My Lords, Amendment 14 amends Clause 2(4). I remind noble Lords that Clause 2 concerns the Council for Financial Stability. Under subsection (4), the council must publish minutes of its quarterly meetings. The Bill is silent on the timeframe in which minutes are to be published. I find the lack of a reference to a timeframe very odd. When the Government set up the Monetary Policy Committee in the Bank of England Act 1998, a clear timetable was set out. Why is this Bill silent? The draft terms of reference say that the minutes of the Council for Financial Stability should be published within one month. I have already remarked in Committee that the statement issued by the Treasury under Clause 1(5), which is how the terms of reference come into being, says whatever the Treasury wants it to say from time to time. The Treasury could change its mind before issuing the terms of reference after Royal Assent, or indeed at any subsequent time. As with the Bank of England Act, this should be in the Bill.

That just leaves the time period that is appropriate. The Bank of England Act says that MPC minutes should be published within six weeks. Even when that Act was being passed, the practice was to do better than that. For a long time now, the Bank has routinely published the MPC’s minutes 14 days after the meeting. That gives financial markets certainty about when information will be available and is sufficiently close to the actual decision to be useful to the markets. If the minutes of the Council for Financial Stability are to have any importance in the financial world, there has to be both certainty on timing and a timeframe which produces information to the markets as rapidly as possible.

My amendment suggests that the Council for Financial Stability should stick with the timetable that the Bank of England now achieves with ease for the Monetary Policy Committee—that is, 14 days. I do not believe that the minutes of the Council for Financial Stability are any more complex than those of the MPC or that this timeframe will be particularly difficult. In addition, the MPC has nine members among whom minutes must be agreed while the Council for Financial Stability will have only three. The task of agreeing the minutes of the council will therefore be simpler and much less time-consuming. I beg to move.

I share the view that it is important that there is the discipline and predictability of a deadline in the production of minutes after a council meeting, as the noble Baroness indicated. Clause 2(4) sets out that the statement of the council should make provision for procedure. In keeping with that concept of procedure, the draft terms of reference, which are available on the Treasury website, stipulate that a final minute is to be published no later than one month after the meeting. The noble Baroness proposes to halve that time so that a final minute should be published within 14 days. If the amendment were accepted, that would be a statutory requirement. To produce minutes in such a short time seems a little dramatic. It is unnecessarily short given that it is appropriate for the minute to be agreed by the parties as a fair record. There is a bit of work to be done. Surely the predictability of the release is most important, not how rapidly it appears. We consider one month a fair and reasonable time. We hope the noble Baroness will therefore withdraw her amendment.

The Minister has failed to explain why a period of one month is reasonable when the Bank of England can do the minutes of the Monetary Policy Committee in 14 days. As I pointed out, there are nine people there to agree minutes with rather than three. Why is a whole month needed for the Council for Financial Stability?

The difference is that the Bank of England is one entity in one building. The council meetings comprise a membership which is more diverse than that. As I said, it would not be appropriate for a minute to be issued in the name of the council without consultation having taken place on it. The difference is simply that we think we need a slightly greater time than the noble Baroness has indicated that the Bank of England takes. A month seems reasonable.

That seems extraordinary—that the Bank of England being in one building somehow makes a difference in this day of electronic communication. Is the Minister seriously telling me that buildings are a relevant factor? The Government are not really committed to keeping up with good practice in delivering minutes. They are refusing to place this in the Bill, leaving it to the Treasury’s own discretion. They are also refusing to contemplate a timeframe which is perfectly achievable in the Bank of England. I shall think about this before any later stages of the Bill. For now, I beg leave to withdraw the amendment.

Amendment 15 inserts a new subsection into Clause 2. This amendment also concerns the minutes of the Council for Financial Stability, requiring them to record the views of each of the members of the council and the extent to which they are in agreement. The Government have lauded the transparency associated with the new Council for Financial Stability and this amendment merely asks the Government to put their money where their mouth is.

The Minister will doubtless say that this should be dealt with in the terms of reference which will be issued under Clause 1(5). As the Minister knows, we are not impressed with leaving matters to this statement because in effect it leaves everything to the discretion of the Treasury from time to time, since it is for the Treasury to determine what goes in that statement. The draft terms of reference state that,

“as necessary, minutes will attribute comments to individuals”.

Noble Lords will immediately spot the weasel words, “as necessary”. Who is to say what is necessary? What criteria will be used when judging necessity? There is nothing in the Bill to insist on that.

The terms of reference also refer to attributing comments to “individuals” not members of the council. This appears to be deliberate. The terms of reference show that, apart from the three people who are members of the council, attendance can include a deputy or senior colleague for each member, who attend even if the key players also attend; a private secretary for each member; and the secretariat. In practice, it appears that even more attend. The minutes for the first meeting of the council in January show that 11 people attended in addition to the three principles. Seven of the 11 were, perhaps unsurprisingly, from the Treasury. I could not fit most of them into the categories described in the terms of reference.

The minutes of the first meeting of the Council for Financial Stability in January show views being attributed to many of these attendees. There is clearly no intention to confine the minutes to the council proper. It is interesting to learn that the noble Lord, Lord Myners, had a lot to say during the meeting but it is not a surprise. Yet the purpose of the minutes is to record what the members of the council said and agreed or otherwise. The Bank of England Act 1998 requires the minutes of the MPC to record the voting preference of each member. It does not require the views of individual members to be attributed. That issue has been debated from time to time. The important function of the MPC is to decide on the interest rate and, more recently, its approach to quantitative easing. It is that decision which must be in the public domain plus the balance of opinion within the MPC.

There is a less obvious decision point as regards the Council for Financial Stability—or if there was one, it would almost certainly not be published for being market sensitive. There is a case for knowing what the views are of the top people at the Treasury, the Bank and the FSA on the issues discussed. Let us suppose, for example, that the Bank of England’s financial stability review highlighted a new concentration of risks in financial markets. Are we not entitled to know what the Treasury and FSA think, or if they agreed with the Bank? That is all my amendment would require. I beg to move.

I rise briefly to support my noble friend. In our debate on the previous day in Committee we focused on Clause 1 and the role of the council. Various parts of the House, including the Minister, understood that there are issues about co-ordination, duplication and who is in charge. If we are to answer those clearly, and if people are to understand this matter beyond peradventure in the future, we need to know who said what about whom. I think that my noble friend’s amendment goes to the heart of that issue and would do a great deal to strengthen and resolve some of our concerns about Clause 1 and the role of the council.

My Lords, I, too, shall be brief but I should like to raise a general point. These procedures do not seem to have a great deal of pace built into them. There is plenty of opportunity for reports to be considered at the next meeting but the next quarterly meeting could be 90 days away. I get the impression that the Bill’s treatment of the council’s proceedings is a sort of construct in order to demonstrate to the markets and to the world outside that problems are being recognised and given due consideration. It seems to me that this is where the status of the council comes into question.

If the council has contentious things to discuss, the minutes will become a very active ingredient in the debate about monetary policy, regulation, supervision and all such matters relating to the market. However, because the council does not have executive responsibility and apparently does not have any powers, it will be difficult to establish where its deliberations are leading in terms of action. I do not get a feel of that from reading the text of this clause but I get a general feeling that something needs to be done to sharpen things up a bit and to ensure that there is some time pressure, as proposed in the previous amendment. I think that that was a sub-plot of what we were discussing. All these very high-powered people on the council will have a sort of authority among them collectively, and indeed individually, and that level of authority is almost looking for an executive function to which to apply itself. Because the council is specifically not intended to be an executive body, we have to wonder how initiatives will be channelled into action which may be needed. I should very much appreciate the noble Lord commenting on how this looks from the Government’s point of view.

My Lords, I am somewhat puzzled by the structure of this clause. My noble friend—rightly, in my view—has suggested that the views of the various members of the council be made explicit and published, and that any disagreement between them be recorded. However, I do not understand why the FSA or the Bank of England publishes a report which then has to be considered and the Treasury prepares a draft report which also has to be considered. I am not sure why there is a distinction between the two. Apparently, there is no question of the Treasury suggesting that the minutes are a risk to the stability of the economy. Having said that, I am not at all clear what the minutes will look like. Will they be like those of the Monetary Policy Committee, from which one gets a very clear idea of where the balance is on a particular issue, or will they be more like ordinary Cabinet committee minutes, which probably record nothing at all except what decision is reached and therefore will not be very illuminating? It is right for my noble friend to suggest that the views of the members of the council should be made public.

My Lords, when I first saw this amendment, my inclination was to suggest to the noble Baroness that she had not gone far enough. If you want to be as prescriptive as this and are so concerned about every word that is spoken by this body, why not open it up to the public? Why not allow people to turn up to its meetings? Indeed, I think it is such an interesting body that you will be able to charge for it. By allowing the council to function in a goldfish bowl, the deficit could be reduced—at least by a small amount.

My rather more serious point about this and all the other amendments to this clause is that today is likely to be the last day on which we debate this Bill in Committee. There may be another but certainly we will not get through the whole Bill. We know that the Conservative Party opposes this clause, as it does all the clauses in the first set, so we know that, even if any other parts of the Bill go through, the Conservatives will not allow this clause to go through in the wash-up. It is important that we get through other parts of the Bill, such as the schedule on the consumer financial education body, which we may get to, at least in part, tonight, and there are other aspects of the Bill which I think everyone in the House would like to see on the statute book. My point is that we are going into long and detailed discussions on amendments, which will not be moved to a vote or carried, to clauses which will then be struck out by the noble Baroness’s party in a fortnight. Therefore, we should move on to the parts of the Bill which are of real value and which all noble Lords wish to see on the statute book.

My Lords, it goes without saying that I have some sympathy with that view but I imagine that I will have difficulty in persuading the noble Baroness and those behind her that that is the way in which we should proceed. Therefore, we are dealing with what look like minutiae.

The Government have already indicated how they intend these issues to operate. The first shadow minute of the council in January clearly set out the different views of the attendees at the meeting, which is the basis of the concern that all noble Lords have expressed. The noble Baroness was absolutely right when she anticipated that “the Minister will say that these should be in the terms of reference”. So I do. I said that in the debate on the previous amendment and I am not going to change my view with regard to this one. That is where we think these issues should be placed.

Of course, I entirely accept her objective and the objective of all noble Lords who have spoken that the minutes should be clear about who says what. That is the real burden of the issue. I merely say to the noble Lord, Lord Stewartby, that this is not an executive body; it is a body concerned with strategy. What the individuals say in these discussions is of the greatest importance but it is not an executive body and does not have executive responsibility in quite the way that the noble Lord gave the impression of being the case.

In terms of objectives, I do not think that there is anything at all between us. We all agree that the record of the council’s meetings has to be clear and open about who contributed what and who said what so that there is a very clear perspective of the deliberations. We have already provided for that in the Bill and I do not think that the noble Baroness’s amendment adds significantly to it. Therefore, I hope that she will withdraw this amendment, as she did the previous one.

My Lords, can the noble Lord clarify the point that I raised? Will the minutes record only what the FSA or the Bank of England said were dangers for the financial situation or will they include the views of the Treasury as well? In addition, why is there is a distinction between a draft report and a report?

I am sorry that I did not comment directly on the point that the noble Lord raised. That was possibly because I recoiled in horror when he suggested that the council’s minutes should be like Cabinet minutes, as that would be counter to the concept of how the council is to be reported. The views of the Treasury and the Chancellor will be clear from the council’s minute. It will be quite clear what the participants have said.

There is not much between us either on the point that the noble Baroness emphasised as necessary, as if there was some kind of malign Treasury initiative to airbrush the discussion. That is not so. There is, simply, an enormous difference between a verbatim report—I hope that she is not actually canvassing that—and a report that accurately reflects and gives to the outside world a clear picture of how the participants conducted themselves at the meeting, without going to quite the point that the noble Baroness has stressed. I therefore hope that she will withdraw the amendment.

My Lords, I start by thanking my noble friends Lord Hodgson, Lord Stewartby and Lord Higgins for their support for this amendment. The noble Lord, Lord Newby, again raised his concerns that these Committee days should be used to discuss the bits of the Bill that the noble Lord thinks are important. As he is aware, we do not yet know when Parliament will be dissolved. Until we know that, we do not have an end time and do not know how many days we will sit in Committee. There is a working assumption that this may be the last or the penultimate day in Committee, but if there is not an election in May, we could sit for many happy days in Committee on this Bill. If the Government wish to focus on clauses to which they attach real importance, it is for them to propose the deletion of other clauses. Otherwise, so far as these Benches are concerned, we will scrutinise this Bill in the normal way and not make any assumptions about an election, or otherwise.

There is a difference of view between myself and the Minister in what he said about my amendment. The noble Lord emphasised how the minutes will record who said what and the views of the attendees, and that everything will be clear and open. My amendment is rather narrower. It says that the minutes should record what the members of the Council for Financial Stability said, not what any Tom, Dick or Harry who turned up to the meeting said. Of course, I am well aware that they are not any Tom, Dick or Harry but all fantastically important people, but the point is that the minutes do not differentiate between the members of the Council for Financial Stability, which is one of the points that I drew out in my opening remarks. However, it would not be worth pursuing that particular debate this evening, so although we may return to it later, I beg leave to withdraw.

My Lords, I shall move Amendment 16 and speak to Amendments 18 and 24 which amend Clauses 2 and 3. These amendments are still on the theme of the minutes of the Council for Financial Stability, because it is such an interesting topic. Under Clause 2(5), the minutes of the quarterly meetings are not required to be published if one of three exceptions applies. They are: commercial confidentiality; non-interference with action by the tripartite authorities; and anything which is a threat to financial stability. We might conclude that there is enough wriggle room in those exceptions for the minutes to contain virtually nothing at all of interest, but I shall not pursue that theme.

My concern today is with the first let-out of commercial confidentiality. I have two different concerns, which my amendments address. Amendment 16 inserts “or market sensitive” into the first exception, so that matters would not need to be included in the minutes if they were commercially confidential or market sensitive. That is, I am offering the Government an even wider exception than that drafted. I am starting from the assumption that the Government would not want the minutes to contain market-sensitive material; if I am wrong on that, doubtless the Minister will correct me. Clearly, something can be commercially confidential and not market sensitive. The two might have the same meaning on a particular matter for a large organisation, but would likely not have the same degree of correspondence for a smaller organisation.

I was not sure whether Clause 2(5)(b) and (c) covered all the market sensitive bases either. Something that was market sensitive—in the sense that financial markets would react to the information—might not stop the tripartite authorities from acting. Similarly, something might be market sensitive but would not itself pose a threat to financial stability and come within the terms of Clause 2(5)(c). My point is that if the Government want to prevent the release of market-sensitive information in those minutes, are they absolutely sure that they have the drafting of Clause 2(5) correct?

Amendment 18 addresses a different point; what is meant by “commercial confidentiality” in this Bill? As was pointed out in the other place, the Bill does not define commercial confidentiality—an excuse which the Government often use when there is nothing commercial or confidential at all. Anyone who has looked at responses to freedom of information requests will find how elastic the concept can be. My amendment merely requires that the council should set out what it understands by commercial confidentiality for the purposes of the permission not to include material in the council’s minutes under Clause 2(5)(a) or the annual report under Clause 3(3). An alternative approach would be for the Government to add a definition to Clause 4, but that solution would be less flexible and I know how Governments always like to preserve flexibility. I have not yet mentioned Amendment 24, which is a mirror image of Amendment 16 but relates to the annual report rather than the minutes. I beg to move.

My Lords, the noble Baroness has made a good case for Amendments 16 and 24, and I propose to accept them. On Amendment 18, she pressed us on whether the Government felt secure about the issue of commercial confidentiality. I am grateful to her for that amendment and the chance to reinforce our position.

We are cautious about the council providing, on a one-off or a continuing basis, the explanation of what it considers is meant by “commercially confidential”. A very high-level explanation is unlikely to add much to what is in the Bill, while a detailed explanation risks being insufficiently comprehensive and raising the prospect that it would have to be expanded to cover specific pieces of information that are not covered by the existing one. That would not be a desirable state of affairs. In this context, the definition of “commercially confidential” is clear. Many discussions of the council will involve the position of specific firms, and much of the information, and those discussions, may well be commercially confidential and be made available to the council in that expectation.

I accept that without a precise, on-the-record definition there is a degree of subjectivity, but we consider that to be necessary. The wriggle room provided allows some sensible judgment to be exercised, and to avoid the forced release of information that could be unhelpful to the firm concerned and therefore ultimately to wider financial stability. This is an area where it is right for the balance to be struck; I think that the noble Baroness was indicating that she understood that. We think that it needs to be struck in favour of not disclosing information, at least until we are satisfied that publishing it would not be prejudicial to any commercial interest.

I understand the point that the noble Baroness makes about how emphatic we could be on this issue. We are asking here for some element of flexibility and wriggle room, because we cannot predict all circumstances or where the commercial confidentiality of a particular organisation might be compromised. That is why I would like her to withdraw her Amendment 18, against a background in which I hope that she will recognise the generosity of the Government’s spirit in accepting the other two amendments.

My Lords, we appear to be back to the phenomenon we experienced on our previous Committee day when the Government tried to share out; if they accepted one amendment, I had to not move another one. Here, they have accepted two, so presumably I am somehow in debt to the Government if I withdraw the one remaining in the group.

I am grateful to the Minister for accepting Amendments 16 and 24. It is a pity that the Government have not accepted the possibility of setting down what commercially confidential means. I mentioned that those who had seen Freedom of Information Act requests would often be puzzled by the use of the commercially confidential reason for redaction. I remember one in particular, on Companies Act charges, where virtually everything had been redacted in circumstances where there was no commerciality involved because nobody else was in competition with Companies House and there was no confidentiality either. So the Government are not entirely to be trusted with the concept of commercial confidentiality. We shall see how that turns out in practice.

My Lords, Amendment 17 would amend Clause 2(5) so that minutes of the Council for Financial Stability which are withheld on the basis of commercial confidentiality or one of the other let-outs in Subsection (5) have to be published once the reasons for the non-publication cease to exist. We completely accept, as I made clear, that there are good reasons for non-publication of minutes, although we hope that the exemption will be used sparingly. I hope that the Government do not intend that such minutes, having qualified for exemption, will then be kept secret until the 30-year rule kicks in, or whatever shorter period is used in future. If the Government believe in transparency they will support this amendment. I beg to move.

My Lords, the noble Baroness has taken notice of the comments of the noble Lord, Lord Stewartby, and we are speeding up. This amendment focuses on the release of information that was initially exempt from public minuting and therefore not included in the council minutes, but which no longer meets the criteria for exemption. The amendment is neither necessary nor appropriate. It is not necessary as it would make no practical difference. As currently drafted, Clause 2(5) does not prevent the publication of information when the conditions in that clause no longer apply. The key question is what is the most appropriate vehicle for releasing information that is no longer necessary to be withheld such that it maximises transparency and public benefit in the context of a piece of legislation that is designed to further transparency. It is quite possible that a number of matters could steadily and incrementally no longer meet the exemption criteria in the months after a meeting. I do not believe, however, that a steady series of updated tweaks to the minutes is the best way to communicate the relevant information. The annual report provided for under Clause 3 provides a much more appropriate vehicle for the coherent and informative release of financial stability information regularly. The Government believe that the annual report is the appropriate place for such subsequent release, so I urge the noble Baroness to withdraw her amendment.

My Lords, I think that I accept the Minister’s point; we would not want a drip-feeding of bits of minutes as the exceptions dropped away. I can see that the annual report may well be an appropriate place for the inclusion of that material. I shall reflect further on what the Minister has said. I beg leave to withdraw the amendment.

My Lords, Amendment 19 would amend Clause 2(6). Subsection (6) allows for the Council for Financial Stability to meet additionally to its quarterly meetings. This is obviously sensible as quarterly allows a long time between meetings even in times of relative calm. If there were real financial stability issues, we would expect the council to meet more frequently. Clause 2 provides for minutes to be published only of the quarterly meetings of the council. It seems to envisage that the quarterly meetings will consider strategic issues only, as set out in subsection (1). The additional meetings allowed for under subsection (6) could be either strategic or tactical as the subsection does not constrain them at all.

The schedule of meetings set out in the terms of reference tie the quarterly meetings to the different reports from the tripartite authorities that will be expected on a quarterly basis. But it must be possible that other strategic issues will arise outside that tidy schedule, for example some new rules from the EU or the Financial Stability Board. The draft terms of reference specifically allow for these extra meetings to cover both strategic and immediate issues. Furthermore, the draft terms of reference say that in the current financial market conditions the council will meet at least monthly. So it is puzzling to find that the clause provides for no minutes of the non-quarterly meetings to be made available, nor do the terms of reference seem to allow for this.

This issue was debated in Committee in another place in connection with a slightly different amendment. The Minister’s reply was along the lines that if the council had to give minutes for every meeting but had to remove all items of substance, that could itself be harmful. He made the distinction strongly between quarterly strategic meetings and other meetings but, as I have tried to show, the terms of reference do not confine strategic issues to the quarterly meetings, and not every item on the agenda of non-quarterly meetings, even if of an urgent nature, will need to be removed using the criteria in subsection (5) which we debated in the previous group of amendments.

None of this makes sense except in the context of a Government who believe in only a bit of transparency but not enough to really embrace the concept. It may be that my amendment is not quite right because I can see that there could be circumstances when to announce that a meeting has taken place, even if it is a month later, but not to reveal anything about it, might be a problem. We should be able to redraft this so that the fact of a meeting, as well as its content, is capable of escaping publication using the subsection (5) let-outs. But we should not draft the Bill on the basis that everything that happens outside the quarterly meetings must be kept out of the public domain since it is clearly intended that the council will meet in addition to the quarterly meetings.

I hope that the Government will see that their half-hearted commitment to transparency will fool no one and could harm the credibility of the Council for Financial Stability. In another place the Minister was keen to say that the council was part of creating trust in the UK’s financial stability. I have to say to the Minister that partial transparency is not a hallmark of trustworthiness. I beg to move.

My Lords, I support my noble friend’s Amendment 19. It is important that if there are emergency meetings of the council the minutes should be published, especially if there are special meetings because of new rules from the EU.

Amendment 19 would require any additional meetings of the council beyond the quarterly ones to be covered by published minutes. In providing greater formality and transparency the Government have struck a balance between a public benefit of greater transparency and the need to maintain confidentiality in respect of operational matters relating to specific markets or firms. The proposals for the council, in particular the provisions for additional transparency and accountability, are therefore centred on the concept of the strategic quarterly meetings.

The Government believe that transparency over the council’s forward-looking strategic discussions would be very much in the public interest. Agendas for these meetings are agreed in advance by the three participating members of the council. Therefore, it would be perfectly appropriate if one of the members of the council wished to put on the agenda something which had been covered in an intervening meeting but which they felt had strategic relevance and which should be part of the published minutes.

The Government do not believe that it would be helpful to publicly minute all meetings. When the council needs to meet more regularly than every quarter it is likely that discussions will be dominated by operational matters that are likely to need to remain confidential. Minuting meetings that are dominated by confidential discussion would not be at all helpful. For example, publishing a minute which revealed nothing of substance could lead to damaging speculation about the stability of specific firms or markets. Such speculation may naturally be centred on firms or markets that are not in fact the subject of specific concern on the part of members of the council.

The Government believe that transparency over the quarterly strategic discussions is much more beneficial. Hence, the distinction we make between the quarterly meetings and, when necessary, other meetings. I hope, therefore, that the noble Baroness recognises that this is a significant step forward in terms of transparency compared to previous arrangements. I urge her to withdraw her amendment.

My Lord, the noble Lord finished his remarks by saying that it would be a contribution to transparency. However, Her Majesty’s Government propose exactly the contrary: to have meetings outside of the quarterly meetings that will not be minuted. If that is the case, all that will happen is that, if there is something that might possibly embarrass Her Majesty’s Government or which the Government do not wish to be seen for reasons other than those of commercial confidentiality, they will simply postpone those until a discussion or a meeting between the quarterly meetings.

I find it almost impossible to envisage a situation in which that might be contemplated. However, if the noble Lord allows me to answer his question for the benefit of the exercise before he comes back eagerly to give the House a further question; it would require the complicity of the Governor of the Bank of England and the chairman of the Financial Services Authority. That is why such a tactic would not even be contemplated, let alone take place.

I am not sure that that is correct. I believe the noble Lord has led a very sheltered life.

I do not know about that. Could I explore this difference between the quarterly and monthly meetings? As I understand it, the Council for Financial Stability in its shadow form is currently meeting on a monthly basis. It has presumably met subsequently to its first meeting. Can the Minister explain what the difference between its first two meetings was?

The Council for Financial Stability has had two meetings in shadow form. One was a quarterly strategic meeting, the minutes of which have been published and are available on the Treasury website. They meet many of the tests that noble Lords have set in terms of clarity and clear attribution of comments, with a focus on the contributions made by the members of the council, including those of some of the bit-part players who have been allowed to make modest contributions and to have their moment in the sun. The council is meeting again this week in its shadow format. The two non-quarterly meetings—that is the one that we have held and the one that we are holding later this week—deal very much with issues of the moment relating to markets, individual companies and economies. I do not think that it would be right for me to go further than that, without undermining our very clear distinctions.

The quarterly strategic meetings will, importantly, focus on the reports published by the Bank of England and by the Financial Services Authority on financial stability and on financial risk. I note again that the discussion at the Council for Financial Stability takes place after the publication of those reports, so that there is no fettering of the ability of the Bank of England and the FSA to publish their views openly. The fourth major publication moment for the quarterly meetings will be the report published by the Council for Financial Stability under the direction of the Treasury.

So there is a very clear distinction and difference between the issues of the moment of the monthly meetings, as they are at the moment, which rather speak to at least some of the points made by the noble Lord, Lord Stewartby—although my noble friend Lord Davies of Oldham was correct in reminding the House that the Council for Financial Stability is not an executive body—and the quarterly meetings, which are more reflective in terms of their focus on the central risks to the financial system.

My Lords, I am sure that that is now as clear as mud for everybody. I thank my noble friends Lord Northbrook and Lord Howard of Rising for their contributions to this short debate. It is very mysterious that you could have body which somehow divides itself up into an operational being—meeting other than quarterly—and a strategic being—meeting quarterly—when it is very clear just by looking at the first set of minutes that there was not just strategy discussed.

I did not say—and would not have wanted to have said—that the monthly meetings are operational. I said that they deal with issues of the moment relating to specific companies, countries and markets. I did not say that the Council for Financial Stability is an operational or executive body.

My Lords, I did not intend to say that the body was executive. We flogged that one to death on the first day of Committee when we found out that this is just a talking shop. Everybody knows that this is just a talking shop. This is another case of the Government being in fantasy land. They have invented the Council for Financial Stability—which is a way of dressing up some failed arrangements. They have elaborately put Clauses 1 to 4 in this Bill. They have people attending it; they have created a secretariat, minutes of two kinds of meetings, schedules and all kinds of things like that. They have a little bit of transparency, because they will tell us what is in some kinds of meetings, but not what are in other kinds of meetings. The more we hear about the Council for Financial Stability, the more it has no real meaning.

If something is as flawed as this, it is clearly very difficult to improve it. We will carry on trying to improve it, but perhaps not with this amendment. I beg leave to withdraw the amendment.

My Lords, I shall be very brief. I intervene particularly because I wish to apologise to the House. When I spoke on Second Reading on 23 February, I failed to declare an interest, which I now believe I should have declared, as chairman of Oxford Investment Partners, an investment company that is majority-owned by a number of Oxford colleges. It is regulated by the Financial Services Authority, as indeed am I personally as its chairman. I forgot about it because I was not talking about that at all; I was talking about the need for a structural separation between conventional banks, utility banks, narrow banks and investment banks—this sort of Glass-Steagall thing. I should have declared this interest and I apologise.

While I am on my feet, however, I think that the Minister also owes the House an apology of a different kind. On Second Reading, he said:

“Arguably, the only advanced economy able to largely withstand the banking crisis was Canada, and its regulatory structure is very similar to our own”.—[Official Report, 23/2/10; col. 1000.]

When I heard that I was very puzzled, because I did not think that it was. However, I thought that I should check up on it first. I found that, in a fundamentally important way, it is not similar. Our structure—which the Council for Financial Stability, or whatever it is, enshrines—is a tripartite structure. The Canadian structure is quadripartite, which is fundamentally different. The Canadian system separates conduct of business regulation from prudential regulation. They are in two completely separate institutions, whereas our system puts them together. In my judgment, that is the single biggest mischief in the tripartite system that the Government have put into place. Conduct of business regulation is a totally different matter, requiring a totally different expertise and totally different kinds of people from those required for prudential supervision and prudential regulation. They have to be separate. You can separate them out in two ways: you can do it as the Canadians have done it, or you can do it as the Conservative Party has decided is the right way, by putting prudential supervision with the Bank of England and separating out the conduct of business regulation.

My Lords, I have always believed that affairs in this Chamber should be debates and not conversations. Therefore, I did not come back on my point to which, with great respect, the Minister did not reply. However, I am not clear why the reports under Clause 2(2) assessing the risk to the stability of the UK financial situation are to be made only by the Bank of England, on the one hand, and the FSA on the other. One might think that in a tripartite system there could be some issues which neither the FSA nor the Bank are immediately responsible for but which might be reported as a risk as far as the Treasury is concerned. I do not think that I have had an answer on that omission.

My only other point is rather more fundamental. On the whole, the failure of the existing tripartite system, and the past one, resulted largely from a lack of co-ordination between the three component parts. The Bill seeks to ensure that the three parts do co-ordinate their efforts in future, and that is very much to be welcomed. However, there are some dangers. If all these reports and so on are to be published under Clause 2 and it can soon be seen whether there has been an adequate response to them, it might have a destabilising effect rather than a stabilising one.

My Lords, I spoke to the question of whether Clause 2 should stand part during our first Committee sitting, when we debated whether Clause 1 should stand part. However, perhaps I may just say how much I agree with my noble friend Lord Lawson on the split of conduct of business and prudential regulation, which is a point that I made during that sitting. It was one of the clear failings of the arrangements set up by the Prime Minister when he was Chancellor of the Exchequer in 1997, and it has contributed to the problems we found when the financial crisis hit the UK. That is why we propose reversing it.

My Lords, when the Minister reflects on our debates on this clause and on the official and unofficial meetings of the council—the quarterly meetings, which are strategic, and the interim ones, which are “operational”, which I think was the Minister’s phrase—will he also reflect on the fact that knowledge that the council has met, knowledge which may well be spread abroad, while no minutes are being published, will have a far more destabilising effect than fessing up and explaining what is happening? If we are to have these meetings—some of which are to be minuted while others are not—people will draw the very worst conclusions from the meetings that are not minuted.

My Lords, I shall address the points made by the noble Lords, Lord Lawson, Lord Higgins and Lord Hodgson of Astley Abbotts. When the noble Lord, Lord Lawson, said that he should perhaps have made a declaration, I thought that it might even have been a declaration of his previous directorship of Barclays Bank. Earlier today, during Question Time, the noble Baroness, Lady Trumpington, declared an interest in a body that she had chaired some time ago. What noble Lords are meant to declare in debates seems a confusing matter. One of the strengths of this House is that everyone who participates in a Committee such as this one makes a contribution on the basis of extraordinary involvement and experience in the financial sector—in clearing banking, private equity, investment management and all other spheres. We draw great strength from the fact that Members of this House have such experience.

Perhaps I may make a conditional apology to the noble Lord, Lord Lawson of Blaby. If I was incorrect in what I said, of course I will apologise to the House. However, I am not at this stage convinced. The difference in regulatory responsibility which Canada reflects in the division of responsibility between prudential regulation and conduct of business—a difference which one or two other regulators also reflect either in their structure or in the fact that there are two different bodies—does not depart from the fact that Canada, like the UK, has a separation of responsibilities between the Treasury, the central bank and the bodies that are responsible for regulation. Specifically, I do not believe that regulation and conduct of business in Canada are the responsibility of either the Treasury or the central bank. It was on that basis that I suggested that Canada’s structure was similar to that of the UK.

I would also argue, if time permits, that I was not suggesting that Canada was saved by its regulatory structure alone. There are a number of features to the Canadian banking market—in particular the guaranteeing of residential mortgages—which meant that many of the problems experienced in the United States and elsewhere with subprime mortgages were not visited on Canada.

My Lords, I am most grateful to the Minister for giving way, I am grateful too for his conditional apology, and I hope that he will look more closely at this. The point is, however, that in every country the Treasury and the central bank are separate, so what we are talking about is the specific issue of the supervisory and regulatory arrangements for financial institutions. It is a fundamental difference whether you have one or two covering conduct of business and prudential.

The noble Lord was kind enough on Second Reading to say that he had put aside my memoirs for rereading. I love the “re”; I am most grateful to him for the “re”. If he recalls, I described in my memoirs the White Paper on banking supervision, which I published a quarter of a century ago, in which I indicated how this issue could be strengthened. The one thing it had to be clear about is that prudential supervision and conduct of business regulation are two completely separate activities and it is damaging to put them together.

I am familiar with the arguments that the noble Lord reflects in his contribution, and it is correct that I am rereading his memoirs. He quoted at Second Reading from something which appears quite early, in chapter 32, of his memoirs. This weekend, I saw a reference to an editorial which the noble Lord had written as a youthful editor of the Spectator. He had given guidance on a situation in which even the readers of the Spectator might have concluded that a change from a Conservative Government might have been the appropriate action. I will be digging in my archives to see whether I can find this.

I see a look of puzzlement on the face of the noble Baroness. If I misread the Coffee House blog, as produced by the Spectator, I will not be able to find the article which the blog attributes to the noble Lord.

It is more than 40 years since I was editor of the Spectator. Not only was there no Coffee House blog in those days, there was no blog anywhere in the world.

I do not want to be detained on this subject. However the beauty of the digital media is their ability to allow us, at a couple of clicks, to find the pearls of wisdom produced by the noble Lord when he was editor of the Spectator, some 40 or 50 years ago. I, for one, am delighted that I am able to access such insights.

The noble Lord, Lord Higgins, refers to Clause 2(2), which relates to the publishing of reports. The reports to which this refers are of course the reports which are already produced by the Financial Services Authority and the Bank of England. The council will also produce a report on financial stability, and the Chancellor of the Exchequer will continue to account for the regulatory architecture and the Treasury’s views on financial stability to Parliament and to the Treasury Select Committee. I see no need for an additional, formal report from the Chancellor; there is a danger that we might go from having very little transparency to being overwhelmed by it.

The noble Lord, Lord Hodgson, referred to the fact we will know that non-quarterly meetings have taken place and that in itself will lead to speculation as to what might have been discussed in those meetings. The markets and investors are already aware that the court of the Bank of England and the board of the Financial Services Authority meet on a monthly basis. That court and that board discuss issues which are confidential and market sensitive and are they not under an obligation to publish minutes. The fact that those meetings are taking place does not appear to pose any threat or speculation as to the issues which might have been discussed or conclusions which might have been drawn from matters which were on the agenda for those meetings.

This is of course called the Council for Financial Stability. It is a very central matter; it is concerned with co-ordinating the preservation and stability of our financial markets, so it is not like the sort of executive board the Minister describes; it is central to our financial affairs. Therefore when it becomes known that it has met out of sequence, people are bound to ask what it is meeting about; what is the instability threatened about which co-ordination is required? People will inevitably draw the worst conclusions, as that is human nature.

I do not think it will necessarily be a matter of public record that the non-quarterly meetings have taken place, and therefore this concern which the noble Lord has should not arise.

My Lords, I shall speak also to Amendment 23. We have now reached Clause 3, which deals with an annual report of the Council for Financial Stability. Under Clause 3(1) the Treasury is required to produce an annual report of the council’s work. I have suggested amending this by Amendment 22 to say that the council should prepare its annual report. Amendment 23 would amend Clause 3(1)(b) so that the report is to cover the council’s views of what is important about UK financial stability rather than the Treasury’s views as currently drafted.

It seems to me that if the Government are serious about the council making a contribution to financial stability, with the three principals contributing on something near an equal basis, it cannot be seen as an outpost of the Treasury. If it is just the Treasury calling in the Bank and the FSA once a quarter, or even more frequently, to discuss their reports and then the Treasury writing up its version for the outside world and Parliament, the Government will soon undermine their own creation.

There is an important issue here. It is clear from the draft terms of reference and from the minutes of the first meeting of the shadow council, both of which I refer to today, that the Treasury is in the lead. Of the 14 people attending the meeting of the council in January, eight were from the Treasury, compared with three each from the Bank and the FSA. It seems the secretariat is provided by the Treasury.

This is a familiar syndrome. The Government have a problem—in this case it is the credibility of their financial stability arrangements. They then set up a body or a committee or, as in this case, a very grand council. Then they get some heavy hitters on it and then they swamp it with people from the Treasury who, being very clever people, can manoeuvre the body to their own ends. I will not name names today, but I can produce a pretty long list of people who have been sucked into these sorts of bodies only to find that they are a front for the Treasury doing its own thing.

The Treasury already has its fingerprints all over the Council for Financial Stability. It sets the terms of reference and the Treasury, in the form of the Chancellor or his deputy, will always chair it.

When this was debated in another place the Minister said that the Treasury had to have control over the annual report because it was the Chancellor who was accountable to Parliament and to the public. However, that is only partly true, as Parliament would expect to discuss the workings of the Council for Financial Stability with both the Governor of the Bank of England and the chairman of the FSA, both of whom are already regular attendees at the Treasury Select Committee in another place and in Select Committees in your Lordships’ House. Of course we accept that the buck stops with the Chancellor—we teased that out on our first day in Committee—but he does not need a Council for Financial Stability in order to talk to the FSA and the Bank of England.

The Bill is predicated on there being some substance to the Council for Financial Stability and, if that is the case, it cannot be just a front for the Treasury. One way of demonstrating that substance is for the council to have its own annual report. The Bill is confused about the role and the real importance of the Council for Financial Stability. Our solution is not to have it at all because it would be redundant in our scheme for reuniting macro and micro-prudential supervision but, if it is to remain in the Bill, it ought to have logic and a consistency about it. I beg to move.

In supporting my noble friend’s amendment, I would point out to the Minister that if the council reported, it would have the advantage of the Governor of the Bank of England being involved. As he pointed out to me earlier, if the Governor of the Bank of England is involved it would give certain probity to proceedings that might not otherwise be there.

In refining the tripartite through the Council for Financial Stability, the Government are keen to improve the transparency and accountability of the current arrangements. The publishing of minuted quarterly meetings forms an important element in this, as does the formal report on the council by the Treasury each year. The report will cover the activities carried out by the council and it will also describe significant regulatory actions taken and future developments proposed for regulatory legislation.

Amendment 22 would require the council and not the Treasury to prepare the report. The Government believe that it is appropriate for the Treasury to lead on the drafting of the annual report; the Chancellor is in the chair of the council and is ultimately accountable to Parliament and the public. We recognise the vital interest that other council members have in the report. As such, it is not the intention of the Treasury to produce a report without recourse to the other authorities. Indeed, Clause 2(3) provides explicitly that the draft of any report prepared by the Treasury must be considered by the council at one of its quarterly minuted meetings, and noble Lords will bear in mind that comments will and can be attributed to members of the council at those meetings.

The draft terms of reference also sets out a formal engagement process for the council prior to publication, and there will clearly need to be official-level engagement between the Treasury and other authorities prior to any formal discussion. In sum, the authorities will work closely on the production of the report and the council will formally consider and discuss a draft of the report in advance of publication. That discussion will be publicly published with the comments of both the chairman of the Financial Services Authority and the Governor of the Bank of England minuted—as will be the comments of the Chancellor—if they wish to make minutable comments. However, it is right that the responsibility for producing the report lies with the Treasury. The Bank of England and the FSA will continue to produce their own regular reports on the risks to financial stability and their own annual reports on which they will be free to comment on the Council for Financial Stability.

Amendment 23 concerns the scope of the report as set out in Clause 3(1). The report is intended to cover the activities of the council in the previous year and, additionally, any matters that have special significance for the stability of the UK financial system. The amendment would change the scope of the report to being a matter for the council and not the Treasury. I do not accept this proposal for two reasons. First, the report is conceived as a report of the Treasury and, as such, provides an avenue for the Government to report more widely on financial stability. A Treasury report adds balance to the work of the council, with other members providing the financial stability report and the financial risk outlook. Secondly, other members will have the opportunity to be fully consulted, as I have set out previously. There is, therefore, scope for the views of all members of the council to be incorporated in the final report and transparently recorded.

On the clause stand part debate, the Government believe that the annual report provided for by this clause will provide for enhanced transparency about the work of the council, the risks to financial stability and the actions that are being co-ordinated to mitigate those risks. I cannot see how removing this requirement for greater transparency and accountability would in any way be beneficial to the maintenance of financial stability. I may well have led a sheltered life, but I do not think I have been so sheltered that I cannot see that the proposals made here represent a significant step forward in transparency and accountability. Accordingly, I urge the noble Baroness to withdraw her amendments.

My Lords, it is a fairly weak sanction in Clause 2(3). It states:

“Where the Treasury prepares a draft report under section 3, the Council must consider the draft”—

but it cannot do anything about it. Coupled with my noble friend’s comments on the balance on the council of eight, three and three, it is not going to have any ability to override in the final instance the Treasury’s views.

I can only repeat to the noble Lord, Lord Northbrook, what the noble Baroness has been saying: there are three members of the council. There may well be others in attendance providing support to the three principal actors, plus those responsible for minuting the meeting, but the council comprises the Chancellor of the Exchequer, the Governor of the Bank of England and the chairman of the Financial Services Authority. They will consider the report in a minuted meeting and if they were not happy with the report I am confident that the chairman of the FSA and the Governor of the Bank of England would make clear in their comments that they were not content, and they would, through the careful process we have set out for ensuring that there is adequate time to prepare and agree the minutes, ensure that those minutes reflected their views. I regard that as a powerful sanction. Indeed, I would suggest to the noble Lord, Lord Northbrook, that they are akin to the raising of eyebrows—a sanction to which the noble Lord has in the past referred to with some fondness.

My Lords, the Minister gets ever more ingenious in his defence of the nonsense that is in the Bill. The Government are trying to pretend that the Council for Financial Stability means something and then, all of a sudden, it is the Treasury that takes the lead on drafting and produces the report. That is not covered by Clause 3, which states that the Treasury must prepare a report and include matters which in the opinion of the Treasury are significant. We are told that the really important sanction is that the Governor and the chairman of the FSA can have minuted the fact that they do not like what is in the report. This is worse than fantasy: it does not have coherence or logic; it is plain that this is a body which fulfils a Treasury civil servant’s idea of what it will be like in practice to have three important people working together.

I shall not take any more of the Committee’s time today. The points raised by my noble friends Lord Northbrook and Lord Howard of Rising are entirely to the point. We have not heard a single bit of sense from the Minister in his defence of the Treasury taking the lead and deciding what goes into the annual report of the council, other than to underline that the council is a piece of nonsense. I beg leave to withdraw the amendment.