§ 'No levy shall be imposed under section 19(1) or (2) of this Act for the purpose of financing expenditure incurred by the Board by way of administrative expenses in performing their functions under this Act until approval thereto has been given by resolution of each House of Parliament'.—[Mr. Moate.]
§ Brought up, and read the First time.
§ Mr. Moate
I beg to move, That the clause be read a Second time.
I have tabled this clause not in any sense of belligerence to the principles of the Bill but more, as always, as a humble seeker after truth as to how the Bill is to operate in certain vital respects.
1828 Within the Bill there is a great deal of description of the Policyholders Protection Board. We are informed that the Board will consist of five people who will be paid remuneration and reimbursed expenses.
It is probably safe to assume from what we have heard that the Secretary of State will be taking fairly early steps to appoint the Board, presumably regardless of whether any insurance companies are in difficulties and whether they suspect that it will be brought into operation imminently. Therefore, immediately the Bill becomes an Act, presumably expenses will be incurred by way of the administration or remuneration of the Board.
My object is to ascertain how and when the Board is to be established, how its expenses are to be met, and how, if at all, it is to be staffed. I hope that the Minister will be able to, give me some precise answers, because it would be helpful to the industry and to the public 1829 at large to have some idea about the mechanics of the operation.
I mentioned staffing, which raises questions about the nature of the Board. I understand that there has been little debate so far about the type of point that I am putting. Is this Board to be entirely independent of the Government with a separate office and staff, or is it to be an adjunct of the Department of Trade to be activated only when the Secretary of State demands? I find something unattractive about the idea of this group of important men sitting on a Board which will be brought into life by the Secretary of State only if he considers that a particular need exists. If the Board is not prepared for the shock of meeting the Secretary of State it might not be in a position to do a very good job of work. If the Board is to have any useful purpose it must be aware of events as they developed. Presumably it must have an office. If it is to have an office and staff, who is to pay? I see no Money Resolution relating to the Bill. Where is the money to come from?
On examining the Bill we find in Clause 17 that the Board may recover from its levies any expenditure incurred by it by way of administration. It would seem that levies will have to be raised immediately to finance the Board's bureaucracy. Alternatively, I suppose it could use its loan powers to raise the money. As I understand it, those powers exist only in anticipation of the levies that will subsequently have to be raised.
That leads me to the crux of the matter. It is generally understood that the levies will be called for only in the event of a collapse or to help avert a collapse. It will be a matter of great surprise to the industry and to policyholders if they are told that a levy will have to be raised on all policies to meet the annual administration expenses of the Board. Maybe we shall be told that there are to be no administrative expenses. That makes the Board a strange and unarmed weapon. It is important for us to know the answers to the questions I have posed.
I return to a number of questions. First, where is the money to come from to finance the Board's expenses? Assuming for the moment there is no actual or imminent collapse of an insurance company, will the Minister make it clear 1830 how these comparatively modest sums are to be collected from the industry?
If no expenditure is to be incurred, how is the Board to be constituted? I hope that it will not be a Board that is to be brought into life at the behest of the Department of Trade. If that were so, all that would happen is that the officials would have taken so many steps along the road to liquidation, or would have been involved in it to such an extent, that it would become impossible for the Board's members to act in any other way. That would set the Board on an irrevocable course of action.
If the Board is to have no resources and if it is to be merely an extension of the Department, an extension of the Minister's powers, I fear that it will be a case of the blind leading the blind. My main object is to seek information about the mechanics of the Board's operations. I believe that the clause has merit in its own right in as much as it states quite clearly that no levy shall be imposed for the purpose of covering the administrative expenses of the Board. I believe that to do otherwise would be an objectionable proposition to put to policyholders and the insurance industry.
§ Mr. Clinton Davis
I am grateful to the hon. Gentleman for enabling me to have this opportunity to say one or two things about the Board. It is clear, notwithstanding the hon. Gentleman's concluding remarks, that the proposal he is putting before the House is largely by way of probing the situation. I have always recognised the hon. Gentleman as a humble seeker of the truth. On one or two occasions I have joined him on similar exercises, but we were frustrated.
The object we have in mind in establishing the Board is that it shall be brought into effect as soon as possible after this measure receives the Royal Assent. We can then consider the appointment of members of the Board. The hon. Gentleman will recall that we have given an assurance that the majority of the Board's members will be drawn from the senior officers of insurance companies. That in itself will indicate the way in which the Board is to be administered. The Board will not be dealing with Government moneys, as such. 1831 Therefore, there is no purpose in a money resolution. As the hon. Gentleman put it, that is the way in which the Board will be kissed into life. I am not sure that I would have used that expression myself, but there it is.
The Board will be independent of the Government. It will not be an adjunct of the Department of Trade. I understand that the BIA has indicated that, initially, it is prepared to bear certain staffing and office administration expenses, but those expenses are not likely to be substantial. I am grateful to the BIA for having made that suggestion. Those expenses will not be met from any levies.
The Board will operate only when there is a failure. Indeed, there will be no need for it to meet or to undertake any duties unless there is a failure. On the basis of that assurance, I hope that the hon. Gentleman will feel it unnecessary to pursue the clause to a Division. I hope, too, that he will agree that we have had a positive response from the BIA.
§ Mr. Higgins
The House will be grateful to my hon. Friend the Member for Faversham (Mr. Moate) for tabling the clause. I believe that it has clarified a number of points which, despite our intensive deliberations in Committee, did not emerge very clearly before. The Under-Secretary of State has said that the Board will meet only if there is a failure of an insurance company. Am I wrong in supposing that it will also need to consider the whole procedure of rescues or liquidations? Am I right in thinking that it is not only in the event of a failure that the Board will have some task to perform? I may have misunderstood, but was the hon. Gentleman saying that the Board will never meet unless a failure has taken place? That was not my understanding of the way in which it was to operate.
My second point is that, in a sense, the answer which my hon. Friend received from the Minister was surprising. My hon. Friend is right to be concerned about the fact that a levy might be raised, even though no failure has taken place and although there is no expectation of such an event. The arrangements that the hon. Gentleman has suggested and 1832 welcomed seem to be rather unorthodox although, as he points out, no money resolution has been made to provide finance to cover the Board's operations. However, on reflection, does the Minister think that that which is before us is a satisfactory arrangement? Is there any precedent for financing the work of a Board set up by statute in this way? It seems to be a somewhat unsual arrangement.
§ Mr. Robin Maxwell-Hyslop (Tiverton)
It occurs to me that if the expenses which fall on the BIA achieve any magnitude there will be an incentive for fringe companies not to belong to the BIA, bearing in mind that membership is not compulsory. In that way they will avoid having to contribute towards the expenses of the Board.
§ Mr. Clinton Davis
The point that has been made by the hon. Member for Tiverton (Mr. Maxwell-Hyslop) is so unlikely as hardly to merit a reply. The expenses that will be involved initially will be so minimal as to have no impact upon the sort of situation of which he has spoken.
The hon. Member for Worthing (Mr. Higgins) asked me one or two questions about the Board. He suggested that it will be an unorthodox situation, and unprecedented. That may be so, but that does not demonstrate that it is a bad idea. The fact that we start with a new idea is not necessarily a disadvantage. Clearly someone has to start new ideas. I repeat that the BIA has undertaken something for which I am most appreciative-namely, the initial expenses.
I want to clarify one point that was raised. Perhaps I inadvertently misled the House—and I do not wish to do that. The Board may think it appropriate to meet informally to discuss the possibility of its functioning and how it can go on functioning in the event of a collapse, but it would not be called upon to undertake its statutory functions unless there were a failure. That is the point that I was seeking to make.
I imagine that individual members of the Board would want to meet. Where they meet is a matter for them. I do not prescribe any limits. They may wish to go to Locketts, where they have duckling, in the manner of Shrewsbury. I was 1833 asked how that was done, and the question was answered by my hon. Friend the Under-Secretary of State for Industry—the hon. Member for Manchester, Ard-wick (Mr. Kaufman)—who said it is picketed. They will be able to rejoice wherever they wish. I hope it is clear that no matters of any substance are envisaged.
§ Mr. Moate
I am grateful to the Minister for having clarified the method by which the Board will be established, the timing, and how it will be financed, but I am a little bemused by his answer. I do not necessarily find unwelcome this unorthodox arrangement for a statutory board to be dependent for its lifeblood upon a commercial organisation, but some members of the BIA may be a little surprised at what has been announced. I do not know the views of the majority of the members, but one or two are by no means sympathetic to the idea of there being such a Board, and they might see this as their association nursing a viper in its breast, but no doubt once the Board is established they will extend to it their hospitality and give it the benefit of their considerable expertise.
There is a certain area of confusion between the statutory powers of the Board and the information that it will receive. One would assume that if the Board is to meet from time to time within the BIA it will be given a great deal of research facilities and information from the BIA. It may be that not a great deal of thought has gone into the mechanics of the operation and that, understandably, the Minister has been concerned with the principles of the legislation. Perhaps this has not been thought out as clearly as the Minister would like it to be when the Bill proceeds further.
It worries me that the Board will incur only minimal expense. I am in favour of all boards incurring little or no expenditure, but in this case the Board will have no staff. It will have no resources to gain any independent knowledge of what is happening in the insurance market. On the other hand, if the Board is well informed it will be because of individual members' expertise, or because knowledge has been passed on by the BIA. Bearing in mind the criticism levelled at the BIA when the insurance companies put up slogans such as "Get the strength of British insurance round you", people 1834 will be surprised that it is the BIA that is putting its strength around the Policy-holders Protection Board.
§ Mr. Clinton Davis
Members of the Board must seek their information and research as widely as they can, and no doubt the BIA, the Department and their own expertise will be of considerable assistance to them.
§ Mr. Moate
On balance, I am attracted by the Minister's reply. It is a welcome re-establishment of relationships between this new statutory Board and the BIA. Nevertheless, it raises certain interesting questions, which we may have to examine when the operations commence. In view of the answers that have been given, I beg to ask leave to withdraw the motion.
§ Motion and clause, by leave, withdrawn.