recall him participating in the debates on Second Reading, in Committee or earlier today, and his speech did not reflect the full view of other parties in this House that the Bill is a very good Bill, in the words of the Chair of the Treasury Committee.

I want to respond to some of the points raised in the debate and, in particular, to put on record how pleased I am that everyone welcomes Government new clause 12, which is supplemented by the text of the letter from the Chancellor to the Chair of the Treasury Committee that was sent earlier today and that I read out in my opening remarks. This has been an important opportunity to put on record how our amendment recognises the important scrutiny role of the Treasury Committee.

I would also put on record the important role of this House in scrutinising the Executive. This is another opportunity for us to emphasise the importance—the necessity, even—of preserving the independence of the FCA chief executive’s operational role, apart from Government. Our amendment reaffirms that commitment to continued independence of the FCA. It is vital consumers and firms know that regulatory decisions are being taken in an objective and impartial way. The FCA is an operationally independent regulator and must carry out its functions in line with the framework of objectives and duties established in statute and the independence of that chief executive is protected by statute, with clear provisions requiring the terms of appointment to be such that the appointee is not subject to direction by the Treasury or any other person.

Throughout their appointment, the FCA chief executive is scrutinised on an ongoing basis to ensure their continued independence. It was notable that in the course of the debate nobody could point out anything as regards the allegations made in the press about operational interference. I look forward to seeing the Treasury Committee’s report, because I know that it has carried out a thorough investigation into the matter.

Our new clause ensures that the Treasury Committee will always have time to scrutinise an appointee before they get their feet under the desk. I have also put it on the record that the legislation is very clear that once they are appointed the Government absolutely cannot dismiss an FCA CEO except in the limited circumstances set out in statute. I will not read out paragraph 4 of schedule 1ZA to the Financial Services and Markets Act 2000 again, but I referred to it in my opening remarks and reiterate that it applies not only to the CEO but to the chair and the external members.

We heard from my right hon. Friend the Member for Chichester (Mr Tyrie) about his reaction and his decision to withdraw his new clause 1. He asked whether he could expect legislation in the next Session outlining the five-year term. As he knows, he has our commitment to find an early opportunity to put that into legislation. He is aware of the strictures that exist in relation to writing round and getting Cabinet agreement, but he has that commitment now from the Dispatch Box. He asked whether the legislation is permanent—a good question. It is possible that legislation becomes permanent, but it is also possible for a future Government, a future House of Commons and a future Treasury Committee to change legislation.

I am grateful to the Minister for what she says. The clarification that I seek relates not to legislation, which stands or falls like any legislation, but to the arrangement. Is it intended that the arrangement between the Treasury Committee and the Chancellor, put in place in the exchange of letters today, will be permanent?

The Chancellor has many powers, but not necessarily the power to ensure permanence, which is a very long time. I can assure my right hon. Friend that it is the Chancellor’s intention that that remain the case for the length of time that he is able to exert power and influence over the matter. I hope that answers the question in the spirit in which it is asked.

The hon. Member for Leeds East (Richard Burgon) asked me to confirm that the NAO can look at the Bank’s success in meeting its objectives, but not necessarily at the desirability of those objectives. I have already said that that is exactly what the Bill achieves. The arrangements set out in the Bill have been agreed by both the Comptroller and Auditor General and the Governor, and the terms of reference have been made available to the House. The CAG is content that the scope of his powers is appropriate and the Bank is content that they do not go too far.

The hon. Gentleman asked whether the Bank should have practitioner representation. The Prudential Regulation Authority has a practitioner panel, which ensures that the interests of those who must put the PRA’s rules into practice are communicated to the PRA. That panel includes representatives of banks, insurers, building societies and credit unions, among whom the hon. Gentleman’s new favourite publication, City A.M., is widely read. Consumers also have an input through the FCA consumer panel, which has a statutory right to make representations to the PRA.

Speaking to her amendment, the hon. Member for Bishop Auckland (Helen Goodman) asked about the Bank of England and the extent to which it is subject to the Freedom of Information Act 2000. It is thanks to this Bill that the Bank is subject to the FOI Act. There are three specific limited exclusions from the Act as it applies to the Bank and, as I explained earlier, those are entirely sensible. The Bank of England is not alone in having particular elements of its work carved out from the Act. Other organisations to which specific exclusions apply include the Verderers of the New Forest, S4C in Wales, the Competition Commission and the BBC.

On the hon. Lady’s question about the Governor’s analysis supporting selling RBS shares at prices substantially above the price at which the shares are trading today, the Governor has explained that his analysis is based on commercially confidential information obtained as part of the PRA’s supervisory responsibilities. In the Freedom of Information Act there is, rightly, a standard exemption for commercial interests.

The hon. Member for East Lothian (George Kerevan) said that there was a lot to be commended in the Bill. He asked about the range of expertise and perspectives on the court. He raised an interesting philosophical question, which is that in the past the court has been a much larger organisation, with 19 members—unwieldy, in the Treasury Committee’s view—but that it should represent the views of the entire UK. All members of the court should consider the whole UK, rather than acting as a representative of a particular part. He seems to have forgotten our exchange in Committee, when we talked about the trade union representation of the court and I assured him that we have said nothing during the passage of the Bill that would change the post-war reality.

Each of the committees of the Bank of England will have a strong external representation, and no external member will be able to serve on more than one of the policy committees at the same time. That answers some of the questions raised by the hon. Member for Kirkcaldy and Cowdenbeath (Roger Mullin) about group-think. By legislating for clear decision-making procedures for each of the committees and providing that the statutory duties and responsibilities granted to them can be exercised in no other way, we empower the varied perspectives of the external members on each. All that adds up to a set of protections for external input and oversight that mitigate the risk of just one view emerging from the court or any of the Bank’s committees.

In answer to the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards), if he wants to get in touch himself—I hope that he will take the opportunity to do so—the Bank’s regional representatives in Wales are Agent Steve Hicks and Deputy Agent Ian Derrick.

The Minister will have heard today the heartfelt concerns of representatives from Wales, Scotland and Northern Ireland about the accountability of the central bank to the devolved Parliaments and Governments. Will she at least commit to a Treasury report on that, or will she request the Bank of England to produce a report on how it aims to improve its financial accountability and its relationship with the devolved Parliaments and Governments?

I think that there are a range of different ways in which that can happen, particularly now that the Treasury Committee in this House has a member from Scotland, and of course we all welcome the fact that the very coins in our pockets are minted in the great country of Wales.

The hon. Member for Carmarthen East and Dinefwr identified the Federal Reserve as an example of a central bank that adopts a dual mandate. US policy makers have judged that that is right for them. We believe that the primacy of price stability is important for anchoring inflation expectations, and we are joined in that belief by other central banks, including those in Canada and New Zealand and the European Central Bank.

I am pleased to have had this opportunity to respond to a range of issues raised in this part of the debate. I commend the Government’s new clause to the House and hope that it will agree to include it in the Bill.

Question put and agreed to.

New clause 12 accordingly read a Second time, and added to the Bill.

New Clause 2

Composition of the Court of Directors of the Bank of England

“In making nominations to the Court of Directors of the Bank of England, the Chancellor of the Exchequer must have regard to the importance of ensuring a balanced representation from the nations and regions of the United Kingdom.”— (George Kerevan.)

Brought up, and read the First time.

Question put, That the clause be read a Second time.

New Clause 9

Money laundering

‘(1) In any regulations or orders transposing money laundering measures contained within Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 (or in relation to any subsequent EU amending or successor measure) the Secretary of State shall have a duty to ensure, insofar as such regulations relate to institutions regulated by the Financial Conduct Authority—

(a) reasonable regard and due prominence is given to—

(i) Preambular (33),

(ii) Article 13(2),

(iii) Article 15, and

(iv) Article 16 and Annex II;

(b) clarity is achieved with respect to the meaning and interpretation of “prominent public function” in the context of money laundering;

(c) reasonable regard and due prominence is given to Article 22 which recognises that a PEP may have no prominent public function; and

(d) any interpretation of “adequate” Article 20(b)(ii), and “enhanced” in Article 20(b)(iii) takes account of, and gives due prominence to, the provisions in Article 13 on risk sensitivity.

(2) The Financial Services and Markets Act 2000 is amended as follows.

(3) After Part 20A insert—

“Part 20C

Money Laundering

333U Anti-money laundering: guidance

‘(1) The FCA must, prior to relevant regulations coming into force, issue guidance to regulated entities on the definition of one or more categories of “politically exposed persons” (“PEPs”).

(2) Guidance under subsection (1) must include, but need not be limited to—

(a) a requirement to take a proportional, risk-based and differentiated approach to conducting transactions or business relationships with each category of PEP that may be defined; and

(b) specified categories of persons to be—

(i) included and

(ii) excluded

from any definitions of PEPs.

(3) The Secretary of State may, by regulation, make provision about—

(a) the guidance issued, amended and/or reissued under subsection (1);

(b) arrangements for complaints about the treatment of individuals by regulated entities to be received, assessed and adjudicated by the FCA, where—

(i) a person was treated as though he or she was a PEP (and he was not),

(ii) a person who is a PEP was treated unreasonably in disregard of guidance under subsection (1), particularly in regard to specific elements required under subsection (2)(a), or

(iii) a person was refused a business relationship solely on the basis of that he or she is a PEP,

(c) circumstances in which—

(i) compensation payments are to be required from, or

(ii) financial penalties are to be imposed on regulated entities where complaints under paragraph (b) are upheld.

(4) For the purposes of subsection (1), “relevant regulations” means regulations transposing into UK law measures that EU Member States are required to implement to combat money-laundering (or subsequent regulations amending those regulations) that contain references to PEPs.

(5) The power to make regulations under subsection (3) is exercisable by statutory instrument which may only be made after a draft of any such instrument has been laid before, and approved by a resolution of, each House of Parliament.”’—(Mr Walker.)

Brought up, and read the First time.

With this it will be convenient to discuss the following:

New clause 10—Debt management plan charges

(1) The Financial Services and Markets Act 2000 is amended as follows.

(2) After section 137FBB insert—

“137FBC FCA general rules: debt management plan charges

(1) The FCA must make general rules in relation to debt management plans.

(2) The rules must specify that—

(a) if a majority of creditors agree to a creditor fee arrangement, then all creditors shall be bound by the arrangement;

(b) a creditor fee arrangement may subsequently be varied by the agreement of a majority of creditors; and

(c) a creditor fee arrangement and any variations must take the form of a written contract executed by a majority of the creditors and must be distributed to all creditors upon completion.

(3) In this section—

“creditor fee arrangement” means an arrangement whereby the fees incurred as part of the debt management plan are paid by the creditors, calculated either as a fixed amount, a percentage of the amount owed to them or a combination of a fixed amount and a percentage; and

“a majority of creditors” means a subset of creditors where the amount owed to them is more than half of the total amount owed.”’

New clause 14—Combating abusive tax avoidance arrangements—

‘(1) Section 3B of the Financial Services and Markets Act 2000 (Regulatory principles to be applied by both regulators) is amended as follows.

(2) At the end of subsection (1) insert—

“(i) combating abusive tax avoidance arrangements.

(1A) (a) in observing principle (i), the regulators must undertake, in consultation with the Treasury, an annual review for presentation to the Treasury into abusive tax avoidance, including measures to ascertain and record beneficial ownership of trusts using facilities provided by banks with UK holding companies or entities regulated by the Bank of England or the FCA, control of shareholders and ownership of shares, and investment arrangements in an overseas territory outside the UK involving UK financial institutions.

(b) in this section “beneficial ownership of trusts” includes ownership of any equitable interest in a trust including being an object of a discretionary trust, power of appointment or similar arrangement as well as any vested interest under a trust;

(c) “control of shareholders and ownership of shares in companies using facilities provided by banks with UK holding companies or entities regulated by the Bank of England or the FCA” shall include control by any person with control over a voteholder in a company as defined in Part VI Official Listing s.89F of the FSMA (2000) as applied mutatis mutandis to this context, whether directly or indirectly, and whether alone or in concert with some other person.”’

Amendment 1, in clause 24, page 20, leave out lines 5 to 10.

Amendment 8, page 20, line 10, at end add

“and insert—

‘(6) Where the authorised person mentioned in subsection (5) is a relevant authorised person, as defined under section 71A of the Financial Services and Markets Act 2000, subsection (5)(d) does not apply and subsections (7) and (8) do apply.

(6A) If the FCA satisfies itself that a person (P), who is a senior manager in relation to a relevant authorised person, is guilty of misconduct by virtue of subsections (5)(a)-(c), then P shall be guilty of misconduct, subject only to subsection (8).

(6B) But P is not guilty of misconduct by virtue of subsections (5)(a)-(c) and (7) if P satisfies the FCA that P had taken such steps as a person in P’s position could reasonably be expected to take to avoid the contravention occurring (or continuing).””

Amendment 2, page 20, leave out lines 22 to 27.p

Amendment 9, page 20, line 27, at end add

“and insert—

‘(6) Where the PRA-authorised person mentioned in subsection (5) is a relevant authorised person, as defined under section 71A of the Financial Services and Markets Act 2000, subsection (5)(d) does not apply and subsections (6A) and (6B) do apply.

(6A) If the PRA satisfies itself that a person (P) who is a senior manager in relation to a relevant PRA-authorised person is guilty of misconduct by virtue of subsections (5)(a)-(c), then P shall be guilty of misconduct, subject only to subsection (6B).

(6B) But P is not guilty of misconduct by virtue of subsections (5)(a)-(c) and (7) if P satisfies the PRA that P had taken such steps as a person in P‘s position could reasonably be expected to take to avoid the contravention occurring (or continuing).”

Amendment 10, in schedule 4, page 62, line 2, leave out paragraph 18.

New clause 9 is designed to prevent the restriction or withdrawal of banking services from perhaps tens of thousands of people. Those people include soldiers and others serving in the armed forces, judges, civil servants, trade unionists, and local councillors and their officials. Those people, along with their families and associates, are deemed to be “politically exposed persons” for the purposes of the fourth money laundering directive, which is due to be transposed into UK law by no later than June 2017.

The scope of new clause 9 is straightforward. It is designed to ensure that when that money laundering directive is transposed into UK law, reasonable regard is given to the parts of the directive that deal with proportionality. The new clause makes it clear that prior to the enactment of the directive, the Financial Services and Markets Act 2000 will be amended so that the Financial Conduct Authority will be required to publish clear guidance to the banks defining what it deems to be proportionate. New clause 9 also makes regulatory provision for PEPs who believe that they have been treated unreasonably by their banks to ask that their case be adjudicated by the FCA.

I congratulate the hon. Gentleman on introducing the new clause. I understand from what we heard during today’s topical questions that it is likely that the Government will accept it, so he is obviously in the right area. Is he worried that banks are acting in advance of the measure and that there is quite a lot of evidence that they are already gathering information about ordinary, law-abiding members of the public and using it as an excuse to restrict their banking activities?

The hon. Gentleman makes a valid point. Banks are de-risking very aggressively at the moment and we need to inject some proportionality into their actions. I believe that the new clause will go some way towards achieving that.

New clause 9 inserts into the Bill a process of adjudication. If a politically exposed person believes that they are being treated unfairly—being denied access to banking services—they can take their concern or complaint to the FCA, which can then adjudicate. The FCA can decide whether banks are interpreting the directive over-aggressively and, if they are, levy a fine on them for doing so. The new clause has nothing to do with reducing accountability; it is about increasing proportionality, which is the right thing to do.

Why is new clause 9 needed? It is needed because it is clear that in interpreting the fourth money laundering directive, banks are making no distinction, when determining who is a politically exposed person, between PEPs drawn from the corruption hotbeds of Nigeria, Russia and parts of the subcontinent, and those drawn from developed democracies such as ours that have high levels of scrutiny and accountability.

May I put on record the thanks of all of us in the House to my hon. Friend for his diligence, focus and tenacity in bringing this massively important issue to the attention of the Government and for what we hope will be a satisfactory conclusion today? Does he agree that the collateral damage of some of the precipitous action of the banks has been a big impact on people’s families and, as a corollary, their future credit worthiness?

My hon. Friend makes a good point. As I said, the banks have acted very aggressively, and I shall return to that point in a few moments.

May I thank the Economic Secretary for her time and patience in dealing with this matter? I have been speaking to her about it for four months, and I admit that I have got a little over-excited on occasions. However, she has always maintained high levels of good humour and patience, for which I thank her. It is important to put that on the record.

At this late stage, without the intervention of new clause 9, the directive risks blighting the lives of decent people. They are not just people working in public life and service but, as my hon. Friend the Member for Peterborough (Mr Jackson) pointed out, their partners, spouses, children, parents, siblings and in-laws. The directive is not proportionate.

Even more worryingly, the directive covers the close associates of politically exposed persons. I am aware that one such close associate is a member of the press lobby. He had some problems with an individual savings account and was subject to close questioning by his bank. When he asked the person on the other end of the phone why the bank was conducting itself in such a way, the response was, “Because we understand that you are an associate of the Prime Minister.” Even the media are caught up in this directive, or rather the banks’ de-risking in preparation for its introduction.

The Financial Action Task Force, whose guidance underpins the directive and is repeatedly referred to in it, states:

“For close associates, examples include”—

the House needs to listen carefully to this because it is quite an odd paragraph—

“the following types of relationships: (known) (sexual) partners outside the family unit (e.g. girlfriends, boyfriends, mistresses); prominent members of the same political party, civil organisation”—

that could be the National Trust—

“labour or employee union as the PEP; business partners or associates, especially those that share (beneficial) ownership of legal entities with the PEP, or who are otherwise connected”.

My fear is that, without clear Government-backed FCA guidance, as provided for in new clause 9, the banks, in their rush to de-risk, will continue to draw on the work of the Financial Action Task Force. The Financial Action Task Force states in paragraph 37 of its 2013 guidance:

“there should be awareness that middle ranking and more junior officials could act on behalf of a PEP to circumvent…controls. These less prominent public functions could be appropriately taken into account as customer risk factors in the framework of the overall assessment of risks”.

The case that my hon. Friend makes is overwhelming. Will he tell the House whether he is aware of anyone who is opposed to what he is trying to do?

I am sure that there will always be people who are opposed to what I am trying to do. That is the nature of society—we live in an open society in which people have different points of view on many issues. The fourth money laundering directive should be about capturing bad people in its scope, not capturing all people. If everyone is thought of as bad, it is very difficult to identify who is actually breaking the law. We want to go after the law breakers, not those people who, by accident, are described or identified as PEPs by banks in this country.

Does my hon. Friend share my concern that the rush to implement these actions ahead of the directive indicates a desire by the banks to take what seems to be decisive action against a group of people who are quite easy to target, and that the banks will be less keen to take that action against people who are harder to track down? [Interruption.]

Order. I know the fondness of the right hon. Member for East Yorkshire (Sir Greg Knight) for live music, and it is a fondness that I share, but there are limits.

I thought that rather complemented the intervention from my hon. Friend the Member for Braintree (James Cleverly)—it was almost like an opera singer opening his lungs.

My hon. Friend makes a very good point. Banks need to invest their resources, time and energy in going after high-risk people. Banks know which people are high risk. To be perfectly honest, whatever people in this country think about their Members of Parliament, trade unionists, council officers and leaders, Assembly Members and Members of the Scottish Parliament, they are, in the main, not bad people indulging in money laundering. I am not saying that there will not be a bad apple, but those people do not present the real and current risk. Banks’ energies should be focused not on chasing after the good, but on chasing after the very bad.

The Financial Action Task Force catch-all that says that even middle-ranking people can be involved in money laundering basically puts everyone above grade 7 in the civil service in the frame. Think of people in a Government-backed organisation or trade union regional organisers. If banks follow the FATF guidance, those people could be deemed to be politically exposed persons, so not only their banking facilities, but those of their families and associates, could be withdrawn or curtailed.

I will make some progress, as I was not planning to speak for so long. Once a PEP, always a PEP. Although article 22 of the directive states that after 12 months have passed from the point at which the politically exposed person has left office, a bank can decide that that person is no longer a PEP—that sounds like good news—it goes on to say that banks will

“be required to take into account the continuing risk posed by that person and to apply appropriate and risk-sensitive measures until such time as that person is deemed to pose no further risk specific to politically exposed persons.”

That is the lobster pot from which few will escape. Banks are risk averse, so they will feel that it is much better to keep someone as a PEP indefinitely than to take the risk of downgrading them to the status of a normal customer unless they are obliged to do so.

Forget people serving in public life; let us think about those who have left it. Without the protections and guidance in new clause 9, ex-Army officers, ex-judges, ex-trade union representatives, ex-community leaders, volunteers and ex-members of political parties, and former Members of Parliament could be denied the opportunity to serve on charitable and company boards because their presence would confer the status of politically exposed person on the rest of the board. That status is best avoided by individuals who are not yet stigmatised. If conferred, such a status could lead to a withdrawal of the relevant charity or company’s banking services. This is not supposition and I am not making this up. Along with the restriction of banking services, the closure of personal accounts and the blackballing of family members, it is happening now. In accepting new clause 9, the Government will enshrine in an Act of Parliament that banks have a legal duty to act proportionately and in accordance with FCA guidance, and that is the correct thing to do.

New clause 9 is not about protecting politicians. Politicians are politically exposed people, but I understand that even a Parliamentary Private Secretary in the Treasury has had difficulties with this issue. Although the rights of politicians and their families are no less deserving of respect than anyone else’s, this is about protecting the banking, financial and future employment rights of the many thousands of people whose names appear in the civil service year book. It is about protecting the rights of military personnel who serve our country, committed council officials who serve their community and trade unionists. New clause 9 not only protects those people’s rights, but the rights of their extended families who had no say in their relation’s career choice, but are dragged into the scope of the directive.

Finally, I thank the Government for indicating that they will accept new clause 9. By doing so, they will reduce the chances of an Army officer who is serving their country somewhere hot and dangerous receiving a telephone call from his or her spouse saying, “Darling, while you’re being shot at, we’ve had our bank account closed and we’ve lost our mortgage.” I congratulate the Government on doing the right thing today.

I am pleased to follow the hon. Member for Broxbourne (Mr Walker) who made an excellent speech on an important subject. He showed his characteristic bravery and forcefulness in addressing an issue that many other hon. Members wanted to address, but were unenthusiastic about putting themselves in the firing line.

The Minister said earlier that everybody is happy with this Bill, but now that we are discussing the regulation of financial services, she may discover that Labour Members are not quite so happy with this part of the Bill. I wish to speak in support of amendments 8 and 9, and I am also sympathetic to amendment 2 tabled by the Scottish National party. Getting the senior management regime right is vital for reducing the risk of further irresponsible behaviour in financial institutions, particularly the banks. We all know the devastating impact that the behaviour of the banks had on rest of the economy—anyone who is in any doubt about that should see the film “The Big Short”, which wonderfully describes that episode, albeit from an American point of view.

The clauses on the senior management regime are a retreat from the sensible legislation introduced in 2012, following the Parliamentary Commission on Banking Standards, which recognised that one way of changing behaviour and culture is to make those people at the top of the banks accept their full responsibility. The clauses in the Bill no longer do that. It is completely sensible for people to be expected to have the same responsibility for the behaviour of those who work for them that other institutions have for health and safety.

We have heard a number of arguments for the Government’s decision to reverse the reversal of the burden of the proof—rather an awkward mouthful—and one of the main arguments is that the regulatory approach that was legislated for in 2012 is too burdensome. This, however, misses the whole point, which is that we want people to spend more time looking at how to reduce risk rather than spending a great deal of time on how to make lots and lots of money irrespective of the risks posed to the economy. The risk does not apply ultimately to themselves on their own account, but it infects all other financial institutions.

I attended a seminar in the City last week, and senior practitioners from law firms, accountancy firms and from some of the big asset managers were in attendance and proved to be supportive of the original parliamentary commission approach. I expressed my feeling that it was disappointing that the Chancellor was going back on this, and suggested that he was not doing it as a whim, but because he had been lobbied to do so. I asked why they thought he had been lobbied in this way. It was, of course, a naive question, and I had no idea what the answer would be. They all roared with laughter and said, “Well, it’s obvious. It’s a way to facilitate people making millions of pounds without facing any downside risks.”

We cannot put ourselves in that situation again. The cost of the bail-out in 2008 was £133 billion. We really must take seriously the lessons that can be learned from that, which is why the amendments tabled by my Front-Bench team and by the SNP should be taken seriously and accepted by the Government.

I should like to take this opportunity to introduce my new clause 10, which is aimed at safeguarding the free debt management sector. Let me reassure the Minister that this is very much a probing amendment; I know she is looking forward to responding to it.

There has been a long debate over the “fee versus free” principle in the provision of debt management plans for indebted consumers. It is not my intention to re-open that debate now, although my concern is about free providers that are facing a looming capacity crisis.

Organisations such as PayPlan and Christians Against Poverty operate the “fair share” model of free debt management that sees creditors covering the cost of customer plans on a polluter-pays basis—in other words, through schemes that are free to the debtor. These organisations are facing increasing pressure as a consequence of fee-charging firms leaving the marketplace after failing Financial Conduct Authority authorisation. In one recent case, this left 16,000 debt management clients unsupported, and these customers are now being are being signposted to free providers. The last thing people want to happen when they are caught up in the desperation of heavy debts and are trying to slog their way out of it is, of course, that the person advising them suddenly disappears so that they have to start again with new people.

The debt management sector is nearing a desperate point, and the market is becoming increasingly inefficient, with consumers treated badly in many cases. The fair-share operators I mentioned have seen their revenue reduce as a consequence of consumers’ disposable income falling. As more and more fee chargers leave the market, we will soon face a situation in which fair-share operators are unable to provide economically viable plans. Plainly, we now face a situation in which consumers will be charged higher fees and their options for free debt management services will be severely limited—again, we are going in the wrong direction.

There were considerable and commendable efforts over the course of the last Parliament aimed at safeguarding free debt management provision, most notably on the creation of a voluntary protocol. Members of all parties have tried to make similar long-term changes, reflecting the cross-party nature of this issue. More recent efforts have come from the parliamentary debt management working group, of which I am a member. I see in her place our chairman, the hon. Member for Makerfield (Yvonne Fovargue), who is poised to speak in, I hope, support of my new clause.

Recent efforts have been aimed at establishing an industry-wide offering of free consumer debt management services. I accept that, while desirable, such an approach may not be feasible at this time. The new clause provides for a small tweak to the Financial Services and Markets Act 2000, mandating all creditors, via an FCA rule change, to fund free-to-consumer debt management plans under the “fair share” model. Many large creditors—banks and credit card companies—do accept a reduction in the amount due in exchange for the establishment of a coherent plan, but some still do not, and the new clause is intended to tackle that. While it falls short of outlawing the provision of fee-charging plans, it provides a strong safeguard for the “fair share” model, ensuring that customers can continue to access free debt management plans.

I am certain that this is a robust mechanism for desperately needed reform in the debt management sector, and I hope that, subject to Members’ approval, it can be implemented without delay. I thank the Economic Secretary for her interest in the matter, and for her helpful guidance behind the scenes.

Every age has its challenges, and it may well be that historians will look back at our era and marvel at the levels of unsustainable personal debt that were carried by so many people. Such debt may arise from grave misfortune, poor choices or the actions of others, but whatever the reason, it is vital that the right help is at hand to help people to step their way out of debt, and the FCA can assist that process by making the rule changes I have proposed. I thank the Economic Secretary again for her patience and kindness, and commend the new clause to her and to the House.

I am afraid that I cannot support new clause 10. While I have great sympathy with the aim of the hon. Member for South West Devon (Mr Streeter) to keep the free-to-consumer plans going, I do not feel that his new clause will achieve that.

I am slightly unclear about the use of the term “fee”. As the hon. Gentleman said, this is currently a voluntary arrangement. I am a little concerned about what public benefit would result from his proposal. Would it merely ensure supplier revenues for certain service providers? If so, is that really a legislative issue? I have wider concerns. I feel that too few debt providers give advice on debt, but I also feel that the current landscape is fairly confusing. I do not think that introducing a statutory funding mechanism for one debt solution—a debt management plan—is the right way forward. Plenty of options are available to people in debt, including bankruptcy, debt relief orders, debt management plans, administration orders, debt consolidation, and individual voluntary arrangements.

Many of those plans are not funded sustainably. I think that one organisation that offers them is paid £35 for each order that it issues, and that is not a sustainable solution. I do not want providers to offer plans on the basis of how they are funded rather than on the basis of what is best for the individual, but I fear that the new clause could lead to their doing so. I am sure that many would not, but the new clause might lead to more providers’ choosing to offer the “fair share” solution because it is statutorily funded, whereas they make a loss on every debt relief order that they issue. That is not the best solution for the individual who is in debt.

I think that we need a proper review of the current debt solution landscape. I believe that it is too complex, and that it is not properly costed. I also believe that the providers have insufficient funding. As the hon. Gentleman said, there has been a problem with the debt management plans. In fact, a review of the fee-charging debt management companies found that 60% of their clients were put in a worse position. That cannot be allowed to continue, and I am pleased that the FCA is cleaning up the market. However, I worry about what will happen to people who come off debt management plans. They took a big step to deal with their debts—and facing up to the fact that you cannot pay your bills is a difficult decision to make—and went to a provider. Now they have been told, “Actually, your provider was not providing a good service. Go and find somebody else.” I worry that those people will not look around, and I hope that the Minister will look at ways of promoting opportunities for them to go to other providers.

I also hope that funding will be available for the other providers, and that they will not be left in the unsustainable position of having to pick up a large number of people all at once. It might be sustainable to pick up 16,000 people over a few months, but to pick them all up immediately when a company goes bump is really difficult. I have sympathy for the motives behind new clause 10, but I do not feel that it will solve the main problem, which is that many debt solutions providers do not have sufficient funding. The new clause would focus on only one solution and could well skew the market in the wrong way, to the advantage of the providers rather than of the people who need the solution.

I should like to speak to amendments 1 and 2, tabled in my name, and in passing to amendments 8 and 9, tabled by Labour Members. I shall not press amendments 1 and 2 to a vote, but should Labour Members move on amendment 8 and the consequential amendment 9, we will support them.

There is much in the Bill to commend it to us and to the House, and much that will add to the regulatory regime and its performance in the UK. However, the worst part of this legislation—the time bomb ticking away inside it—is the Government’s attempt to shift legislation that they put in place only four years ago on the reverse burden of proof for major financial infractions. That is the nub of the matter. Legislation was introduced four years ago that identified senior managers in major banks and other financial organisations and stated that if a serious infraction of regulations was encountered on their watch, they would automatically be held responsible unless they could prove that they had taken due steps to prevent it from happening.

That legislation had a great deal of support in the House and among the public, because it was the one sure way of ensuring that those at senior level in the financial sector would not continue to do what they had done all through the 2007-08 crisis: blame everyone else and say that it was not their fault. The legislation made senior managers responsible, just as senior managers in other organisations and utilities have become responsible for major crises.

Why would the Government want to change that law before it even came into operation this month? That sends out the wrong signal. When we put legislation in place that has consensus behind it, we should try it and see whether it works. However, the Chancellor, whose constant refrain is that he has a long-term economic plan, has decided to change the legislation before it has even come into operation. That change sends out all the wrong signals. The Minister will probably say that the measure is disproportionate now that the Government have widened the number of people being caught up in the senior management regime to tens of thousands, and that applying the law could become problematic. I know all the explanations, but I put it to her that by reneging on legislation that was put in place with great fanfare four years ago before it is even operational, the Government are simply signalling to the rest of the world that they are loosening the regulatory bonds. They might think that they are not doing that, but they are sending out the wrong signal.

The Government have been sending out another signal as well. For years, the Chancellor and other Treasury Ministers have been telling us that we should pay lower taxes, that taxes are bad, and that we should keep more of our own money. Suddenly, however, when we discover that hundreds of thousands of people are setting up secret offshore bank accounts, the Government get all holy and moral, saying, “We didn’t mean you to do that!” This Government sometimes speak with two voices. Individual Ministers are honest and sincere, but they do not understand that they sometimes speak with one voice on taxes and regulation and then do the opposite. It sends out the wrong signal. The Government cannot go on blaming other people. They are to blame if they change the rule without having put it into force for at least a few years to see whether it works. That is why we must leave the provisions in the Financial Services Act 2012 until it has been proven that they do not work.

I rise to speak to new clause 14, amendment 8, and amendments 9 and 10, which are consequential on amendment 8, tabled in my name and those of my hon. and right hon. Friends. I will first discuss new clause 14 on combating abusive tax avoidance arrangements and then our amendment on the reverse burden of proof, or the presumption of responsibility, as I choose to call it, for senior managers in the banking sector.

Labour tabled new clause 14 in the wake of Panama papers leak, which the hon. Member for East Lothian (George Kerevan) just mentioned. The new clause sets out that combating abusive tax avoidance should be established as new regulatory principle for the FCA, and requires the FCA to

“undertake, in consultation with the Treasury, an annual review for presentation to the Treasury into abusive tax avoidance”.

The new clause makes it clear that the new principle should involve

“measures to ascertain and record beneficial ownership of trusts using facilities provided by banks with UK holding companies or entities regulated by the Bank of England or the FCA, control of shareholders and ownership of shares, and investment arrangements in an overseas territory outside the UK involving UK financial institutions.”

Members will be aware that Labour published its tax transparency enforcement programme following the Panama papers leak, and the release of the information that thousands of companies listed in the Mossack Fonseca papers have financial services provided by UK banks. Our programme makes it clear that Labour will

“work with banks to provide further information over beneficial ownership for all companies and trusts that they work for.”

The new clause seeks to establish a procedure to enact that.

Last week, the Government announced a deal on the global exchange of beneficial ownership. We of course welcome that as an initial step, but it is insufficient. The measures announced by the EU this week are also welcome, but they do not go nearly far enough, because they require only partial reporting. My hon. Friend the shadow Chancellor said last week:

“The turnover threshold is far too high, and Labour MEPs in Europe will be”

doing the right thing in

“pushing to get that figure reduced much lower to make it more difficult for large corporations to dodge paying their fair share of tax.”—[Official Report, 13 April 2016; Vol. 608, c. 369.]

Banks need to reveal the beneficial ownership of the companies and trusts with which they work. That means establishing a record of ownership of the companies and trusts supported by UK banks, whether or not the owners are resident in the UK. We must ensure that Crown dependencies and overseas territories enforce far stricter minimum standards of transparency for company and trust ownership, but when UK banks are involved, it is right that a record is maintained of the beneficial owners that they advise.

The tax expert Richard Murphy has written that Jersey, Guernsey and the Cayman Islands are

“cock-a-hoop at having rebuffed calls from David Cameron that they must have readily accessible registers of beneficial ownership even for the use of UK law enforcement agencies”.

The shadow Chancellor said in response to those calls that the

“agreement is a welcome step in the right direction but it fails to do anything to tackle the tax havens based in British Overseas Territories. Failure to take responsibility for these British Dependencies substantially undermines the effectiveness of this agreement.”

Similarly, we are aware that the Financial Conduct Authority wrote to banks urging them to declare their links to Mossack Fonseca by 15 April. The FCA’s call on UK financial institutions to review links with Mossack Fonseca is welcome, but the regulator should recognise the need for complete transparency to retain public confidence.

The FCA should seek full disclosure and act without delay. The slow, drip-drip responses of the Prime Minister’s office in recent weeks have served only to fuel public concern and have been very much a lesson in how to raise suspicion unintentionally. The FCA should publish details of which financial institutions it has written to and why; what information it has asked them to provide; and what action it will take, now that the 15 April deadline has passed. Importantly, it cannot allow banks and their subsidiaries to conduct an open-ended internal investigation, but must establish an early deadline for the disclosure of all information on their relations with Mossack Fonseca, so that the regulator can take all necessary action. Campaigners Global Witness responded by saying:

“These are welcome first steps…but the UK authorities are missing the wider point. Mossack Fonseca is no bad apple; it is just one small part of a much deeper problem.”

That is why it is necessary for us to have a clear direction of travel towards recording beneficial ownership of trust services by UK banks, as we are seeking to do with this new clause.

Given the widespread concerns about tax avoidance, the British public, who bailed out the country’s banking sector, deserve to know the facts about the role of UK banks in this unfolding story. With new clause 14, Labour has made a positive and practical proposal to take steps to increase tax transparency and publicly available information on the beneficial owners of companies and trusts registered in tax havens.

Let me now deal with the remainder of the amendments. Labour’s position was set out clearly on Second Reading and in our amendments in Committee: removing the reverse burden of proof—the presumption of responsibility—is unreasonable, unwise and, I am sorry to say, risky. We continue to support the current legislation, which was agreed by the Chancellor and in both Houses as recently as in consideration on the Financial Services (Banking Reform) Act 2013. That is why we have re-tabled our amendments on keeping the presumption of responsibility. It should not be forgotten that this measure was a key recommendation of the Parliamentary Commission on Banking Standards, which said that it

“would make sure that those who should have prevented serious prudential and conduct failures would no longer be able to walk away simply because of the difficulty of proving individual culpability in the context of complex organisations.”

The presumption of responsibility, as currently set out in legislation, applies to senior managers. It means that to avoid being found guilty of misconduct when there has been a regulatory contravention in an area for which they are responsible, they will have to prove that they took reasonable steps to prevent that contravention. This Bill removes that onus on senior bankers. The onus is entirely reasonable, proportionate and, as bitter experience tells the British people, necessary. Misconduct and misdemeanours in financial services are not merely a tale from history. In 2015, for example, the FCA had to fine firms more than £900 million, and we have also seen the LIBOR scandal, foreign exchange fines and the mis-selling of payment protection insurance to the value of up to £33 billion. The presumption of responsibility is so reasonable and necessary that the policy was introduced with cross-party support; that should not be forgotten.

The 2013 Act applied the presumption of responsibility, through the senior managers and certification regime, to all “authorised persons”. This Bill extends that authorised persons regime to a wider range of businesses but has watered down the presumption of responsibility to a mere “duty of responsibility”. The vast majority of people working in the financial sector were not, and are not, affected by the existing legislation, and would remain unaffected should our amendment pass. That is why the legislation was passed by Government Members in the first place.

In December 2013, speaking of the stricter measures being introduced by the Government, including the reverse burden of proof, the then Economic Secretary to the Treasury, the right hon. Member for Bromsgrove (Sajid Javid), said:

“The introduction of this offence means that…in future those who bring down their bank by making thoroughly unreasonable decisions can be held accountable for their actions…Senior managers could be liable if they take a decision that leads to the failure of the bank…The maximum sentence for the new offence…reflects the seriousness that the Government, and society more broadly, place on ensuring that our financial institutions are managed in a way that does not recklessly endanger the economy or the public purse.”—[Official Report, 11 December 2013; Vol. 572, c. 252.]

On that, at least, I agree with the right hon. Gentleman. It is a shame that there has been a change in position.

The Chair of the Treasury Committee said:

“Far from imperilling the UK’s global competitiveness, high standards will make the UK a more attractive place to locate.”—[Official Report, 8 July 2013; Vol. 566, c. 76.]

Other commentators and campaigners who have expressed their support include Martin Wolf of the Financial Times. We have re-tabled this amendment to state our clear opposition to this unwelcome, unnecessary and risky change.

The legislation was introduced by the Chancellor in 2013, and Members of the House should not forget that it was due to come into force in March this year. It has yet to be even tested, as the hon. Member for East Lothian said. Now is not the time to make this concession to top bankers. Both the announcement of the Chancellor’s “new settlement” with financial services—including as it does the departure of Martin Wheatley from the FCA and the scrapping of the FCA’s review of banking culture—and the recent discovery that UK banks, Crown dependencies and overseas territories are at the heart of the Panama papers tax haven scandal mean that the proposal in the Bill to remove the presumption of responsibility is the wrong proposal at the wrong time. We urge Members to support our amendment.

Let me turn to new clause 10, which was tabled by the hon. Member for South West Devon (Mr Streeter). We recognise the concern about fee-chargers in the debt management sector, who often charge clients exorbitant amounts to set up plans that can clearly add to clients’ problems, rather than helping to alleviate them. In the scenario proposed, instead of charging fees to customers, the commercial debt management companies would receive income though a statutory levy on creditors, and all creditors would be bound by a fee arrangement to which the majority agree. However, it is not clear how that helps consumers specifically. The rules could bind some commercial organisations to paying fees to other ones. There are serious competition issues here, and I am aware of the FCA’s concerns on that point.

There are questions to ask about how the creditors set the level of fees. The measures would not stop commercial debt management companies charging consumers in addition to the fee. In some circumstances, they could lead to commercial providers advising people on the basis of their creditors and not on their actual needs.

Although the new clause can be admirably presented as a way of killing off fee charging, it may well result in a lifeline being thrown to the sector. Critics may well ask why the Government should intervene to prop up this market, just at the point when the FCA is cleaning it up. Secondly, it introduces a statutory funding mechanism for one debt solution—debt management plans—when in fact there are many options available for people in debt, including bankruptcy, debt relief orders, debt management plans, administration orders, debt consolidation and individual voluntary arrangements. Only about one third of those people seeking debt advice are provided with a debt management plan; for others, it is simply not the right fit. Although we welcome the debate, we feel that it is necessary to consider how best we meet the needs of all people with debt problems, so we do not support the new clause.

Finally, let me turn to new clause 9 in the name of the hon. Member for Broxbourne (Mr Walker). I am aware that this is an issue of concern to Members in all parts of the House. The global rules against money laundering require banks and regulated businesses to carry out enhanced due diligence on all politically exposed persons—individuals entrusted with a public function—but if the transposition of the EU directive into domestic legislation is mishandled, a wide range of other people could be affected. It could adversely affect tens of thousands of people, including civil servants, city workers and even, as has been described, the families of armed forces officers serving our country abroad.

The EU’s fourth money laundering directive, passed last year, will need to be transposed into UK law within two years, as has been mentioned. We need to get this right to ensure that the safeguards proposed to prevent tax avoidance and money laundering and, in the light of the Panama papers, the provisions governing the register of beneficial ownership of companies and trusts do not get in the way of individuals using their bank accounts, securing mortgages or supporting charities. We believe that this is an important issue, and we are grateful to the hon. Member for Broxbourne for all his hard work explaining the potential risks to the House.

Let me start with new clause 9, tabled by my hon. Friend the Member for Broxbourne (Mr Walker) and others, which addresses the important issue of politically exposed persons. My colleague is an expert not only in oratory but in parliamentary procedure and I commend him for his use of both in this example. The Chancellor and I are very concerned about this issue, as my hon. Friend knows, and we are grateful to my hon. Friend for his assiduous work in collating examples that he has heard from colleagues and from the banking sector.

It is absolutely right that the “know your customer” requirements should be tailored to the risk posed, and I reassure the House that we are very much on the side of colleagues in this regard. I therefore welcome the amendment and the strong message it sends to banks as they implement these rules. The new clause also addresses guidance, and I fully agree that guidance will help the banks to take an effective, proportionate and commensurate approach to politically exposed persons. The Government intend to implement new money laundering regulations by June next year at the latest and this amendment will come into force at that time. We will consult on the new regulations this year.

As well as accepting the new clause, I want to take the opportunity to update the House on other action that we have taken to resolve these issues on behalf of Members since my hon. Friend had his Adjournment debate on 20 January. On 1 March we had a meeting with the banks that I organised with the Minister for Security from the Home Office, and on 23 March the Chancellor wrote to the banks to explain our views. We will continue to work with the banks, with the FCA and with others to ensure that a sensible and proportionate approach prevails.

I have also written not once but twice in a “Dear colleague” letter to all Members and Peers giving colleagues the name of a senior designated person to contact at each major bank should they or a family member encounter any problems. To conclude on this new clause, I thank my hon. Friend for bringing the issue to the House so that I can give this reassurance about the attention that the Government are paying to this challenge.

New clause 10, on debt management plans, was tabled by my hon. Friend the Member for South West Devon (Mr Streeter), and I thank him for his collaborative approach in tabling the amendment and the ongoing commitment shown by him and his all-party group to supporting all households in problem debt. The Government share his concerns about the potential for detriment to occur to consumers participating in some debt management plans and I recognise the importance of protecting this vulnerable group of consumers. The Government’s focus has been on comprehensively reforming the regulation of the sector to ensure that financial services firms are on the side of people who work hard, do the right thing and get on in life. Responsibility for regulating debt management firms, like that for all other consumer credit firms, transferred from the OFT to the FCA on 1 April 2014. The FCA has made addressing the risk posed to consumers by non-compliant debt management firms the highest priority, alongside payday lending.

Indeed, debt management firms were in the first group of firms to require full authorisation, and the FCA is thoroughly scrutinising firms’ business models and practices. Firms that do not meet the FCA’s threshold conditions will not be able to continue to offer debt management plans. Removing non-compliant debt management firms from the market will fundamentally reduce the risk of harm to consumers and will ensure that consumers have access to sustainable repayment plans as a result of providers acting in the best interest of consumers.

The hon. Member for Makerfield (Yvonne Fovargue) raised the question of the handover of clients with debt management plans whose firms have not been authorised by the FCA. That is an issue to which the FCA is playing close attention, to try to ensure that data protection issues are taken into account and to accommodate the disheartening position of someone with one of those plans whose firm fails to be authorised, for whom a better alternative must be found.

On the issue raised by the amendment—how debt management plans are funded—charities such as StepChange and Christians Against Poverty already successfully negotiate voluntary funding agreements with creditors through the fair share model. Introducing changes to this funding arrangement, such as mandatory contributions, may have unintended consequences, disrupting a successful funding arrangement for charities. Consequently, setting the level of this share is not supported by the not-for-profit sector. Similarly, not-for-profit providers are concerned that formalising fair share contributions may change charities’ relationship with creditors and compromise their independence. The perception of charities by their clients as impartial advocates is essential to encouraging households in problem debt to come forward for support.

With the FCA’s authorisation process ongoing, and the anticipated changes in the market that that will bring, now is not the right time to introduce changes to the way debt management plans are funded. Any consideration of changes to funding arrangements should take place when the shape of the debt management market is known. The best setting for looking at the full landscape of debt advice funding will be in the context of the public financial guidance review, which includes a commitment for the Government to monitor the impact on the FCA authorisation process. If necessary, the funding arrangements for debt advice will be reviewed, and the Government may consider broadening the funding base to include other sectors, to ensure that consumers continue to get the help they need. I trust that this assures my hon. Friend the Member for South West Devon that the Government continue to consider it a priority to help those facing problem debt, and that he will not press his amendment to the vote.

I shall deal now with amendments 1, 2, 8, 9, and 10, which would apply the reverse burden of proof to senior managers in the banking sector or in all authorised financial services firms. We reject both sets of amendments, above all because the senior managers and certification regime with a statutory duty of responsibility will be an extremely effective tool for holding senior managers to account.

The duty of responsibility will extend to all senior managers. The discredited approved persons regime will be replaced. Firms must identify exactly what their senior managers are responsible for. Senior managers will not be able to wriggle off the hook because they did not know what was being done in the areas for which they are responsible. The reverse burden of proof is not needed to deliver what we want to deliver—a culture change.

Lord Turnbull, who was a Cross-Bench member of the Parliamentary Commission on Banking Standards, said:

“In future, senior managers will have to take responsibility for what goes on in the teams for which they are responsible and for the actions of the people whom they have appointed and thereby given accreditation.”

He went on to say:

“I still fail to see why the reverse burden of proof is the only way to get people to understand that. . . I believe that the proposal now in the Bill—

that is, the duty of responsibility—

is superior.”—[Official Report, House of Lords, 15 December 2015; Vol. 767, c. 2026-28.]

In written evidence to the Public Bill Committee, the Building Societies Association stated:

“The lack of individual accountability to date is mainly the result of a failure to allocate responsibilities in firms’ corporate governance frameworks. Because this deficiency will be fully addressed by the new strengthening accountability in banking rules (through responsibility maps, individual statements of responsibility, handover arrangements), the reversed burden of proof is unfair and is redundant”—

not my words, but those of the Building Societies Association.

Today’s debate is about what happens when things go wrong and a firm breaks a regulatory requirement. Under the reverse burden of proof, the senior manager responsible for the area of the firm where the breach occurred would have to prove that they had taken reasonable steps to prevent it. The Bill will impose a statutory duty of responsibility on senior managers. Senior managers would still be required to take reasonable steps to prevent breaches of regulations in the areas of the firm’s business for which they are responsible. However, when such a breach occurs, it will fall to the regulators to show that the responsible senior manager had failed to take such steps. This duty will be extended with the senior managers and certification regime to senior managers in all authorised financial services firms, ensuring that they are held to the same high standards as those in banks.

Contrary to the allegations of the hon. Member for Leeds East (Richard Burgon), the duty is in no way “soft” on bankers. A senior manager can be found guilty of misconduct if a breach of regulatory requirements occurred in the area of the firm’s business for which they are responsible and they did not take reasonable steps to prevent it, whether they were aware of the contravention or not. The hon. Gentleman quoted a previous Economic Secretary, my right hon. Friend the Member for Bromsgrove (Sajid Javid). I think that he might be confusing the reverse burden of proof with the criminal offence of recklessness causing a bank to fail. I can assure him and the House that that criminal offence, with a possible seven-year sentence attached, came into effect in March.

New clause 14 seeks to give the FCA and PRA a statutory duty to have regard to combating tax avoidance, and for them to report annually to the Treasury. I welcome the opportunity once again to set out the measures that this Government have taken—far more than any previous Government—to tackle tax evasion, tax avoidance and aggressive tax planning. We have become a world leader in tax transparency. However, as the UK tax authority is Her Majesty’s Revenue and Customs, rather than the FCA or PRA, it is responsible for ensuring that businesses and individuals pay the taxes they owe.

Last week we set out a far more effective package of proposals to tackle the problem of tax evasion and avoidance, ensuring a multi-agency approach by strengthening HMRC and involving relevant bodies such as the FCA. The Government are committed to giving HMRC the tools to do its job, whether by introducing over 40 changes to the tax laws, or by providing additional funding to strengthen its capability in key areas. I could go on, Madam Deputy Speaker, about all the measures we have introduced—

Okay, the hon. Gentleman wants to hear more. In the July 2015 Budget we confirmed an extra £800 million investment to fund additional work to tackle evasion and non-compliance. HMRC’s specialist offshore unit is currently investigating more than 1,100 cases of offshore evasion around the world, with more than 90 individuals subject to current criminal investigation. Even before last week, HMRC had already received a great deal of information on offshore companies, including in Panama, and including Mossack Fonseca. This information comes from a wide range of sources and is currently the subject of intense investigation.

We are going further by providing new funding of up to £10 million for an operationally independent cross-agency taskforce. It will include analysts, compliance specialists and investigators from across HMRC, the National Crime Agency, the Serious Fraud Office and the Financial Conduct Authority. It will have full operational independence and will report to my right hon. Friends the Chancellor and the Home Secretary.

Of course the FCA has a role to play. Its 2016-17 business plan states that the fight against financial crime and money laundering is one of its priorities. Its rules require firms to have effective systems and controls to prevent the risk that they might be used to further financial crimes. That is why the FCA has written to financial firms asking them to declare their links to Mossack Fonseca. If it finds any evidence that firms have been breaking the rules, it already has strong powers to take action. However, it is HMRC that is ultimately responsible for investigating and prosecuting offences associated with tax evasion.

Finally, with regard to trusts, we believe that we have secured a sensible way forward by ensuring that trusts that generate a tax consequence in the UK will be required to report their beneficial ownership information to HMRC. By focusing on such trusts, we are focusing on those where there is a higher risk of money laundering or tax evasion, which arise when trusts migrate or generate income or gains, and minimising burdens on the vast majority of perfectly ordinary and legitimate trusts.

Although I appreciate the spirit with which the new clause has been tabled, I do not believe that it would be appropriate to change the role of the FCA or the PRA, so I urge the hon. Member for Leeds East not to press the new clause.

Question put and agreed to.

New clause 9 accordingly read a Second time, and added to the Bill.

New Clause 14

Combating abusive tax avoidance arrangements

“(1) Section 3B of the Financial Services and Markets Act 2000 (Regulatory principles to be applied by both regulators) is amended as follows.

(2) At the end of subsection (1) insert—

(i) combating abusive tax avoidance arrangements.

(a) in observing principle (i), the regulators must undertake, in consultation with the Treasury, an annual review for presentation to the Treasury into abusive tax avoidance, including measures to ascertain and record beneficial ownership of trusts using facilities provided by banks with UK holding companies or entities regulated by the Bank of England or the FCA, control of shareholders and ownership of shares, and investment arrangements in an overseas territory outside the UK involving UK financial institutions.

(b) in this section “beneficial ownership of trusts” includes ownership of any equitable interest in a trust including being an object of a discretionary trust, power of appointment or similar arrangement as well as any vested interest under a trust;

(c) “control of shareholders and ownership of shares in companies using facilities provided by banks with UK holding companies or entities regulated by the Bank of England or the FCA” shall include control by any person with control over a voteholder in a company as defined in Part VI Official Listing s.89F of the FSMA (2000) as applied mutatis mutandis to this context, whether directly or indirectly, and whether alone or in concert with some other person.””—(Richard Burgon.)

Brought up, and read the First time.

Question put, That the clause be read a Second time.

Clause 24


Amendment proposed: 8, page 20, line 10, at end add

“and insert—

‘(6) Where the authorised person mentioned in subsection (5) is a relevant authorised person, as defined under section 71A of the Financial Services and Markets Act 2000, subsection (5)(d) does not apply and subsections (7) and (8) do apply.

(6A) If the FCA satisfies itself that a person (P), who is a senior manager in relation to a relevant authorised person, is guilty of misconduct by virtue of subsections (5)(a)-(c), then P shall be guilty of misconduct, subject only to subsection (8).

(6B) But P is not guilty of misconduct by virtue of subsections (5)(a)-(c) and (7) if P satisfies the FCA that P had taken such steps as a person in P’s position could reasonably be expected to take to avoid the contravention occurring (or continuing).””—(Richard Burgon.)

Question put, That the amendment be made.

Clause 36

Banks authorised to issue banknotes in Scotland and Northern Ireland

I beg to move amendment 4, in clause 36, page 34, line 15, at beginning insert—

“( ) Subject to the provisions of subsection (3A).”

This amendment and amendment 5 would enable Lloyds Banking Group, the holder of the Bank of Wales trademark, to issue banknotes in Wales.

With this it will be convenient to discuss amendment 5, page 34, line 44, at end insert—

“(3A) Regulations under subsection (1) must make provision authorising Lloyds Banking Group to issue banknotes in Wales”.

See the explanatory statement for amendment 4.

I am delighted that we have reached this group as I feared that our consideration on Report would be concluded prematurely. I therefore have only a very short speech, but luckily this is rather a straightforward and uncomplicated matter. If I had known that I would have far more time than I assumed—a rare privilege in this place—I would have prepared a far lengthier speech, quoting extensively from the masterpiece “A History of Wales” by the late, great John Davies, or John Bwlchllan as he was known to his friends, and from “When was Wales?” by the great historian who was a member of the Labour party and of Plaid Cymru, Gwyn Alf Williams, who retired to Drefach Felindre in my constituency.

I am delighted that my amendments 4 and 5 are being supported by the Labour Front-Bench team. When I was eating my cornflakes in the hotel this morning, it was a nice surprise to receive an email from David Williamson, the Western Mail correspondent, citing a press notice by the shadow Secretary of State for Wales saying that she supported my proposal. Perhaps this is the start of a beautiful new relationship, although I fear that I might be doing my best to scupper those sorts of endeavours after the election. I aim to press amendment 4 to a Division, with your permission, Mr Deputy Speaker.

I have spoken on this issue before in the Chamber, but I will reiterate a few points that I made on Second Reading. The amendment deals with the historical anomaly that prohibits Wales from producing its own distinctive banknotes. Both Scotland and Northern Ireland are allowed to do so, and so to celebrate their respective national figures and landmarks.

The hon. Gentleman talks about our historical position, so does he support my view that my predecessor but one in what was then the constituency of Pontypool, Leo Abse, made probably the greatest contribution in the 20th century as a Back Bencher to changing people’s lives, and therefore would be a fine candidate to go on such banknotes?

I thank the hon. Gentleman for that intervention. When I realised that I would be able to make this speech, I feared that there would be a lot of interventions along those lines. I will be citing some notable names during my speech, but that is not a matter for politicians to determine.

I will in a minute—we have to hear from Blaenau Gwent. It would be appropriate if there was a conversation among the people of Wales about who they would like on their banknotes.

As part of the list of great men and women whom the Welsh people could consider having on our banknotes in the future, may I suggest Aneurin Bevan, a son of Tredegar and founder of the national health service?

The hon. Gentleman will note that two men—great men—have been recommended, but I would like to see more women represented on banknotes, whether they are Welsh or Bank of England notes. Does he agree that, whether or not one is a big spender, a resident of my own constituency, Dame Shirley Bassey, would be an excellent person to be on a Welsh banknote?

I am grateful for that intervention, too. I saw that name mentioned very honourably in this morning’s Labour press notice.

Like other parts of the UK, Wales was once awash with small banks covering relatively small geographical areas, and those banks were allowed to issue their own banknotes. The Bank Charter Act 1844 brought an end to Welsh banknotes and provincial banknotes in England, but that measure did not apply to Ireland or Scotland. Four banks in Northern Ireland and three in Scotland have the authority to issue their own banknotes, provided that they are backed by Bank of England notes. The amendments would allow Lloyds Banking Group, which holds the rights to the Bank of Wales brand and is in part publicly owned by Welsh taxpayers, to issue Welsh banknotes, just as is permitted for the three clearing banks in Scotland and four in Northern Ireland.

Does my hon. Friend agree that a worthwhile commercial advantage would be gained by issuing banknotes? That value would then accrue to Lloyds bank, and possibly to taxpayers in Wales and the rest of the UK, which would be a good move.

I am grateful to my parliamentary leader for his intervention. He is completely right, and that is why four banks in Northern Ireland and three in Scotland have continued the practice. There is a commercial interest for Lloyds, but also a public interest due to our part ownership of the bank.

Permission to issue Welsh banknotes would be a welcome boost to brand Wales, recognising our country as an equal and economic entity. Notes in Northern Ireland celebrate individuals such as J.B. Dunlop, Harry Ferguson and James Martin, as well as architectural splendour such as that of Belfast city hall. Notes in Scotland pay tribute to that country’s fantastic bridges and recognise the contribution of people such as Sir Walter Scott and Robbie Burns. Notes currently used in Wales recognise people such as Elizabeth Fry, Adam Smith and Matthew Boulton, and previous notes have portrayed Charles Dickens, Michael Faraday, Sir Isaac Newton, William Shakespeare, George Stephenson and the first Duke of Wellington. They are all great people, but none, to my knowledge, has anything to do with my country.

Is it not fair and sensible for us in Wales to use notes that recognise our historic landmarks, such as the incredible Castell Carreg Cennen in my constituency, Pont Menai in north Wales, Yr Wyddfa—Snowdon, the largest mountain in our country—and our historic greats such as Owain Glyndwr, who was nominated the seventh most important person of the last millennium by The Times, of all papers? There is also David Lloyd George, the originator of the welfare state, Aneurin Bevan, the architect of the NHS, and Gwynfor Evans, the first Plaid Member of Parliament and the father of modern Wales.

A case could also be made for what is arguably the most famous Welsh painting of all: “Salem”, painted by Sydney Curnow Vosper in 1908. His painting of Siân Owen aged 71 at Capel Salem, a Baptist chapel at Pentre Gwynfryn in the north of Wales, is a national icon, much as Constable’s “The Hay Wain” is in England. The Royal Mint already produces Welsh-specific coins, so my proposals raise no major issue of principle—indeed, the Minister referred to the Royal Mint earlier in the debate.

A national poll by ITV Cymru/Wales found that more than 80%—indeed, it was 82.6% when I looked at the website today—of the Welsh public supported these calls. If we are unsuccessful in the Division, I hope that the UK Government will support Plaid Cymru in putting right this historical anomaly and bring forward their own proposals.

I have a Welsh pound coin with me, and it reeks of nationalist propaganda because around the edge it states “Pleidiol wyf i’m gwlad”, which means “True am I to my country”. I certainly agree with that, but it is issued by the Royal Mint.

My hon. Friend makes my point entirely. There is no issue of principle at stake; this is about finding the mechanism for delivery.

This issue has received considerable media coverage in Wales. Considering that we are only two weeks from the Welsh general election, I suggest to Treasury Ministers that the election prospects of their candidates in Wales may be damaged if they choose to ignore the strong views of the people of Wales on this matter.

I support amendments 4 and 5, which were tabled by the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards). In Committee, the Minister highlighted the presence of the Royal Mint in Cardiff and its role in the production of our coins. In reflecting on that, it is worth noting that the pound coin reflects each nation, with the royal arms, the three lions and the oak tree for England; the thistle and the lion rampant for Scotland; the flax plant and the Celtic cross for Northern Ireland; and, of course, both the dragon and the leek for Wales. Since 2010, we have had pound coins celebrating the capital cities in the floral emblems of each nation of the United Kingdom. It therefore seems anomalous that Scotland, with its own Parliament, has its own banknotes and that Northern Ireland, with its own Assembly, has its own unique banknotes, yet that Wales, with its own flourishing Assembly, has no national identifier for circulating currency.

If the amendments pass tonight and Wales is allowed to produce its own banknotes, I very much hope that some north Walians will be featured on them. Does my hon. Friend agree that such notes also represent a fine opportunity to showcase the great figures of Welsh literature and music?

My hon. Friend makes a fantastic suggestion, and I shall return in a few seconds to some Welsh figures from music, if not literature. It is important that all aspects of Welsh culture are represented when, as I hope, the Welsh people are able to choose who should feature on their banknotes and coins. A celebration of iconic Welsh scenes and places would also be appropriate. For example, there could be representations of the steel industry of Port Talbot, or the mining communities of the valleys—even perhaps the Tower colliery which, as those who know about the history of mining in Wales are aware, was run as a co-operative when miners used their redundancy payments to turn it into a successful venture. Such imagery would be well supported across the nation. Shirley Bassey and Nye Bevan, the father and founder of our NHS, have been suggested. It would be great to see Nye Bevan on a Welsh banknote. It might be a bit over the top to feature his famous quotes likening Tories to certain members of the animal kingdom, but that would be a matter for the Welsh people to decide.

My own personal suggestion, for what it is worth, is that given that it is now 30 years since the formation of that great Welsh rock band, the Manic Street Preachers, I would love to see them celebrated on a new banknote, although they might have ideological objections to doing so. It is also the 20th anniversary of “Everything Must Go”— I am talking not about the Chancellor’s policy on RBS shares, but the album of that name by the Manic Street Preachers. As the hon. Member for Carmarthen East and Dinefwr made it clear, however, it would be for the people of Wales, not those from Yorkshire or anywhere else, to decide who or what should appear on Welsh banknotes. In that spirit, I hope that the Conservative Government do not commit the cardinal error of snubbing the Welsh people’s desire for their own banknotes.

I had not thought of that point.

The lack of any Welsh-themed banknotes is an error that the amendments are designed to put right. I would appreciate the Government agreeing to the proposal and investigating the possible costs and timeframes for such a change. Labour Members wholeheartedly and enthusiastically support these amendments.

Anyone would think that a Welsh general election was going on this afternoon, would they not? I am glad that we have had time to debate this issue this afternoon. I can remember the shock in Worcestershire when Elgar, whose birthplace is in my West Worcestershire constituency, was taken off the £20 note. It was certainly a very live political issue.

I know that we all have an emotional attachment to our banknotes, and I therefore sympathise with the desire of the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) to make the case that he has made so ably this afternoon, along with other Members, for banknotes to have some Welsh characteristics. We shall not be able to agree to the amendment today, for reasons that I shall explain, but I hope that what I shall say about our new banknotes will give some cheer to our Welsh colleagues.

First, let me give the House a history lesson. The UK is a rare example in the world of a country that allows certain commercial banks to issue banknotes. As the hon. Gentleman said, since the 1840s, when the House passed the Bank Charter Act 1844, no new bank has been allowed to issue commercial banknotes in the United Kingdom. Let me put that in context. The 1840s happened a long time ago: it was the time of both Elizabeth Fry, whom we celebrate on the Bank of England £5 note, and Charles Darwin, whom we find on the £10 note. Since then, many of the banks that were originally authorised to issue banknotes have lost or surrendered their rights. The last private note issuer in Wales was the North and South Wales Bank, which lost its note-issuing rights in 1908 when it was taken over by the Midland Bank, now rebranded as HSBC. Today, only seven commercial note issuers remain: three banks in Scotland, and four in Northern Ireland. The Government are committed to preserving the long-standing tradition of commercial issuance in Scotland and Northern Ireland, as is clear from the amendments made in clause 36.

Does the Minister agree with my earlier point that there is a commercial advantage to be gained from issuing one’s own notes? Why can that advantage not be extended to bank operations in Wales?

That is the very point that I was about to make. The amendment seeks to confer the right to issue commercial banknotes in Wales—a clear commercial advantage—on just one bank, Lloyds Banking Group. That appears to be based on a link to a right to issuance that was broken more than 100 years ago. Today, the Government—the taxpayer—owns just under 10% of Lloyds Banking Group. Part of Lloyds Banking Group already has a commercial banknotes issuance operation, which may be why the hon. Member for Carmarthen East and Dinefwr chose to focus on a single bank in his amendment. That is due to the acquisition of the Bank of Scotland operation, which is authorised to issue banknotes in Scotland. However, extending the privilege and the commercial advantage of issuing banknotes in Wales to just one bank would raise competition and commercial issues for others.

I liked the wide range of suggestions about who should be represented on Welsh banknotes, and, as I said earlier, the coins in our pockets are minted in Wales. I appreciate that the motive behind the amendment—the symbolic issue about which the hon. Gentleman feels so strongly—is to create a symbol, rather than to deal with a pressing economic or practical need for different banknotes.

The Bank of England has already announced that future banknotes, starting with the polymer £5 note which will be issued in September 2016, will include symbols representing all four home nations. For Wales, the imagery will be taken from the Royal Coat of Arms and the Royal Badge of Wales. The Bank recently announced that the design for the £5 note would be revealed on 2 June 2016.

I am very glad that we have had a chance to discuss the merits of the amendment. The hon. Gentleman will understand why I cannot support it. However, I welcome the opportunity to convey the message that an important symbol of Wales will appear on our new banknotes.

Question put, That the amendment be made.

Proceedings interrupted (Programme Order, 1 February).

The Deputy Speaker put forthwith the Question necessary for the disposal of the business to be concluded at that time (Standing Order No. 83E).

Schedule 2

Appointments relating to Part 1

Amendment made: 3, page 49, line 12, at end insert—

‘( ) In paragraph 14 for “submit a monthly” substitute “, at least 8 times in each calendar year, submit a”” —(Harriett Baldwin.)

This amendment changes the frequency with which the Monetary Policy Committee is required to report to the court of directors from once a month to at least 8 times a year. This is because Clause 8(4) replaces a requirement for monthly Committee meetings with one for meetings at least 8 times a year.

Third Reading

I beg to move, That the Bill be now read the Third time.

It has been a pleasure to take this legislation through this House. There has been a good level of interest from Members from all parts of the House, and a wealth of suggestions and recommendations have been made, which is a testament to how important the issues in this Bill are. Indeed, some of the suggestions have made their way into the Bill.

The Bill will: make the Bank of England more transparent and accountable to Parliament and the public; further strengthen standards in the financial services sector; and strengthen protections for consumers, especially when accessing the new pensions freedoms. Building on the fundamental reforms to the regulatory architecture introduced by the Financial Services Act 2012, the Bill delivers a set of important evolutionary changes to the Bank. It ends the subsidiary status of the Prudential Regulation Authority and creates a new Prudential Regulation Committee, on the same footing as the Monetary Policy Committee and Financial Policy Committee. It makes the oversight functions the responsibility of the whole court, ensuring that every member of the court, executive and non-executive, can be held to account for the use of these functions. It also enhances the accountability of the Bank to Parliament by making the whole Bank subject, for the first time, to National Audit Office oversight. If I may, Mr Deputy Speaker, let me correct something I said in error earlier, when I confused NAO with FOI—freedom of information. Of course, FOI has applied to the Bank of England for some time; this Bill brings in the NAO oversight.

The Bill also implements the remaining recommendation of the Warsh review, updating requirements for the timing of MPC publications and meetings. As my right hon. Friend the Member for Chichester (Mr Tyrie) said on Second Reading, this Bill

“brings the Bank of England more up to date as an institution, and in doing so it should greatly improve the scope for making it accountable to Parliament and the public”.—[Official Report, 1 February 2016; Vol. 605, c. 667.]

During the passage of this Bill we have rightly devoted considerable time to the question of the appropriate role for Parliament. The Treasury Committee plays a crucial role in providing effective scrutiny of the FCA’s chief executive, and the agreement that we have announced today reinforces that.

The second aspect of the Bill is that it strengthens conduct in the financial sector by extending the senior managers and certification regime to all firms covered by the discredited authorised persons regime that we inherited. We all agree on the vital importance of high standards of conduct in the UK financial services industry. This Government have already taken the initiative in this area; we took a key step by bringing in the regime for the banking sector in March this year. The expansion of this new regime to all authorised persons will enhance personal responsibility for senior managers across the industry and raise standards of conduct more broadly.

Thirdly, the Bill introduces support for consumers accessing the new pension freedoms. To support consumers who, from April 2017, will be able to sell their annuity income stream in the secondary market for annuities, the Bill will extend the scope of the Pension Wise guidance service to cover these consumers, and introduce a requirement that, in effect, ensures that consumers with a high-value annuity receive appropriate financial advice before making the decision to sell their annuity income stream. These measures will help make consumers better informed and less vulnerable to mis-selling and scams.

In order to ensure fairness for people seeking to access their pensions early, the Bill will also give the FCA a new duty to cap early exit charges that act as a deterrent. This will provide real protection to consumers in contract-based pension schemes who are looking to make use of the freedoms.

The Bill also supports the Government’s consumer protection objectives by giving the Treasury a new power to provide financial assistance to illegal money-lending teams tasked with tackling loan sharks. Today, we have also added the amendment tabled by my hon. Friend the Member for Broxbourne (Mr Walker).

In closing, I thank all right hon. and hon. Members who have contributed to the debates, both by speaking and by tabling amendments. In particular, I thank all the members of the Public Bill Committee for their efforts and for the time spent going through the Bill clause by clause. The hon. Members for Leeds East (Richard Burgon) and for Wolverhampton South West (Rob Marris) provided challenging discussion throughout the passage of the Bill. The hon. Members for East Lothian (George Kerevan) and for Kirkcaldy and Cowdenbeath (Roger Mullin) gave close scrutiny to the Bill. My right hon. Friend the Member for Chichester made valuable contributions that have been most helpful and insightful, particularly on Treasury Committee matters.

I also thank the Treasury Whips, my hon. Friends the Members for Truro and Falmouth (Sarah Newton) and for Central Devon (Mel Stride), who have provided me with much support both during and outside Bill debates. The Chairs of the Public Bill Committee, my hon. Friend the Member for Altrincham and Sale West (Mr Brady) and the hon. Member for Sedgefield (Phil Wilson), and you, Mr Deputy Speaker, have handled our scrutiny well.

I thank my Parliamentary Private Secretaries, who took on the important and thankless task of sitting behind me during our sittings and ensuring that I got the right briefing, for supporting me generally throughout this process.

Lord Bridges and Lord Ashton have done a fantastic job in taking the Bill through the other place, and I trust that they will continue to do so when the Lords consider our amendments.

Finally, I give thanks to the organisations that have assisted us in developing the Bill—the Bank of England, the National Audit Office and the Financial Conduct Authority. I must also give sincere thanks to Treasury officials, lawyers and parliamentary counsel, who spent many hours in the box, drafting amendments and briefings for these debates.

We have had useful and wide-ranging debates, and our discussions with Members in all parts of the House were constructive, even when we did not agree and had to settle matters with a vote. We have shown an understanding of each other’s position and improved the legislation as a result. The Bill will now go back to the other place, where their lordships will consider the useful changes that we have made to the Bill. I hope that they will welcome the legislation in its current form.

In conclusion, this Bill makes changes to strengthen the governance and accountability of the Bank of England. It will contribute to the Government’s commitment to strengthen standards across the financial services industry and ensure that consumers are well protected. I commend its Third Reading to the House.

It is my pleasure to speak for the Opposition on Third Reading of the Bank of England and Financial Services Bill. The Chair of the Treasury Committee very kindly referred to the good humour and good nature I showed in one of my speeches. I am afraid that, if he were here now, he would be disappointed with the speech that I am about to make. People could be forgiven for thinking that I am returning to what some call my po-faced modus operandi.

The role of Government in legislating for financial stability and in ensuring that the Bank of England acts in the interests of the wider economy is to get the balance of regulation right. Righting the wrongs of the 2008 bankers’ crisis is an important task for any responsible Government—a task that Governments around the world have focused on fulfilling in the past decade. The task has been being attempted since the bankers’ crisis of 2008, and today the bankers’ Chancellor is threatening to set it back.

The Bill has seen a number of changes since it first appeared in the other place, some of them for the better, but the precipitate changes that the Government are making to financial services regulation through their new settlement with the financial sector, including through measures in this Bill, suggest that they have failed to learn the lessons of the 2008 bankers’ crisis.

The Bill is a missed opportunity. The measures we have challenged on Second Reading, in Committee and on Report include the proposed abolition of the Bank’s oversight committee, the proposed veto on the National Audit Office’s powers of investigation, the proposed downgrading of the power of the Prudential Regulation Authority to that of a committee of the Bank, and the proposed reversal of the presumption of senior managers’ responsibility for misconduct cases. However, we also welcome a number of measures, including the Lords-stage concessions on the powers of oversight for the Bank’s non-executive directors, the reversal of the veto on the NAO’s powers of investigation, and the measures announced on funding for illegal money-lending teams in Her Majesty’s Revenue and Customs.

We are disappointed that other proposals have not been accepted by the Government. The leak of the Panama papers in the past fortnight has reawakened public concern about our financial system. There has been publication of thousands of documents detailing the systematic use of tax havens for the registration of secretive trusts and shell companies that are serviced by UK banks and that hold trillions of pounds out of reach of HMRC—a state of affairs that rightly outrages people across the UK and the globe. That is why earlier today we offered the Government an opportunity to demonstrate their commitment to delivering the necessary tax transparency measures through our new clause 14.

That new clause, if the Government had supported it, would have instituted a new principle for the FCA: that of combating abusive tax avoidance arrangements, including by establishing a register of beneficial owners of trusts serviced by UK banks. Of course, that in itself is not sufficient, and Labour has set out its tax transparency enforcement plan. Earlier today, our new clause raised the vital issue of the UK banks’ involvement in the Panama papers, which the FCA has now asked them to report on.

The Government have set out initial plans but, with respect, they have not in our view grasped the bull by the horns. They have been dragged there by campaigners, charities and commentators who have rightly urged action on anti-abuse rules and country-by-country reporting. However, it is on the regulation of banks’ activity here in the UK, which has been such a dominant issue in recent years, that the Government have rolled back, watering down their proposals—or, should I say, U-turning on them.

Under the current presumption of responsibility that applies to senior managers, to avoid being found guilty of misconduct in an area for which they are responsible, they will have to show that they took reasonable steps to prevent that contravention. The Bill removes that onus on top bankers, an onus that is entirely reasonable, entirely proportionate and, as very bitter experience tells the British people, entirely necessary. Misconduct and misdemeanours in financial services are sadly not merely a tale from our history. In 2015, for example, the FCA had to fine firms more than £900 million. There was also the LIBOR scandal, foreign exchange fines and the mis-selling of PPI to the value of up to £33 billion, and the presumption of responsibility was so reasonable and so necessary that the policy was introduced with cross-party support. That should not be forgotten.

It is remarkable that only days after the leak of the Panama papers and the pressure on the Prime Minister to defend his creative financial arrangements, the Government can come to this House and defend their decision to reverse regulation that they chose to bring in back in 2013, following the comprehensive work of the Chair of the Treasury Committee, my colleague Lord McFall, and others on the Parliamentary Commission on Banking Standards. This measure, which the Government are yet to implement, has been rolled back by the bankers’ Chancellor under pressure from those who would have been scrutinised. This change of policy did not take place in isolation; as I say, it was part of the Chancellor’s new settlement with the financial sector.

Another idea that we supported today, alongside our Treasury Committee colleagues, was strengthening the role of the Treasury Committee in the appointment of the chief executive of the FCA. It is the Treasury’s influence over the FCA and financial regulation that has been the subject of so much debate and concern in the past year; there has been debate and concern about the removal of Martin Wheatley and the scrapping of the FCA review of banking culture. More widely, as part of the post-crash debate, there have been concerns about whether bank capitalisation and leverage would be at sufficient levels and whether a suitably strong ring-fence would be implemented.

Added to this toxic cocktail of the bankers’ Chancellor’s own stirring is his unhealthy obsession with flogging off the Government’s Royal Bank of Scotland shares at a huge cost to the public purse. I have previously asked the Minister whether the Government will establish a floor price for the sale of RBS shares, as they have with Lloyds shares—or do they accept that the Chancellor got it wrong when he said that his loss leader last year would lead to better sales?

There is also the issue of pension master trusts. In Committee, the Minister told my colleague the shadow Financial Secretary that the Government would bring forward legislation, but the Minister of State for Pensions has since told the Work and Pensions Committee:

“I have been pressing for a Pensions Bill but so far we don’t have one”,

even though the Government could not protect savers without one. Will the Minister say when the Government will take action?

This Bill is a missed opportunity to demonstrate how the Bank of England could carry out its work in the most efficient way possible, with transparency and accountability in its decision making, serving the interests of the people who have sent us here to represent them, and a missed opportunity to demonstrate that senior managers in the financial sector could continue to do their jobs while being effectively and appropriately regulated. These are more missed opportunities from the missed-target Chancellor.

The context of the Bill is vital to understanding our concerns, and the concerns and demands of the wider public. We are eight years on from the economic crisis—the bankers’ crisis, which brought the financial services sector and our country to their knees. The sector was rescued by the decisive action of the then Prime Minister.

Does my hon. Friend agree that we should take over and run these dodgy banks that have been in trouble all these years?

The Prime Minister of the day did step in and take appropriate action. The important thing is that the lessons of the financial crisis and the banking crisis are learned. I believe that the Opposition have learned those lessons, but those on the Government Benches have not.

Do the Chancellor and the Government still not understand the widespread anger out there? Do they not recognise the public’s deep distaste for the ever-expanding horror story of bailed-out bankers not being brought to book? The Panama papers shone a light on the squalid practice of the super-rich squirreling away money offshore that Britain needs for our schools and hospitals, and to bring down the UK debt that has rocketed on the Chancellor’s watch. As I said on Second Reading, all that is taking place while there are cuts to pay, pensions, welfare, councils and services.

The public are right to remember that because of the behaviour of some top bankers, people whom this House is meant to represent lost their homes and their jobs. We should never forget that it was the bankers’ crisis that caused the deficit that this Government have relied on as their justification for their political choice to cut our public services, cut funding to our local authorities, cut the incomes of working people and cut support for the most vulnerable people in our communities. The global financial crash caused the huge increase in the deficit and stalled the economy. It also gave the Government the opportunity to carry out their long-harboured and decades-old ideological desire to cut public services and wither away the state.

We need a healthy and effective banking sector, but one that is appropriately regulated, serves the interests of the whole economy, does not hurt ordinary people or small and medium-sized businesses and delivers the vital investment our country needs for long-term growth. The Conservative Government’s climbdown on the presumption of responsibility, which they previously supported, will hinder, not help, the fulfilment of those ambitions.

Personal responsibility is vital for the operation of our regulatory systems. The Chancellor’s policy U-turn reduces precisely the personal responsibility that the Parliamentary Commission on Banking Standards recommended in its 500-page report. Scrapping a key measures before it has even had a chance to be tested makes no sense—unless, of course, the Chancellor is just following bankers’ orders. The startling and precipitous scrapping of a widely welcomed measure shows that there is a very real risk of failing to learn the lessons of the bankers’ crisis, and that is why we will oppose the Bill today. I urge all hon. Members to do the same.

We, too, will oppose the Bill on Third Reading. During Treasury questions today, the Chancellor said—I wrote the phrase down, because I was rather taken with it—that he was quite certain that we now have “better and tougher regulation of the financial system.” That is a good test, and it is a good test for this Bill. Do we have tougher regulation? As the law stands this evening, if a senior named manager in a major financial institution discovers that there has been major corruption, wrongdoing and regulatory failure at their bank on their watch, they are culpable unless they can prove to the FCA that they took reasonable steps to stop that happening. As we speak, they would be responsible, and that has been the case for a month and a half.

If we pass the Bill tonight, the situation will change. That manager will no longer be personally responsible. They will be able to argue, “Actually, I ticked all the boxes, signed all the forms, went to all the group therapy sessions with those on my trading floor and told them all to be good boys and girls, but do you know what? They weren’t, and they hid it from me.” And so we will go through the whole cycle again. The law as it stands, as passed by this Government and this Chancellor, makes each individual senior named manager responsible, like the captain of a ship or ferry; if something goes wrong, they are responsible and they cannot claim otherwise. If we pass the Bill, far from toughening the law, we will weaken it.

The only explanation we have heard from the Government is that it is a bit more complicated now because the Bill widens to tens of thousands the number of people who will be designated as responsible people when it comes to identifying who is in charge when something goes wrong. I understand that, but it is perfectly possible, as we tried in Committee, to ring-fence and say that the very senior people in the major banks—the systemically dangerous banks—should be held personally responsible, unless they can prove that they took proper steps. But no, the Government are using the widening of the designated persons regime to weaken and water down the current legislation. That tells me that they are not really serious about being tougher; they are more concerned with getting by.

There was an interesting debate in Committee about transfer vehicles. Those are a bit technical, but they are to do with how the insurance market reinsures itself to spread risk. There are clauses in the Bill—this is a good thing to put into it—that give the Treasury powers to regulate the use of transfer vehicles in the reinsurance market in a tougher fashion, to use the Chancellor’s key word.

I do not have time to go into detail about what is happening, but insurers can offset some of their risk in the reinsurance market, and they usually do that by selling some of it to specialist wholesale houses, which buy into the risk, but whose capital covers the risk if something goes wrong. Now, the insurance market is instead moving towards reinsuring through specialist vehicles of the kind that got us into trouble in the mortgage market in the lead-up to 2007.

When the issue was discussed in Committee, it was interesting that Ministers argued that we needed to put in place a regulatory framework that made it easier to shift the burden in the reinsurance market away from wholesalers that are capitalised and towards special vehicles using all the financial markets’ tricks of the trade, which led to the disaster in 2007. That said to me that, deep down in the Bill, the Government are up to their old tricks—they want to deregulate and to have less tough regulation, rather than more regulation. On those grounds, the Bill fails the Chancellor’s test, and we should vote against it.

There are good things in the Bill. In particular, we can pride ourselves on the fact that, through the Committee stage and leading up to Report stage today, the Government have been persuaded—I use that word in inverted commas—to take the Treasury Committee’s advice and to set a precedent, in that the FCA’s chief executive will in future be subject, de facto, to having their appointment approved by the Committee and, therefore, by this House rather than the Executive.

That does two things. First, it makes the FCA more accountable, because it is accountable to the House rather than the Executive. Secondly, it protects the FCA from interference by the Executive. That is a good precedent. If it is extended, we will be able to ensure that all the key regulatory bodies and their senior staff are approved by the House and, in particular, that the Governor of the Bank of England is subject to scrutiny and approval by the House, rather than simply appointed by the Executive. That is important because of the large powers that have been transferred to the Bank of England since the crisis of 2007.

However, there are still loose ends, and so I come to the word “better” in the Chancellor’s little homily. Have things got better? They have got a little better, given the ability of the House to protect the FCA and to have a role in appointing its head, and we can take that further into other regulatory bodies. However, there are loose ends at the FCA. Much of the Bill and much of the debate has been about the FCA. In the last instance, the FCA is the consumer’s champion: it regulates how the banks sell. Many of the problems we have had in the last 10 years have been about mis-selling by the banks. Every Member in the House will know we have a number of legacy organisations and legacy campaigns because we have still not put right the mis-selling that has taken place across a range of banks and products since the turn of the millennium.

The FCA is important, and protecting it is important, because, in the last instance, it is the consumer’s champion. A few weeks ago I went to FCA headquarters and had a meeting with Mr John Griffith-Jones, who is the chairman of the FCA. I put it to him, “You are the consumer champion,” but he demurred. He does not feel that the FCA is the consumer champion. He thinks that that would go too far and that it would be partisan and take up the consumer’s choice. At present, the FCA is still too much the creature of the Treasury. If we want a tougher and better regulatory regime, we have to make the FCA truly independent.

The FCA is getting a new chief executive, but I am not going to offer platitudes and pleasantries. When the new chief executive starts, I think that the chairman of the FCA should consider his position, because I think it also needs a new chairman. We are only starting on the road of making sure that our regulatory bodies are fit for purpose; we have not got there yet.

Finally, many people in Wales, Scotland and Northern Ireland are disappointed that the Government stood on ceremony and decided not to widen the remit of the membership of the core bodies of the Bank of England, starting with its court, to allow proper representation of all of the regions and nations, including the north of England. Most people in this country, and certainly those in the Celtic regions, are long of the view that the Bank of England, the banks and the key regulatory authorities are far too focused on the square mile of the City of London and its needs. We will never have a tougher, better regulatory system unless we widen the remit until the whole of the UK—the individual nations and the regions of England—is represented. Until we do that, the Bank of England is still suspect. That has not been delivered, so there is still a suspicion across the UK that the banking regulatory system operates ultimately in the interests of the bankers, rather than the people. Until that changes, we will not have a better or tougher regulatory system; we will simply have the same old regulatory system dressed up under a different name, and the same old banking crisis will be around the corner yet again.

Question put, That the Bill be now read the Third time.

Bill read the Third time and passed, with amendments.