§ 4.6 p.m.
§ Mr. Michael Marshall (Arundel)
I beg to move Amendment No. 1, in page 1, line 5, leave out Clause 1.
§ Mr. Speaker
With this amendment we may also take Amendment No. 2, in page 1, line 8, after 'words', insert 'profitable'.
§ Mr. Marshall
In considering this Bill we have come to the end of a somewhat remarkable chapter in the annals of this House. Let me first welcome the Minister of State, who is the great survivor—the man who came through the purge of the Department of Industry following the Industry Bill. He is the man who battled single-handedly to guide the proceedings of the Bill upstairs in Committee. We lost his other ministerial colleague after Second Reading and we did not see him in Committee. Now, this afternoon, we have the enigma whether we shall see a Treasury Minister on the Front Bench. I understand that we shall see the Financial Secretary to the Treasury a little later in the debate. Perhaps the Minister of State will now say whether the Financial Secretary will take part in these debates and will be able to answer questions.
§ The Minister of State, Department of Industry (Mr. Gregor Mackenzie)
Perhaps it is appropriate for me now to say that we have only recently seen the selected list of amendments. Therefore I shall consult my hon. Friend the Financial Secretary when he arrives. I am sure that my hon. Friend will be able to deal with any points that arise.
§ Mr. Marshall
I am grateful to the Minister of State for that comment. With his usual bland charm, he has been kind to his Friends and to the Government as 395 a whole in covering up for them. However, it is a disgrace that throughout the proceedings on this Bill we have lacked the voice of the Treasury. It is incredible that in view of the recent developments we have not had the presence of a Treasury Minister until this very late stage.
I do not want to labour this point, but I shall return to it possibly at a later stage. We must remember that the Treasury is the master of this Bill. Whatever has been said upstairs on the Bill, time and again when we have run into problems, and the Minister of State, valiant though his efforts have been, has not been able to resolve many of our problems. We look forward to seeing the Financial Secretary because we wish to press him strongly on many of the points that arise on these amendments.
The amendments go to the heart of the Bill, which will give the Post Office extended power to provide banking services. This raises issues relating to structure, resources, fair competition, staffing and certainly the taxpayers' liability inherent in any build-up of the Giro's banking activities. Some of these points will be discussed in detail by some of my hon. Friends. I wish to concentrate on a number of broad principles that stem directly from the clause.
First, it must be put on record that throughout our proceedings we have had great difficulty in obtaining a clear view of the commercial objectives of Giro. It is these objectives in relation to banking activities that are sought to be extended. We have had a confusing picture as to how far the commercial objectives are in harness or in conflict with social objectives. There has been ignorance on our part because we have not been informed about the Government's approach to supervisory banking legislation.
We were told at earlier stages that the Department of Industry could not intervene in matters covering commercial judgment by Giro. On the other hand, if we seek to challenge the commercial judgment of Giro we are told that commercial confidentiality is involved which may reveal sensitive information. Therefore, we are in a "Catch 22" situation where nobody is able to give us the answer. Behind the scenes sits the 396 Treasury, the real monitor of this process. We have so far been hamstrung in our proceedings. I mean no disrespect to the Minister of State for we appreciate what he has tried to do. However, the situation has reached the ultimate in absurdity.
This follows two new developments in the past week since we concluded the Committee proceedings. The first major event was the pronouncement about the control the Government intend to exercise in building up banking operations by Trustee Savings Banks as expressed on Second Reading of the Trustee Savings Banks Bill, when they laid bare their intention to introduce supervisory legislation in respect of both the TSB and Giro. There were also statements by the managing director of Giro last Friday about the rôle he sees for Giro as part of a massive State bank.
These two important developments are relevant to this Bill. Despite the reservations and arguments of the Minister of State, we should explore these matters in detail. We should consider why Parliament should be asked to give the Post Office additional banking powers, with all the attendant expenditure, including advertising under Clause 1. Let us consider, therefore, how the restrictions imposed by the Treasury on the TSB are relevant to and parallel with the build-up of Giro.
On Second Reading of the Trustee Savings Banks Bill, the Paymaster-General said that the establishment of the TSB would represent "a third force" in banking, which he described as "mutually owned". He said:The banks will, of course, be subject to quantitative controls by the Treasury on the level of investment and loans."—[Official Report, 17th February 1976; Vol. 905, c. 1209.]One immediately asks, if that is so for the TSB, why is it not so for Giro?
The Paymaster-General also said that the credit services to be provided by the TSB would include facilities for personal loans within the range £150 to £1,500. Clear lines were drawn in respect of the TSB, but our amendments to provide the same limits for Giro were defeated in Committee. Once again, why is this distinction made?
The right hon. Gentleman also said that reserves were to be built up at the 397 same time as banking services were developed for depositors. In other words, they were to avoid the topping up by the Treasury which in effect is happening to Giro. He said that the Treasury was to determine the amount and proportion of the banks' funds which could be invested in a selected range of assets and in particular the "overall liquidity position" of each bank. Once more, there is a contrast with Giro. Despite our attempts in Committee, despite reservations expressed on all sides about reserve asset ratios and the technical insolvency of Giro, we have had no definite limitations or assurances.
The Government's view of the TSB contrasts sharply with the open-ended, blank cheque approach to Giro. Towards the TSB a cautious and selective approach is required by the Treasury, but the same scrutiny has not been brought to bear on this Bill. The Paymaster-General said in that same debate that the general policy for the Trustee Savings Banks would be the maintenance of a very high level of liquidity with little expansion. We have had no such clear assurance about the Giro.
Finally, and most telling of all, I come to the rôle of the Financial Secretary, whose arrival we shall no doubt welcome. [HON. MEMBERS: "Where is he?"] This is an important matter and I am sorry to have to quote the hon. Gentleman in his absence, but perhaps I can return to this matter when he does appear. As I said, the Minister of State is the great survivor in the Department of Industry. The Financial Secretary could be reasonably christened the Third Man, with all the overtones of the man we need to pin down.
On Second Reading of the Trustee Savings Bank Bill, the Financial Secretary said that the whole approach to the Trustee Savings Bank had to be looked at in the light of new banking supervisory legislation which would be introduced to deal with both the TSB and Giro. In other words, we are today discussing the extension of banking powers for Giro which we must assume will be overtaken by further legislation.
That brings us squarely back to the problem we face with Giro, and the totally unqualified, unco-ordinated and piecemeal development—I am quoting 398 the hon. Member for Thornaby (Mr. Wrigglesworth)—that we see in this Bill. To that extent, we are at one with the hon. Member for Thornaby, who called for a clearer view of the Government's intentions in this sphere. I believe that his estimate of the situation on Second Reading of the Trustee Savings Banks Bill would be generally accepted:The Committee stage of the Post Office (Banking Services) Bill has just finished. Its passage has been notable for having taken place in almost total isolation, without consideration being given to the role of the National Giro whose services it seeks to extend in relation to other sections of banking in either the public or the private sector or to various bodies responsible for the supervision of the banking system."—[Official Report, 17th February 1976; Vol. 905, c. 1220.]I feel tempted to start again now that T see that the Financial Secretary has finally joined us. [HON. MEMBERS: "Hear, hear."] I am greatly encouraged by the way in which the House has responded to the importance of this moment. The arrival of the Third Man in the shape of the Financial Secretary is a matter of great importance.
I have been quoting the Financial Secretary. It is important that he should know that we have been particularly concerned with his statement as reported in column 1245 on 17th February, when he confirmed that the Government intended to introduce new banking supervisory legislation to deal with the Trustee Savings Banks and Giro. I have been drawing a parallel between the two. The Treasury has taken a cautious, controlled approach to the development of the TSB, while in this Bill we are asked to support a totally open-ended and uncontrolled development of Giro.
We hope that the Financial Secretary will intervene in the debate. As the argument develops, I am sure that he will appreciate that we have been hamstrung so far by the lack of a Treasury spokesman. The Minister of State has worked valiantly, but the Treasury is clearly dominant, and we should know its view of the development of Giro's banking services.
I had been quoting the summary of the hon. Member for Thornaby who considered that this Bill has been dealt with in a totally unco-ordinated way. We entirely agree, but in putting the balance right it was hard for some of us to 399 believe our ears when the hon. Gentleman went on to argue that the TSB should take the greatest care before moving into more abrasive, competitive and inevitably risky worlds.
The hon. Gentleman impressed on the Government the need for adequately qualified staff. He also sought greater control by the Bank of England. He knows that it was precisely that type of approach which we were pressing the Government to adopt towards the Bill, but it was rejected time and time again when our amendments were defeated.
There is a quite incredible distinction between the activities of Post Office Giro and those of the Trustee Savings Banks. This prompts the question whether there is a distinction between Government Departments and whether, indeed, the Treasury has sought in some way to avoid extending its interest to Giro for reasons which we hope to hear from the Financial Secretary. However, all these matters highlight that any attempt which has been made by the Opposition to give teeth to the Bill or to take the opportunity to exercise some judgment on the future development of Giro's banking has been denied us.
Our amendments for ceilings, personal loans, personal overdrafts and corporate overdrafts were turned down in Committee. Our attempt to exclude the development of a credit card business was voted down despite the history of loss-making which credit cards have had in connection with many of the major banks. Our amendments concerning foreign exchange transactions, investment advice and trustee advice were all turned down when we pressed upon the Government the view that they were matters which went far wider than the Giro was qualified to undertake or its history suggested it had adequate resources to tackle.
Mr. Tim Ronton (Mid-Sussex)
My hon. Friend referred to credit cards. I am sure he will agree that there was a considerable area of doubt left when we discussed this matter in Committee. I hope that he will press the Minister to say this afternoon whether Giro intends either to go into the credit card business itself or to enter into a relationship with one of the existing credit card companies. Doubt- 400 less, since our debate in Standing Committee, my hon. Friend has read the report in the national Press which indicates that Giro is, at present, in the course of negotiation with one of the credit card companies. It would be most helpful if my hon. Friend would press the Minister for specific clarification on this matter.
§ Mr. Marshall
I am grateful to my hon. Friend. He has made an important intervention. I hope that the Minister has hoisted that point on board. I shall certainly press him hard on the matter of credit cards. There is a good deal of worry about this matter. There is also the question of the Eurocard. If we carry the credit card to its logical conclusion there is no reason why Giro should not enter the whole Eurocard system providing access to foreign exchange at any port of call. These are matters which seem to be swept under the carpet in the general line that the Minister has adopted. He said that he could not seek to put any restrictions on Post Office Giro but would expect it to move along a prudent course. I hope that he will take this point on board because it is important that we understand Giro's intentions concerning credit cards.
I turn to the wider question of the intentions and ambitions of the Post Office Giro itself. Last Friday under the headlineGiro chief outlines the basis for massive state bankMr. Singer, the managing director of Giro, made a number of statements which were reported in The Guardian by Tom Tickell. His comments are most important concerning the way we have to judge what is likely to be the outcome if the Bill, and especially Clause 1, is passed. My first quotation comes from the beginning of the report where it says:The National Savings movement, Giro, and the Paymaster-General's office could beneficially be combined into a state bank the size of Barclays, according to Mr. Alfred Singer, chairman of National Giro".
§ Mr. Marshall
Exactly.The overall Barclays Group including its foreign and inurance broking subsidiaries had assets of just over £14 billions in 1974. The total for the bank on its own came to £7.4 billions. Figures for last year are not due until March. The consortium Mr. Singer envisages, 401 would be somewhere in between. The National Savings movement on its own has assets of around £7 billions, while the Trustee Savings Banks which are strongest in Scotland and the north-east hold some £3½ billions of investors' money.The report concludes:Giro is a minnow in this company. After the reconstruction last year the Government White Paper listed past assets at £9.1 millions, down from the previous total of £16.8 millions.I can only say that if Giro is a minnow it is showing great pretensions in seeking to become a whale. If Giro is to be the prime mover in bringing together what The Guardian describes as a massive State bank, this is indeed a matter that we should explore very carefully and fully.
§ Mr. Gregor Mackenzie
I too, have read what Mr. Singer said. I have read the fine print of both the articles that appeared in The Guardian last Friday. Mr. Singer is entitled to his point of view just as we all are. However, whatever may lie in the future and whatever hopes individuals may have for the future, they are not written into the Bill. It is the Bill that we are primarily concerned with today. We are not concerned about the union of the Paymaster-General's office and Giro. With great respect, that is not what is contained in Clause 1. I assure the hon. Gentleman that we are only putting forward the Bill. We are not crystal gazing for the future.
§ Mr. Marshall
I am grateful to the Minister for his intervention. He has touched on an important point. I do not want to be too legalistic, but the assurance which he has just given is one which perhaps does not fully meet the point. He has anticipated the question I was about to put. Despite the assurances which he gave us in Committee, and the assurance which he has just given us, we need to have a much more clear-cut answer from him. Does the Minister of State not accept that there is nothing whatsoever to stop Giro, under Clause 1, seeking to pursue the concept that Mr. Singer outlined last Friday? I do not see how he can possibly deny that that opportunity becomes open if Giro seeks the extension of banking powers.
If he believes that there is some mechanism which would prevent that movement, I hope he will make it 402 abundantly clear. I do not see, certainly as Clause 1 stands, that there is any limitation such as he has described. I accept that his view and that of Mr. Singer may differ. However, as I understand the Bill, there is nothing which would inhibit Mr. Singer from pursuing the objective which he clearly spelled out to the Press and which he will no doubt wish to pursue during the months and years ahead.
Does the Minister of State accept that Clause 1 is nothing short of an empire builder's charter? I believe that the type of banking envisaged is one for which there is no public demand. Indeed, there is no evidence of great movement towards a public need for State banking. We know only too well that moves towards a nationalised bank are more than ever likely to follow the pattern of other nationalised industries where the taxpayer's purse is inevitably at stake in picking up the tab.
I trust that the Minister of State will return to my basic question because I do not believe that he has been able to set anyone's mind at rest with his brief answer. How can the Minister of State possibly justify the piecemeal legislation which his hon. Friend the Member for Thornaby has referred to, when now there is so clearly a need for a coordinated approach by the Government, the House and indeed the country to the working of the Trustee Savings Banks and Giro?
Will the Minister of State confirm that whatever the powers proposed under Clause 1, they must be subject to the regulatory powers of the new banking legislation which his hon. Friend the Financial Secretary to the Treasury has promised will follow shortly?
§ Mr. Marshall
I am sorry to say that this is part of the pattern which we have had to put up with frequently during discussion of the Bill. We get the feeling that the Treasury is with us in spirit but never in the flesh. The precise point here is: when can we expect regulatory powers in new legislation affecting both Giro and the Trustee Savings Banks, legislation which would seem to call into question the whole basis of the Bill now before us?
§ 4.30 p.m.
§ Mr. Ian Wrigglesworth (Thornaby)
I may not be able to spirit the Financial Secretary back into the Chamber, but at least I can bring back his words on the Second Reading of the Trustee Savings Banks Bill. He gave an assurance that I should like to repeat for the benefit of the House. He said:… there will be new banking supervisory legislation which will deal with the Trustee Savings Banks and Giro among others."—[Official Report, 17th February 1976; Vol. 905, c. 1245–6.]The assurance the hon. Member is seeking was given on that occasion.
§ Mr. Marshall
I think that the hon. Member may have misheard me earlier when I quoted precisely those words. I acknowledge that the assurance was in response to points that the hon. Member for Thornaby had put to the Financial Secretary. We have been told that new legislation will be introduced. Is it not absurd for us to consider the extension of the Post Office banking services when we are apparently so close to a decision about the supervisory control of those very banking powers? This approach calls into question the whole background of this Bill, since the Post Office is undergoing a major review and the Treasury is looking into the supervision of banking activities. It seems quite incredible that the Bill should be proceeded with in this fashion.
Will the Minister of State tell us what effect the future legislation is likely to have on the questions we have raised so far? Will it include a legal definition of banking services? He will recall that this question was raised in Committee by my hon. Friends. It was one of a number of outstanding points which we were unable to discuss then. What advice has the Minister of State had on that score? These are important matters which must be the subject of any future legislation the Government may introduce. Anything the Financial Secretary can say to throw light on that legislation will be helpful.
We were unable to get answers on other outstanding questions in Committee, but the Minister of State promised to come back to some of them on Report. One concerns the liability of Giro under the Consumer Credit Act. We need further information about that. What 404 are the Government's views on Giro's rôle in financing commercial property development? This point was raised with the Minister of State by the hon. Member for Birmingham, Perry Barr (Mr. Rooker). I do not wish to go into the rights or wrongs of that issue. Would the extension of banking services under Clause 1 allow Giro to move into any kind of fly-by-night activity if—and I do not impugn the motives of those who manage Giro now—it were handled in a less than wise manner? But with the whole history of secondary banking, and the problems which have sprung up there and in property, the Minister of State owes the House an explanation of the Government's attitude to Giro's possible development into these activities.
My hon. Friend the Member for Howden (Sir P. Bryan) put a series of questions in Committee. His close study of the Bank of England Quarterly Bulletin shows that Giro's progress with Government deposits had been slow in recent months. His researches also brought to light the wide variations in the use of Giro by local authorities. These figures seemed to vary from one quarter to the next. The Minister of State undertook to give the Government's assessment of Giro's progress in this area which we might call traditional business.
My hon. Friend the Member for Mid-Sussex (Mr. Renton) posed a wide range of questions and focused on Giro's activities in foreign exchange. We were promised more detail on the level of these activities both now and for the foreseeable future. These are some of the many questions—my hon. Friends will wish to develop others—arising from the clause which goes to the very heart of the Bill. It seeks to develop Giro in a wider banking sphere which seems to represent a totally open-ended commitment for the taxpayer.
The question of the degree of research which has been carried out into this expansion is still unresolved. On Second Reading I asked the Minister of State about market research. At that time we had to rely upon the Financial Secretary to the Treasury, who gave helpful information. He said that the market research had been carried out by Lancaster University, Marplan and others. It is typical of the "Catch 22" situation we face on this Bill that when I sought 405 further information from the Financial Secretary he said, not unreasonably, that this was a matter for Committee. In Committee, however, I was told that it was commercially sensitive information.
§ Mr. Viggers
Will my hon. Friend invite the Paymaster-General to take a seat in the Chamber, as this issue very much concerns his Department?
§ Mr. Marshall
I am afraid that my hon. Friend will have an uphill task in trying to get the Treasury to do more than stay quietly in the background. It regards this as a dirty dog of a Bill, one in which it wants to play no part. For reasons we are unable to determine, we cannot get them to come to the Dispatch Box to tell us about what appears to be a division within the Treasury which is doing a proper job of scrutiny on the Trustee Savings Banks while, on the other hand, ignoring the real worries of the House and the taxpayer over Giro's banking services.
We have not had answers from the Minister of State about market research, so I hope that even at this late stage he will be able to give us some assurances. Is it true that the market research has been undertaken by Lancaster University and Marplan? If so, is it relevant to the kind of proposal Giro is putting forward for its extended banking services? Does that market research support Giro by confirming that there is room in the market for its expansion at—and this I stress—a profitable level?
Given that personal loan business is the very heart of this kind of development, can the Minister of State say categorically, assuming that the market research identified a real need, that it overturned the qualified view put forward from a number of sources recently on banking services and to which we drew attention on Second Reading? I mention in particular the article in The Times of 9th December. It set out quite clearly that about 80 per cent. of the population is the absolute limit of those who can reasonably be expected to go in for personal loans; that at the moment 50 per cent. of the public were already exercising this option through the "clearers"; that of the remaining 30 per cent., 10 per cent. were dividing their business between the Trustee Savings 406 Bank and the Giro. That leaves an apparent available market of 20 per cent.
Was the market reasearch undertaken for Giro sufficiently optimistic to suggest that Giro could make inroads into that 20 per cent.? The problem with that 20 per cent., according to every estimate we have made, is that the "clearers" are moving very strongly into personal loans at the rate of about 4 to 5 per cent. of turnover each year. In fact, The Times suggested that at the present rate of striking, that market would be totally absorbed within the next 10 years. Yet it is precisely within that period, that Giro will be seeking to build up its business to include a substantial amount of personal loan business.
Those are some of our questions of detail on the clause. We require answers to them today. If we do not get the answers, we must assume that the vetting machinery is inadequate—and this has been proved to everyone's satisfaction by the failure of the Treasury to make its views on the matter known—or that we are not getting the kind of commercial information necessary to reach a proper decision. It is a commercial decision. It is a suggestion that by taking some £30 million of the taxpayer's money the Post Office Giro should be free to move into wider banking services.
If that is the case, we must insist that there is adequate commercial justification. We have not had such a justification in Committee or in the House. I invite the Minister of State to give us it today. As the Bill stands there is no proper vetting method, so without that justification, the House would be failing in its duty if it accepted the premiss of the Bill as set out in the clause.
Giro's background is one of loss in the last six out of seven years. Other businesses would not come to the market with such a background.
On Second Reading we paid tribute to Giro for its improved management. I do not in any way wish to criticise the ability of the present management, but Giro has a long way to go. We should encourage it to go ahead, as the Trustee Savings Banks are, but its reserves should be built up before it moves into new areas of business. Whatever the ability of Mr. Singer and his Board, we are left with the impression that this is yet another 407 tranche of taxpayer's money being thrown out to meet the pressures of the Department of Industry.
We find that time and time again the Department of Industry, because of lack of Treasury supervision, is having to take as read what is put to it by Giro, or other parts of nationalised industries.
I conclude with praise for the Minister of State. Perhaps by now he is becoming embarrassed with our praise, but he has had to carry single-handed the burden of the Bill since Second Reading. He has tried to give us honest answers to the questions which we have raised. He has frankly explained the limitations of what he could tell us. On one hand he has had to accept what Giro told him and on the other there was the failure of communication by the Treasury.
The Minister of State is like a sturdy Scottish thoroughbred, harnessed to the Giro plough—and I am sure he will appreciate the picture I am painting of him—erratically venturing into new fields, bearing on his shoulders a figure of the Treasury receiving a series of misleading directions from the edge of the field from the Governor of the Bank of England. It is because we want to save him from this dilemma, and to save the taxpayers from throwing £30 million down the drain—and perhaps wasting even more in the future—that we shall press our amendments to a vote.
§ 4.45 p.m.
§ Mr. Viggers
I wish to declare an interest, although I do not regard it as particularly relevant. Before I came to the House I was a director of a merchant bank and I am still on the board. I am also a director of a licensed dealer in the City of London.
The Bill is the worst and the worst handled with which I have been associated in the two years I have been in the House. It takes excessive powers for that which the Government say is proposed. It is a badly handled Bill because no Treasury Minister took part in the Committee stage. The Financial Secretary and Paymaster-General have been in the Chamber for only about five minutes each. Yet, between the time of the Second Reading and Report, the Financial Secretary to the Treasury stated that there will be new banking 408 supervisory legislation to deal with the Trustee Savings Bank, Giro and others. It is disgusting that the Financial Secretary should make that statement and not give us more information.
Now that we have the Sex Discrimination Act it is perhaps not possible for me to say that the House is impotent, but I hope the media will note the impertinent manner in which the Government are dealing with the Bill. The Explanatory Memorandum to the Bill says:The Bill will have no direct effect on the number of public sector employees.But the Under-Secretary of State on Second Reading said:We believe that there will be no addition to senior management levels. Fourteen additional staff, headed by the loans manager, have been employed to operate the personal loans service."—[Official Report, 20th January 1976; Vol. 903, c. 1261.]I hope that there will be no increase in public sector staff. If there has been, then the Explanatory Memorandum is a three-letter word beginning with L, the use of which would have me excluded from the Chamber.
The Bill is appalling. Our amendments, particularly the first, try to ensure that Giro concentrates on activities which are profitable and to allow Giro make a sensible profit and take sensible risks.
The concept of Giro is unfair because the capital which it is proposed it should have is inadequate for the services which are proposed. A sum of £13 million is intended to be the public dividend capital and £16.7 million, from memory, is intended to be part of the obligation to the National Loans Fund, which means that from the beginning Giro operates with a deficit of £3.7 million. No bank other than a Government operated institution would be allowed to carry on in that way. Giro has never been intended to stand on its own. It is part of the Post Office and the Minister of State made this clear in Committee when he told us:Giro is part of the Post Office, and the Post Office's resources stand behind the Giro in every respect … the whole of the resources of the Post Office will stand behind the Giro system in its banking operations."—[Official Report, Standing Committee B, 3rd February 1976; c. 91–2.]That is directly related to fairness and profitability.
The clearing banks have a capital base which enables them to sustain losses, 409 which can and do happen, but Giro is to have no such reserve. The picture emerges of a banking operation with a public dividend capital of £13 million and £16.7 million of indebtedness to the National Loans Fund, operating with a negative reserve or deficit of £3.7 million. It will be moving into high-risk areas of banking.
During the Committee the Opposition moved a number of amendments. We tried to ensure that Giro would not offer unsecured personal loans in excess of £1,000, but the amendment was rejected. We tried to ensure Giro would not give more than £1,000 on personal overdraft, but the amendment was rejected. In both cases, the Government were able to give no indication of the limits they regarded as fair.
We tried to move an amendment that the banking services should not include overdrafts for Government Departments, public authorities, local authorities or nationalised industries where the overdraft exceeded £250,000 for any period in excess of seven days, £100,000 for any period in excess of one month, or £50,000 in excess of three months. That amendment was rejected. We tried to exclude credit cards, and that amendment was rejected. We tried to exclude foreign exchange operations, and that amendment was rejected. We tried to exclude registration, investment and trustee banking services, but again we were rejected by the Government.
The point is that Giro apparently will be able to move into all sorts of high-risk areas of banking. Different people will have different opinions about what is intended for Giro. The Minister of State has his own view. He believes that Giro will be extending modestly into certain areas of banking. One accepts that that is his intention. But it appears not to be the intention of the people running Giro. What is the use of passing carte blanche powers when the people running Giro already appear to have the larger intention of giving wide meaning to the powers they have been given?
The capital of Giro is extremely important. A paper was recently agreed between the Bank of England and the London and Scottish clearing banks spelling out the need for capital in the clearing banks, summarising the conclusion 410 by saying that the clearing banks needed capital, first, to provide for the infrastructure of the business and, second, in order to protect depositors against business risks and to engender confidence of potential depositors and trading partners
But—and this important question has not been answered—what will happen when Giro incurs massive losses? There is no reason to believe that the people running Giro will be given some kind of omnipotence which will enable them to avoid losses. Clearing banks incur large losses. Lloyds Bank International incurred a loss of £33 million as a result of unauthorised foreign exchange dealings in Lugano, while Barclays only recently avoided a situation which would have meant a loss of £5.5 million. These are huge sums compared with the capital of Giro, and Giro would not be capable of withstanding such loss.
If Giro were to incur losses, what would happen? With the clearing banks, the first line of defence is the free capital reserves—Giro has none. The second line of defence is the shareholders' funds—and Giro does not have any shareholders' funds. Indeed, Giro fails to fulfil virtually every one of the Bank of England's agreed conditions with the clearing banks.
Therefore, if Giro were to incur losses, one of three things would happen, because losses must be borne by someone. They could be borne by the depositors in the Post Office, which would be wrong, or the Government could bear them, or the Post Office itself from its own funds would have to bear them. But the Post Office does not have free capital to apply to losses in commercial activities such as Giro, and presumably it would have to go in for some kind of commercial activity, perhaps something like pawning the Post Office tower.
How, then, would Giro's losses be met? Would the Minister slink into the Chamber late at night to introduce a special Giro enabling provisions Bill to relieve Giro of losses of £5 million or £20 million or £50 million? I suspect that that is the sort of thing that will happen.
It is clear that it will not be seconded by the Financial Secretary 411 to the Treasury, because in the short time during which he has been in the Chamber he has been in conversation with the Minister of State, no doubt finding out which Bill we are discussing.
The word "profitable" would require Giro to concentrate on activities which are profit-making and not loss-making or potentially loss-making. I do not think that the Minister of State and other hon. Members opposite who sat with him in Committee fully understand the possibilities of making losses in, for instance, foreign exchange operations. What would happen if sterling were apparently weakening and if all the foreign exchange dealers of Giro were advising that it should take a short position?
For the benefit of anyone not involved in these matter, I should explain that that means going short on sterling, selling sterling that one does not have, "doing a bear" on sterling. Would Giro go short on sterling, or would it receive an instruction from its superiors, or perhaps a nudge from the Financial Secretary if he were applying his mind to the matter, conveying that he would be greatly obliged if it did not go short on sterling? If that is the case, will Giro be operating freely as a commercial body, or will it be operating as an arm of the Government?
These questions need to be answered. If Giro is to be encouraged to go into foreign exchange operations, we need to know whether it is to do so with its hands tied behind its back or whether it is to go in freely. If it is to go in freely, hon. Members should realise that from time to time perhaps Giro will be operating like a gnome of Zurich, going short on sterling and running bear raids on sterling. That is a horrifying thought. We must have a reply on this question.
There are good friends of the Post Office Giro on this side of the House. We welcome its activities as a money transmission system and note that its expansion has rather lagged behind that of its European counterparts. But there are two schools of thought on the Government Benches about the Bill. One school of thought wishes Giro to have a sensible expansion as a money transmission system and to be in a position to encourage those people who do not have 412 bank accounts to open them for the first time through the Post Office. That attitude has a great deal of sympathy on this side of the House. The other school of thought on the Government benches wants to allow Giro to expand into all areas of banking activity, thereby incorporating a State bank, set up and planned to go into extensive commercial banking activities, thereby helping to bring about the Marxist Socialist dream of nationalisation of the means of production, distribution and exchange. Many hon. Members opposite wish that to happen, but many others want only a modest expansion of the Giro system.
The Minister of State has consistently emphasised the idea of a modest expansion and of fair competition. I have to say to him and those who think like him that they do themselves and the country a grave disservice by this Bill. They have compromised by bringing in blanket powers for a State bank, linked with assurances that those powers will not be used. But the powers are either needed or they are not. Either they are to be used or they are not to be used. But that we do not know because we are living in a limbo, failing further pearls of disclosure from the Financial Secretary.
It is wrong and potentially dangerous for this blank cheque to be given to Giro, and I hope that the House, the media and the public will become aware of its menace and that the danger of the Bill will be realised if we cannot vote it down tonight.
§ Sir George Young (Ealing, Acton)
In Committee, many hon. Members expressed the view that the light of the Treasury could usefully be shed on the Bill. We are sorry to see the Financial Secretary to the Treasury once again leaving the Chamber, because we were hoping that he might be able to enlighten us on one of the many points raised by my hon. Friends. Single-handed, the Minister of State dealt in Committee with many questions which should have been answered by Treasury Ministers.
I highlight two reasons why we would welcome the Treasury's presence. First, the Minister of State himself told us in Committee:I hope I have said enough this morning for my hon. Friend to see that proposals from Giro will be critically examined by the 413 Treasury."—[Official Report, Standing Committee B, 29th January 1976; c. 50.]If a critical examination by the Treasury constitutes one or two fleeting appearances on Report, I do not think that that is an adequate reassurance to the House.
Secondly, there was clearly a misunderstanding between the Minister and the Treasury as to what constitutes "public sector employees". My hon. Friend the Member for Gosport (Mr. Viggers) referred to that. The Minister said, quoting the Explanatory Memorandum:The Bill will have no direct effect on the number of public sector employees.He continued:Those words refer to employees paid directly by the Exchequer—namely, civil servants."—[Official Report, Standing Committee B, 12th February 1976, c. 239.]I expressed some concern at his interpretation of the definition of "public sector employees" and I took the precaution of tabling a Question to the Chancellor of the Exchequer to resolve the matter. Question No. 215, tabled on 16th February 1976 states:… asked the Chancellor of the Exchequer whether his definition of public sector employment includes or excludes employment within nationalised industries.The reply was:The public sector is defined to include nationalised industries and other public corporations.—[Official Report, 17th February 1976; Vol. 905, c. 608.]I am grateful to the Treasury for clarifying that confusion. I hope that the Minister will apologise for, quite unintentionally, misleading the Committee on the definition of the Bill and its implications on public sector employment.
Clause 1 of the Bill anticipates the development of National Giro from the money transmission service, which it was originally conceived to provide, to a fully-fledged banking service. I am not yet satisfied that the full potential of a money transmission service has been achieved. I fear that the full benefits will not be achieved if the energy and resources of Giro are diverted towards providing a full banking service.
I shall give one or two examples of the way in which the money transmission service could be improved. First, it is still difficult to pay by Giro transfer for goods sold by the Post Office. I invite hon. Members to walk into their 414 local post offices and try to buy some premium savings bonds by Giro transfer. They will find it a complicated procedure. I tried this on the intelligent, courteous and efficient gentlemen who staff the Members' post office and it took them some 10 minutes to unravel the procedures involved in buying premium savings bonds by Giro transfer. Postmasters and sub-postmasters outside the House would have even more difficulty.
Therefore, the Post Office has not resolved the problem of providing an efficient money transmission service. I fear that its resources will be diverted from completing the job which it originally set out to achieve if Clause 1 is passed. I well remember my first day as an employee of the Post Office. I had taken the precaution of opening a Giro account before I joined. I was asked how I would like to be paid and I said by Giro transfer. They threw up their hands in incredulity. They said that they could not do that and asked whether I had not got a proper banking account. That particular problem has now been ironed out but it underlines the point that the Post Office has not yet come to terms with the full potential of the Giro service.
Secondly, it is still difficult to pay Government Departments by Giro transfer. I have here an application to re-licence a motor vehicle. If one wishes to do so by cheque there are very full instructions about how to go about it. Indeed, there are very full instructions about how to pay by all methods except by Giro transfer, which is the central mechanism of the money transmission service. The form reads:Giro transfers should be made payable to the head postmaster's Giro account.However, the form does not give the account number. It is a number which is exceedingly difficult to discover. It is also difficult to pay some other Government Departments and public bodies by Giro transfer. British Rail accepts payment by Barclaycard, which involves it in a discount, but it will not accept payment by Giro transfer.
Therefore, I am not convinced that the benefits of a computerised money transmission service have yet been achieved. I am concerned that the real national economies that could be made from Giro as originally conceived will be lost if the 415 energies of Giro are dissipated by competing in other areas where it may not have this in-built advantage.
The question that all hon. Members of the Committee asked was, where exactly is Giro going? The Minister has tried to allay the suspicions of my hon. Friends and myself by saying that Clause 1 does not anticipate massive growth. However, if the clause is passed neither the Minister nor the House could possibly prevent the development of Giro along the lines described in The Guardian last Friday. The question that the Minister has to ask is, if no change is envisaged in Giro, why is the Bill necessary, and if the Bill is necessary, what precisely are the changes envisaged? That question has been posed time and again. We have not received a satisfactory reply. I hope that the Minister will take the opportunity this afternoon of dealing with that basic question.
§ Mr. Wrigglesworth
The hon. Member for Ealing, Acton (Sir. G. Young) has had fairly wide experience as an employee of the Post Office and knows a little more about the operations of Giro than he has let on in his remarks. Will he comment on the extension of the money transmission services which now collect millions of rent payments every week efficiently and to the great benefit of local authorities? Will he comment also on the money transmission services that work efficiently collecting cash for major multiple retailing firms round the country, to their benefit and to Giro's benefit? Will he tell us something about the profitability that he and his hon. Friends expect to result from the money transmission business on small accounts?
§ Sir G. Young
I am grateful to the hon. Gentleman because he underlined the point I tried to make earlier, that the full potential of Giro may lie in a more extensive money transmission service. Many councils still do not provide the sort of service that my council provides of enabling tenants to pay by Giro. There might be a danger, if the resources of Giro are diverted towards providing banking services, of Giro not capitalising on the in-built advantage it has on the money transmission service. I agree with the hon. Gentleman's remarks. If he intends to intervene in the debate perhaps he will 416 say whether he is satisfied that the full potential of Giro as originally conceived has been effected.
§ Mr. Cecil Parkinson (Hertfordshire, South)
I think I understand why the Minister of State at the Treasury does not find it comfortable to sit on the Government Front Bench next to his hon. Friend the Minister of State, Department of Industry. I believe that the hon. Member for Thornaby (Mr. Wrigglesworth) and I are the only hon. Members who have served on the Committee of this Bill and on the Committee that dealt with the Trustee Savings Banks Bill.
This Bill is being sponsored by the Department of Industry. The Treasury is sponsoring the Trustee Savings Banks Bill. I have read the report of the Second Reading debates on both Bills. It is most extraordinary that, on the one hand, the Department of Industry advanced a range of arguments for allowing the Post Office to extend its banking services, and, on the other, the Treasury advanced the argument that the Trustee Savings Banks should not be allowed to offer a full range of banking services. Virtually every argument which the Treasury has advanced is directly contrary to that which the Department of Industry has advanced.
I shall cite some examples. In the Second Reading debate on 17th February the Paymaster-General, introducing the Trustee Savings Banks Bill, went to great lengths to explain just how careful the Treasury would be in supervising the transition from Trustee Savings Banks to ordinary banks. He explained, for instance, that this transition would take place in three stages. The first stage, which would end in November 1976, would see the number of banks reduced from 70 to 17 and would see the creation of a central body which would supervise the new banks. The second stage would take three years, and in that stage, he said,Depositors will begin to see an important extension in the services offered".However, it is to take three years after the first stage, during which time the Trustee Savings Banks will start to offer a wider range of services.
Then, in stage three, which would last Savings Banks would gradually become normal banks offering the full range of for seven years and end in 1986, Trustee 417 banking services. The Paymaster-General said,The Treasury will continue to keep an eye on the banks' operations and development, particularly on the rate on which the banks build up their own reserves.The Paymaster-General continued,The building up of the banks' reserves is, of course, a crucial element in the transition, which, indeed, cannot be brought to an end before an adequate level of reserves has been achieved."—[Official Report, 17th February 1976; Vol. 905, c. 1207–8.]Therefore, the Treasury are saying this: "We know that the Trustee Savings Banks have been in existence, in some cases, for up to 150 years. We know that they have a quite satisfactory record and that during that time they have built up consumer confidence and have built up for themselves a reputation for knowing how to handle very substantial sums. However, in our opinion, before we can allow this group of very experienced holders of other people's money to move into general banking, 10 years must elapse and the most careful supervision will be placed on these banks at all stages. At the end of 10 years, provided that they have built up considerable reserves, then and only then will it be right for the Trustee Savings Banks to become full commercial banks."
I think that the Treasury is to be congratulated on its very sensible and careful approach, because the Treasury realises full well that banking is a very quick way of losing very large sums of money and that inexperienced people granting credit can lose money more quickly than almost any other group of people. We know that there are numerous examples of secondary banks in which people who thought that they knew something about banking have lost millions of pounds. The hon. Member for Thornaby always seems to regard the secondary banks which have failed as evidence that Giro should be allowed to lend. I see it differently, and as an example of why we should not allow inexperienced people to lend large sums of other people's money.
However, in relation to the Trustee Savings Banks, the Treasury says that it is very important that we take care, and that this transition must take place over a period of time and be carefully supervised. The Treasury says that only if they build up the reserves should they 418 finally be allowed to become full-scale banks.
When we moved a series of amendments in Committee, almost every one of which was designed to bring into this Bill some of the safeguards that the Treasury regards as absolutely essential in its Bill, time after time we were told that we were trying to hamper the development of Giro. The hon. Member for Thornaby has a particularly shameful record in this matter. Anyone who reads his speech on Second Reading of this Bill and then his speech on Second Reading of the Trustee Savings Banks Bill will conclude that he has either a very short or a convenient memory or that he did not believe a word that he was saying in either speech, because the speeches were mutually exclusive.
§ Mr. Tim Renton
Perhaps my hon. Friend is being a little unkind to the hon. Member for Thornaby (Mr. Wriggles-worth). I prefer to think that in between the Second Reading of this Bill and the Second Reading of the Trustee Savings Banks Bill the hon. Gentleman underwent the sort of conversion on the road to Damascus that Saul underwent, and therefore, having not seen the light on the Giro Bill, he had seen it realistically by the time he came to the Trustee Savings Banks Bill.
§ Mr. Parkinson
As we learned in Committee, the hon. Gentleman is quite capable of speaking for himself. My hon. Friend is probably being charitable and I should like to think that the hon. Gentleman learned something during the Committee stage of this Bill.
§ Mr. Wrigglesworth
I do not, even on this occasion, need to speak for myself, because the hon. Member for Arundel (Mr. Marshall) spoke for me and quoted my words exactly. In the debates on the Giro Bill, they were along the lines on which I spoke on the Trustee Savings Banks Bill, so the hon. Gentleman should consult his hon. Friend.
§ 5.15 p.m.
§ Mr. Parkinson
The hon. Gentleman has very easily salved his conscience. I have looked at some of the remarks that he made in Committee. I remember that we moved an amendment that would have limited the amount of money that Giro would be allowed to lend to 419 corporations. The hon. Gentleman made a great speech. He said quite the opposite. He said that there should not be any limit on the lending. He went further, and said,I believe there is a tremendous potential for National Giro which we should encourage it to take."—[Official Report, Standing Committee B, 29th January 1976; c. 40.]The hon. Gentleman was saying that Giro should be encouraged to move into the field of corporate lending, and to lend more and more with no limits.
But what did we find the hon. Gentleman saying on the Trustee Savings Bank Bill? He said that he hoped and trusted that the Trustee Savings Banks would not be allowed to lend money to business and corporate bodies. He welcomed the fact that one of the noble Lords had given an assurance that it was most unlikely that the Trustee Savings Banks would ever lend more than £1,500 to an individual and that at present the Trustee Savings Banks had no plans for going into corporate lending. The hon. Gentleman thought that that was right. He approved of that.
Again, when we tried in amendments to limit the amount of personal lending that Giro could make to an individual, the hon. Gentleman spoke and voted against us, and yet he is taking great satisfaction in the fact that the Trustee Savings Banks—which, after all, have been in existence for only 150 years and have demonstrated that they are to be trusted with other people's money—ought never to be allowed to lend more than £1,500.
The hon. Gentleman's speeches were quite convincing, but if one puts them together one finds that they add up to a complete travesty. They highlight the special point that the Government are speaking in Parliament with two voices at the same time. They are saying that one group of people who are going to convert their activities into commercial banking should be allowed to go ahead. The day that this Bill becomes law, Giro will have the power to offer the full range of commercial banking facilities. At the same time, however, in the same House of Commons but in a different Committee Room, the Treasury is arguing that going into banking is a business that needs to be considered extremely 420 carefully and that 10 years is probably the minimum transitional stage that can be allowed, and then and only then, if the reserves have been built up and if these people have proved their worth, should they be allowed to go ahead.
It is worse than that. Far from the Government insisting on Giro having adequate reserves, they will be allowing Giro to set off with a record, except for one notable year, of unmitigated failure and with an accumulated deficit of £29.7 million. Any directors of any commercial bank which tried to operate with Giro's balance sheet would probably find themselves inside for fraudulent trading. Therefore we have the absurd experience that the House is being treated with the utmost disrespect by a Government who are arguing caution on the one hand but, at the same time, making a wreckless and heedless argument on the other hand.
We know full well, from listening to the Minister in Committee, that it is never intended that Giro should abide by proper commercial criteria. The Minister knows that it should never be allowed to go into business with the balance sheet that it has at present. Time and again we came back to the argument from the Minister that we must remember that Giro was only a part of the Post Office and that the real security for Giro was the huge reserves of the Post Office.
In Committee we heard the argument from the Government—it is a Government who make a habit of speaking with two voices—that the Giro did not want any privileges. They said it wanted to be treated like all the other banks. On the other hand, it did not want any disadvantages. The Government said it was wrong for us to put any limitations on its activities. They said that it should be allowed to carry out the whole range of banking activities.
Having heard that argument, we pressed the matter a little further. We asked how Giro would trade with its present balance sheet as a proper commercial bank. We asked how it could go into business without having any reserves. In fact, its balance sheet displays a thundering great loss. We were told that we must not judge Giro by the criterion of normal commercial banking. It seems that there is not really 421 such a thing as the Giro bank. It seems that Giro is the trade name for a group of the Post Office's services. Behind those services stand the full reserves of Post Office.
Giro wants to be treated as a commercial bank, but if we seek to apply the commercial banking criteria to it we are told firmly that no one ever pretended that Giro was anything but the banking arm of the Post Office, that it is absurd for us to apply normal commercial banking criteria to its activities.
It is a serious matter to move an amendment at this stage to delete Clause 1, but the Government have been putting forward arguments on behalf of the Trustee Savings Banks which fully explain the need for caution and which make this Bill a scandal. The Government cannot make all those arguments about the need for caution on the one hand and launch this bank on to an unsuspecting public. Even since Second Reading there have been developments which have proved conclusively that by the Government's own standards the Bill should not be allowed to go on to the statute book and that Clause 1 should be deleted.
I am not surprised that the Minister of State at the Treasury did not find it convenient to remain in the Chamber. Had he stayed, I reckon that he would have received the fright of his life. I am sure that the Treasury right hand of the Government does not have the slightest idea what the Department of Industry's left hand is doing. If the Minister of State had remained for a few moments he would have either begun to blush or he would have decided that it was necessary to get out. I thought it was wise of the hon. Gentleman to go. I am not surprised that the Treasury does not want to be associated in any way with this appalling Bill.
§ Sir Paul Bryan (Howden)
In the Explanatory and Financial Memorandum it is said that the Bill willExtend the powers of the Post Office to provide banking services …".To come to a conclusion about the extra services it requires, we must be absolutely clear in our minds what Giro does today as opposed to what it set out to do some years ago. I say that without sneering. 422 I merely compare what it is doing successfully today with its original intentions.
That is a matter that was never made clear in Committee. In Committee we had an atmosphere in which the hon. Member for Newcastle-under-Lyme (Mr. Golding) was yearning for Giro's original aspirations—namely, the poor man's bank. That is exactly the rôle it no longer performs. It is the bank of some particularly sophisticated customers. We are told that at least three-quarters of its customers have accounts with other banks. That shows them to be people who are more than capable of judging what is good for them. They have decided that the ordinary bank, or the joint stock bank, performs one task, and they recognise that Giro performs another. We are talking about a sophisticated sort of customer.
In the early days the pressure for a Giro bank came from the trade unions. The trade unions liked the idea of dealing with a non-capitalist bank. However, the trade unions do not use Giro. In his book, Professor Glyn Davies writes:Judged by this attitude then so far as the country's major trade unions are concerned, with a few notable exceptions, National Giro might just as well not have been founded. Thus contrary to general expectations, National Giro has turned out to be neither the poor man's bank nor the trade unions" bank, despite the fervour of working-class support for the cause of Giro before it came into existence.I make these comments not with joy or sorrow but so that we can come to some conclusions about what should be done. Giro is not what many Labour Members thought it would be—namely, the bank which Government Departments would use. In fact, they hardly use it at all. Now that we have seen the aspirations of Mr. Singer we can appreciate that that will not worry them very much—there will be a State bank at their disposal.
Professor Glyn Davies has written a history of National Giro. It is the only fairly up-to-date history that is available. He has always been a Giro enthusiast. His summary of how the system functions now as a business enterprise is as follows:As a living organism it has been developing in ways not entirely anticipated by its founders. In particular, with three-quarters of its individual customers also having accounts with other banks and who by and large tend to use Giro selectively as part of a rather 423 sophisticated system of managing their personal finances, it is serving a different market in different ways from that which was described in the White Paper of 1965 as being intended 'for many people with simple needs and no bank accounts'. Its immediate future rôle will clearly be to seek profitable custom wherever it can find it, rather than straining to adopt an uncomfortable and unprofitable pose as the poor man's bank. Once full viability is achieved a re-assessment of strategy in favour of the unbanked may then be justified; but that situation lies in the more distant future.That is exactly what the hon. Member for Thornaby (Mr. Wrigglesworth) said in Committee. On 29th January he said:It was made clear that the whole concept of the poor man's bank would have to wait until the National Giro had been able to build up sufficient business and profits to be able to extend its operations …"—[Official Report, Standini; Committee B, 29th January 1976; c. 15.]There we have it clear that it is now a business operation. Let us see how Giro goes about it. Professor Glyn Davies writes:The outside expertise which was brought in to help form the new marketing strategy confirmed the more selective approach to which the logic of events pointed. The tariff of standard charges as originally proposed illustrates this selectivity in that it penalised the customer whose account fell below £30 by imposing a penalty charge for every debit thereafter. This penalty was not to apply to one section, those who received their pay through Giro. It is obvious simply from a glance at the table of revised charges that Giro management was even more keen to attract these favoured customers than it was to remove the troublesome and loss-making low-balance accounts.Giro is going out for that business. It has successfully identified an area of profit, something that everyone tries to do in business. That area of profit is occupied by corporate bodies which are reliable, and by men who receive their pay through Giro. They are likely to be reliable people. Giro has dropped its poor man's accounts. I pointed out to a Giro official that half a million accounts is not such a large number. He replied "But we have dropped a lot. We have dropped 100,000 or so which were not good accounts". It seems that Giro operates in the middle-class area, having decided the sort of business it is trying to transact.
I concede that certain new services are required but I do not think that we need any legislation for what is proposed. The new Giro customers are worthy of short-term overdrafts. I do not think 424 it is right that their cheques should bounce within seconds of the computer showing them to be overdrawn. Having identified this area of profit, what is quite certain is that it is a large area and that so far Giro has only just touched the fringes of it. If it carries on as it is, without branching out, a profitable period lies ahead.
§ 5.30 p.m.
§ Mr. Wrigglesworth
It is a gross disrespect to this House, after the Opposition made so much of the fact that the Financial Secretary was not present, that there should be no hon. Member present on the Opposition Front Bench. I hope that that situation will be rectified.
§ Sir P. Bryan
With respect, that was a most curious intervention, bearing in mind the way that we have been treated in Committee and on the Floor of the House. The Opposition Front Bench has been empty for 25 seconds. I do not think that that was a valuable intervention.
As I see it, the future for Giro is profitable if it remains on the lines on which it is now operating and is not diverted into expansion. That is what these extra services seem to do, to divert it. We discussed the question of credit cards in Committee. I rather thought that the Minister said that this had been popped into the Bill by some oversight. He had to defend the idea as best he could but I felt that in his heart of hearts he knew that it would never happen. We did not press the matter hard because we thought that it was ridiculous and that it would be impossible for Giro to carry out the scheme.
At that moment, while the Minister was speaking to us, according to The Guardian Giro was actually negotiating. In fact The Guardian report said:Giro is now in talks with one of the principal credit card organisations in the country, but it is unlikely to reach any decision quickly.It is unbelievable that the Minister should be telling us his opinions in Committee yet not revealing what is taking place. Why should we not know? Throughout w have expressed our disgust at the way we have been treated. I have had a certain sympathy with the Minister 425 because he has been let down. He has had no support.
§ Mr. Viggers
Perhaps it would help if I quote the words used by the Minister of State in Committee. He said:I do not possess a credit card of any kind and I very much resented being presented by Access, I think, some years ago, with a card for which I had never asked and did not use. I took the only course open to me. I cut it in bits and sent it back to the gentleman concerned."—[Official Report, Standing Committee B, 3rd February 1976; c. 74.]Yet we read in the financial section of The Guardian:Giro credit card likely.
§ Sir P. Bryan
I know the Minister of State and do not in any way doubt his integrity. He has been disgracefully let down by the Treasury. He has not been kept informed and we have never been granted the presence of a Treasury Minister for more than five minutes at a time. The Minister has been let down by the Giro people, the Government or whoever is responsible.
Quite apart from the credit card business, we come to Mr. Singer's aspirations, described in an interview published during the debate on the Bill. This is quite fantastic. Something that surprised us as we looked through the Bill was the fact that there was no proposition to ally national savings with the system proposed in the Bill. It stood out a mile that if someone wanted an overdraft and he had £5,000 in national savings it should be possible to use that as some sort of guarantee against an overdraft with Giro. We wondered why this was not so. A few years ago the Page Committee had put forward the same proposal. Now we see why there was no mention of any contact between the two organisations. Mr. Singer has it all in his head. He knows exactly what he intends to do. He said:The national savings movement, Giro, and the Paymaster-General's Office could beneficially be combined into a State Bank the size of Barclays.At last it comes out why there was no mention of national savings in the Bill.
I do not blame the Minister of State. He did not know about this. Mr. Singer knew all about it. I am surprised that Mr. Singer was giving this interview without any reference to the Treasury, the Chancellor or anyone else. I consider 426 this to be disgraceful. We constantly hear about open government but it is not practised. I invite the Minister to let us know of any other secret negotiations or aspirations that may be in the minds of his right hon. Friends or the management of Giro. Not only he but we have been let down.
§ Mr. Anthony Nelson (Chichester)
The words of my hon. Friend the Member for Howden (Sir P. Bryan) and those of my colleagues who have preceded me will, I hope, have persuaded the Minister that we have become increasingly concerned during the passage of this Bill that its intent, and this clause in particular, is far removed from the woolly reassurances we have been given. The Bill will undoubtedly enable the Department of Industry to extend its clammy hand into the area of State banking. The House will by now be aware that this Bill is obviously a hangover from the days of "Bennery". This clause is a wolf in sheep's clothing.
I cannot understand why Clause 1 is necessary or why a Bill encapsulating such a clause was ever brought forward. Under the Post Office Act 1969, the Post Office has the power to provide a banking service. I suggest that such a service could be defined in a number of ways and could reasonably be supposed to include many of the services understood to be authorised by this Bill.
The Bill changes various words in the Post Office Act 1969 to ensure that the Post Office shall still have the power to provide banking services by means of which money may be remitted. That seems to indicate that the banking services to be offered by Giro shall be related to the remittance of money. This is an important constraint if it is a correctly implied one.
The greatest fear is that this Bill will provide a launching pad for State banking. I have no doubt that the clamouring from below the Gangway on the Government Benches—and which we heard from some Labour Members in Committee—will be in support of such an extension. The modest amendments tabled by us in Committee were not accepted. We do not seek to prevent Giro from offering any further services but simply to prevent it from extending its services beyond its 427 capabilities, the Post Office's resources or the original purposes for which Giro was formed.
The White Papers preceding the formation of Giro and the one produced in November 1975 set out clearly the development of Giro and seem to indicate that its primary purpose is the remittance of money. I am prepared to accept that there is some argument in favour of providing a service enabling ordinary people to utilise banking facilities which they might not otherwise be able to afford or be encouraged to use through the private banking or joint-stock banking system. This is desirable and I welcome the success Giro has had in recent years in developing its business.
The problem is that the losses which have been accumulating, in addition to the debt put up at the beginning as part of the Giro capital, are at such a level that they have led to a review and a capital reconstruction which seems to have been associated in a timely way with some decision to extend the services offered by Giro into the area of general banking. This is not necessarily a logical consequence of the difficulties in which Giro finds itself.
It is not sufficient to say that because we have Giro we should look towards the profitable business and concentrate less on the original purposes of Giro, namely the money remittance system. On all sides, there will be a welcome for the success of the remittance business, but we are concerned that this will be a launch pad for sponsored and subsidised banking facilities with which the private sector, however efficient, will not be able to compete and which will, in roller-coaster fashion, become a springboard for State intervention in the monetary field.
Far from improving the money transmission services and attracting new account holders who might not otherwise use banking facilities, the intention seems to be to set up a State bank with no restrictions on its credit policy and no prudential supervision by the Bank of England. The Minister of State has told us:We want it to be a bank. We want Giro customers to be able to obtain from that service exactly the same sort of services that 428 they could obtain from any other commercial enterprise.Despite assurances on cross-subsidisation and the back-up of the Post Office against the resources of Giro, it is clear that it will be in a highly preferential position to any bank operating in the private sector and will not be subject to the same restraints. Its competition with that sector will be unfair. Otherwise, why were our reasonable amendments in Committee not accept.
We were told that the upper limit on personal loans by Giro was £1,000, but our amendment to this effect was rejected. We were told that Giro would not speculate in foreign exchange transactions for its own profit or loss, but our amendment to this effect was rejected. We were told that Giro would not act as an investment adviser or dealer, trustee or nominee. Our amendment to this effect was rejected as being too restrictive. We regret the rejection of these amendments and I am particularly concerned that the Minister did not support the amendment to restrain Giro from entering into foreign currency exchange transactions on its own account.
It may be necessary to make foreign exchange transactions on the authority or instructions of a customer, but we regret and oppose the ability of Giro, or perhaps an employee acting in an unauthorised or ultra vires capacity, to enter into foreign exchange transactions which we all know, from the terrible experiences of very responsible joint stock banks, can result in tremendous losses. We have a responsibility to ensure that the taxpayer is not on the hook for these sorts of losses. It is wrong that the Bill should enable Giro to speculate in foreign exchange. That is not a desirable venture to be subsidised by my constituents.
I regret that the Trustee Savings Banks, which are the subject of another piece of legislation before the House, were not scrutinised together with Giro. It is a complete nonsense that the public sector is offering banking services through the national savings movement, Post Office deposit accounts, Trustee Savings Banks and Giro. All these services could easily be aggregated under one head. I will await with interest the recommendations of the Committee which has been set up to scrutinise the operations of the Post Office, because I feel there is a case for 429 rationalisation here. This should act as a restraint on the House from moving too hastily in giving a body such as the Giro wide discretionary and undefined banking services, while seeking in another Bill to restrain those which the Trustee Savings Banks can offer.
§ Mr. Wrigglesworth
The hon. Member seems to be saying what Mr. Singer said about the development and closer coordination of banking services.
§ 5.45 p.m.
§ Mr. Nelson
I said that I would not be averse to considering some rationalisation of the different sorts of banking services offered by the State, whether through the Treasury, Trustees Savings Banks or the Giro. That is quite different from suggesting that there should be a State bank or that Mr. Singer or any of his successors should be given powers which would enable them to build an empire and set up a State bank.
No details were given in Committee about Giro's policy on personal overdrafts. We were told that full details would be announced by Giro when the time came, but that may be too late. No answer was given to my hon. Friend the Member for Mid-Sussex (Mr. Renton) about the relationship between the Mercantile Credit Company and Giro, and this is a matter we should look at in detail. No reason was given to the hon. Member for Perth and East Perthshire (Mr. Crawford), who has not turned up for the debate today, for the extension of these services into Scotland. Given the higher percentage of account holders in that country, it is not necessarily a fait accompli that the provisions of the Bill should apply there as well.
Inadequate information was given about the credit policy to be adopted—the point raised by the hon. Member for Birmingham, Perry Barr (Mr. Rooker) in regard to loans for property development. To whom will Giro lend? Will it give preference to small account holders or will it operate on purely commercial criteria and lend to clients for any speculative ventures they wish?
We also have fears about the proposed credit cards and relationships under the Consumer Credit Act. On the cheque cards made available by many joint stock banks, the letters "EC" appear in the 430 corner. They enable one to get credit at other banks in the Common Market. Is this system to be applied to the credit cards issued by Giro? If so, this could open up a potentially far greater area of credit-giving by the State bank which could become a launching pad for further difficulties. The account holders of Giro may well be those with a higher propensity to spend who may seek to utilise all the available credit the Bill offers. We should be concerned to see that the Minister institutes proper restraints on that credit and, in particular, on the ability to use credit cards in this country and abroad under the Eurocard scheme.
The Government's policy appears to be that if a State business runs into losses, they do not consider closing it or making it pay its way through time and effort. The answer is always the same—to make it bigger, give it more powers and more money, convert a secured investment into risk capital and write off massive losses to give it another false start. The result is invariably the same—the losses get bigger, efficiency declines, the service deteriorates and the taxpayer has an even bigger millstone round his neck. This has been amply pointed out by the Select Committee on Nationalised Industries in its startling findings arising from its discussions and deliberations on the Post Office.
The Minister of State has said that both the Conservative Party, through my predecessor, and the Cooper Brothers' report were in favour of the expansion of banking services in the White Paper and the Bill. But Giro was clearly seen, under the 1969 Act, as a money transmission service and not as a State bank. Its continued existence was to be tied to its performance and profitability. Furthermore, the Minister told us thaton the advice, guidance and report of a well-known and highly respected firm of accountants, it was decided that Giro should continue".—[Official Report, Standing Committee B, 29th January 1976; c. 21–2.]I was not privy to the contents of that report, but if it did come down so firmly in favour of Giro's continued existence and expansion, we should now be told the basis on which the recommendation was made. I will await the recommendations of the Carter Committee. However, when we are considering a major expansion of the banking services of the 431 Post Office, it would be proper to have the benefit of the deliberations of the Committee which recommended Giro's continued existence.
Hon. Members should not forget that in 1971 the Labour Party's Home Policy Committee in its Composite 33 at the annual conference said:The party is already committed to public ownership of the banking system.That is a fearful thought indeed, and one which may be made possible by the passage of the Bill and by this clause in particular. I have every confidence in asking my hon. Friends to oppose it.
§ Mr. Nicholas Ridley (Cirencester and Tewkesbury)
I must first declare an interest as director of a very small bank. The record of hon. Members entering into banking is not good, and I must be careful, particularly after the examples of the right hon. Members for Walsall, North (Mr. Stonehouse) and Devon, North (Mr. Thorpe). How much more so does that apply to the Minister of State, Department of Industry and the Financial Secretaries to the Treasury, sitting on the Government Front Bench. If they are to go into banking they will need to have great knowledge. I would have no complaint were the Minister of State and the Financial Secretary to leave the Treasury Bench and set up as Mackenzie, Sheldon and Company Limited, Bankers. It would be their own money that they would lose, not mine, and so it would be of no great concern.
§ Mr. Peter Rees (Dover and Deal)
I do not know whether my hon. Friend has taken into account that they might lose their depositors' money, which would be a matter of much greater public concern.
§ Mr. Ridley
My hon. and learned Friend, for once, is wrong. The rules of the Bank of England are extremely strict about how much can be lent according to the base. All a person can lose is his own equity capital in the banking world. That is a point I wish to develop in relation to Giro.
Is it true that Mr. Singer wants the size of his bank to be between £7.4 billion and £14 billion? That is what is reported in the Financial Section of The Guardian. According to the Money Resolution, pay- 432 ments from and into the Consolidated Fund will arise, but that does not tell me how big the payments will be. We want to know how big the bank will be. What matters is how much public money is involved in the equity capital base for the Giro bank. I want to know, and Parliament should know, how much money will be in it.
The problems that the bank will face are well known. If the bank is seeking to break into the big league and do a lot of business, it will presumably be tempted to undercut the joint stock banks. That is a vital point. If it seeks to take business by offering cheaper loans or higher rates for depositors, it will make losses. It will cost a lot of money to refund those losses, either through the Post Office or direct, but, much more important, interest rates in the economy will be affected. If the joint stock banks find that their rates are under competitive pressure from a subsidised public competitor, they will have no alternative but to match those rates, and that will bring down the rate of interest. That could have serious consequences for economic policy and the money supply.
I would have supposed that that cannot happen, because the Bank of England will be controlling the Giro Bank, but I am told that that is not so. I have not read the entire report of the proceedings in Committee, but I understand that the Minister of State said that the Bank of England would not control this monster to which he is giving birth this afternoon. The Bank of England will not supervise it, because it has a mass of Post Office money behind it. The Government do not mind if it losses money, if it undercuts and does not have the proper solvency and liquidity ratios. What an appalling story. Can it be true? Does the Minister of State wish to intervene and tell me that it is not so? He is unleashing into a sophisticated banking atmosphere an animal that will affect the money supply and will cost the depositors in the Trustee Savings Banks and the Post Office Savings Bank, or the taxpayers who subsidise the Post Office, a huge amount of money.
Do Ministers believe that it is right to channel £600 million out of education into this sort of venture? Did they stand at the last General Election to do that? 433 Did they stand on platforms in their constituencies and say "I am for a massive cut in education so that I can play around with banking"? That is what they are doing. I hope that it gives them great satisfaction to vote for cuts in public expenditure to do that.
§ Mr. Nelson
If I correctly judge the enormity of the words and the allegations that my hon. Friend put to the Minister, he may be interested to comment on these words of the Minister:We question the view that the principles to be applied by the Bank of England in assessing the adequacy of banks' capital are directly applicable to Giro as if it were an independent bank."—[Official Report, Standing Committee B; c. 162.]
§ Mr. Ridley
It is an appalling story. I have the highest regard for the Minister of State and have always thought of him as an expert and skilled person. I assume that he has gone into the question of liquidity ratios, solvency margins and all the complex problems that the Bank of England solves through its control of the banks. I take it that he is satisfied on all these counts, and that he will give us a learned dissertation. Perhaps he would like to publish a White Paper setting out his views on the way in which the problems that I have described will be overcome. The quotation given by my hon. Friend the Member for Chichester (Mr. Nelson) causes me some alarm. I wonder whether the Minister's skill in banking is as great as his skill in other directions.
I ask myself "Why do we need to have the damned thing?" We have too many banks. One cannot walk down any street in the country without seeing banks everywhere. There are too many branches. We have four joint stock banks and many small ones. What is the point of having more? Perhaps the reason is employment. Is it the Government's answer to the 1.4 million unemployed to set up State banks? Will they be manned by the unemployed shipbuilding workers in the Minister of State's constituency? Is that the point of them? Do the Government feel that they increase control over the activities of the financial sector by having this Giro bank? No, they want to reduce control.
Methinks the answer—a strange one—is that the Labour Party is motivated by envy. For all their lives and for all the lives of the generations which preceded them, members of the Labour Party have 434 been envious of bankers. Bankers are people who drive about in Rolls-Royces, wearing top hats and smoking cigars, looking cynically and cruelly on the starving masses, and they must be overcome. They are part of Socialist demonology—"If you cannot beat them, at least you can have your own back". It comes from playing too much Monopoly when they were children. If they could move blocks of property across the board and pay £1 million here and £100,000 there they felt that they were playing the bosses' game and getting even with the capitalist tycoons they have hated all their lives. This is an opportunity for them to get even.
I am reminded of what happened in my own home city of Newcastle-upon-Tyne—and, if I may say so, Mr. Deputy Speaker, yours, too—where there was a beautiful eighteenth century centre housing the offices of the bankers, the shipping companies, the mining companies and the engineering companies, which made this country great in the eighteenth and nineteenth centuries and built up its prosperity.
The Socialist council, under Mr. T. Dan Smith, was determined to destroy it, and pulled it all down. The council did not put anything in its place. There was nothing left but a heap of rubble, barbed wire and corrugated iron. The point was to destroy, to level, what had made us great before, and what the Socialists had always envied and resented in the mean bitterness of their minds.
That is the reason for this sordid, squalid, irresponsible little Bill, and that is why I shall have great pleasure in voting against the clause.
§ The Financial Secretary to the Treasury (Mr. Robert Sheldon)
I had not intended to intervene in the debate but am doing so because so many hon. Gentlemen opposite have referred to a number of banking matters, with exaggerations even wilder than those normally made when banking is discussed. For some reason that I have never fully understood, banking is a very emotional subject in this House. When hon. Gentlemen read the report of the debate they may be rather surprised at the heat engendered and the amount of anxiety they have shown. This is a much more modest Bill than they have claimed.
435 The comparisons between the Bank of England's arrangements with the London and Scottish clearing banks, and the possible way in which the Giro might develop, have been very wrong. Perhaps I can help by at least putting that aspect right. Reference has been made to the state of the capital and liquidity adequacies of the banks in general. I am sure that the briefing hon. Gentlemen opposite have received on this matter has been very good, but I do not think that most of it has been critically examined by them, otherwise we should not have heard the extreme statements that were made. But the concern about assessing the level of adequacy are very justifiable, because of the changes that we have seen in recent years.
The working party established by the Bank of England and the London and Scottish clearing banks set out to determine what, in current circumstances, ought to be the principles for determining the adequacies of the capital and those of the reserves. Banking, in the same way as any other institution, has undergone a number of changes, due to inflation and other causes. The working party soughtto examine the traditional approaches to liquidity in the light of recent changes which have affected the liabilities side of bank balance sheets.That is from page 240 of the Bank of England Quarterly Bulletin, September 1975. This was a very necessary task—
§ Mr. Viggers
The Financial Secretary has quoted only the second of the terms of reference. The first is important. Paragraph 2 of the paper reads:The terms of reference of the Working Party were: (i) to consider the purposes for which capital and reserves were required; to develop principles for assessing their adequacy for such purposes and to examine the roles of the different components of capital".That is followed by (ii), which the Financial Secretary quoted, but I think it will be agreed that (i) makes it much broader.
§ Mr. Sheldon
I understand why the Committee took so long over these matters. I was trying to shorten it. When the hon. Gentleman reads what I said first in paraphrasing it I do not think he will find any difference at all, except that one is a little longer than the other.
436 We are concerned with the changing rôle of the reserves and liquidity in the situation following the high levels of inflation—more particularly following the lending by fringe banks to certain of their customers engaged in property deals—and with the relationship between clearing banks and those fringe banks. That is our concern, and the Bank of England was quite properly concerned about it. The Bank of England wanted to find out the extent to which these changes in banking called for any changes in the liquidity and capital adequacies of the banks concerned.
But when we consider the right level of liquidity and capital for Giro, we are dealing with something completely different. The risks are not the same. Anybody with any understanding of banking would know full well that when we are talking, at the one extreme, of fringe banks lending on property, and of the position of banks generally, with their lending on overdrafts in changing circumstances—the kind of liquidity, the kind of cover, and the kind of capital adequate for that kind of operation is quite different from the kind of capital—
§ Several Hon. Members rose—
§ Mr. Sheldon
I ask the House to remember that I am here not because I have personal involvement in the Bill but because a number of hon. Gentlemen requested a Treasury view. I feel that I am entitled to put the case first. Then I shall be very happy to give way.
There are no problems about capital adequacies, because the risks are completely different. In the same paper, a little further on, the Bank of England talks about the broad principles, putting the very point that I am making—that it is inappropriate to attempt to quantify precise ratios. Everyone knows that this is because the risks are different. The measures that the Bank of England may consider to be suitable in one case may not be suitable in another. The measure of adequacy depends on the relationship of risks to lending that the particular part of the financial sector bears.
Let us examine those risks. On 1st April 1975, more than 76 per cent. of Giro assets were risk-free. But the major London clearers, as opposed to 437 that figure of more than 76 per cent. of risk-free assets, had 20 per cent. risk-free, and a further 5 per cent. were virtually risk-free. The remaining three-quarters of their assets were credit risks, or a combination of forced sale and credit risks. The difference in terms of risks carried would still be the same whether Giro were public or private. The type of business is different and therefore the adequacies in relation to capital and liquidity are also different.
§ Mr. Michael Marshall
I am worried about the hon. Gentleman's line of argument, although I am glad that he has been able to intervene in the discussion. He is talking about the historical pattern of Giro. We are concerned about its future activities. Can he justify a situation in which no level is put on overdrafts and personal loans in the corporate sector? In taking a figure of 76 per cent. for risk-free business, the hon. Gentleman is speaking about the past. What of the future?
§ Mr. Sheldon
I am glad that we have reached accord on the present position. It was not obvious from what was being said by the hon. Gentleman's Conservative colleagues sitting behind him.
§ Mr. Sheldon
I have read a good deal of the Committee speeches—speeches made at considerable length. Giro's activities rest on the provisions of the 1969 Act. Confidence created by high liquidity and the soundness of customers will still remain in Giro. The point made by the Opposition related to the extensions of credit which were to be offered.
Mention has been made of the difference between the approach of the Trustee Savings Banks and that adopted by Giro. The legislation relating to the two is the same, as is the principle. In other words, there will be a cautious approach, a high liquidity requirement in both the Trustee Savings Bank and Giro. The investments made will be predominantly in the public sector. Security of that nature will be provided and it will be reflected in a measurement of Giro's capital adequacies.
§ Mr. Parkinson
The Paymaster-General made it clear that only after a period 438 of 10 years, in three different stages, was it envisaged that the Trustee Savings Banks would become commercial banks. The Trustee Savings Banks have been in business for up to 150 years. Giro can, overnight, do what the Trustee Savings Banks will be allowed to do only over a period of 10 years.
§ Mr. Sheldon
I understand the hon. Gentleman's anxieties, but I remind him that we are speaking of different scales of money. The Trustee Savings Banks hold deposits of over £4,000 million available for investment. In setting up a new body there will be a period of time in which control in terms of money will still be available. However, in considering the Giro system we are not talking of anything like that sum of money. The balances handled by Giro amount to £150 million, which, under the 1969 Act, can be limited quantitatively as regards the investments made with it.
Opposition Members mentioned the control provided by the Treasury. That is the same control as existed in the 1969 Act.
§ Mr. Sheldon
The same control. The situation in the Trustee Savings Banks is utterly different and involves a figure of £4,500 million, or whatever the figure might be. It is an important matter when we are setting up a new body and are giving it responsibility to handle sums of money as large as that. We want to see how it acts. We shall release control gradually as we observe its success. In this case, under the 1969 Act we have the powers to limit quantitatively the investment of the £150 million, which is the amount of money involved in Giro.
§ 6.15 p.m.
§ Mr. Tim Renton
Is it not a fact that the managing director of Giro said last week, in an interview, that he saw Giro growing into a bank with something like the combined assets of Barclays? If that is the case, we are talking of assets of £7 billion against the money that Giro can lend. The Financial Secretary said that Giro would handle sums in the region of £150 million. That is a relatively small sum. The Minister of State has constantly stated that Giro is a trading division of the Post Office and that all the deposits 439 of the Post Office should be regarded as standing behind Giro. That will make Giro, in banking terms, a very large concern indeed.
§ Mr. Sheldon
The legislation is quite clear. The 1969 Act has worked successfully for the past seven years and there is no attempt to change those provisions. That situation remains. If we had not introduced this Bill, the provisions of that legislation, which the hon. Gentleman now seeks to condemn, would still be on the statute book. In regard to the State bank, I have no responsibility for what an individual might say, but I have responsibility in terms of the Treasury limit and the quantitative restrictions that it can impose on investment. The control about which the hon. Gentleman is anxious is surely satisfied. There has been no change in that regard.
As for the comparison with the commercial banks, there can be no dispute that the risk element is different. Opposition Members have indulged in a number of bogus points. I hope that I have helped to allay the concern arising in connection with some of them, although I shall be happy to respond to further questions. In a sophisticated Committee stage, I should have thought that some of these matters would be more readily understood. Certainly some of the questions have astonished me. They astonished me when I read them in the Committee proceedings, and they certainly astonished me when I heard them made in the House this afternoon.
§ Mr. Ridley rose—
§ Mr. Sheldon
I give way to the exaggerated claims of the hon. Member for Cirencester and Tewkesbury (Mr. Ridley).
§ Mr. Ridley
I was not a member of the Committee. Perhaps I may ask the Financial Secretary a question about the new arrangements. Will the control arrangement over Giro in relation to the Bank of England apply also to banks in the private sector with 75 per cent. assets in non-risk stocks? Will the new arrangement be generally available to anybody who wishes to set up a bank, provided that 75 per cent. of his assets is in non-risk stocks? In other words, is there to be one law for the public sector and another for the private sector?
§ Mr. Sheldon
I should be very surprised if many commercial banks had 76 per cent. of their assets in non-risk Government stock—
§ Mr. Sheldon
This point was answered when I said that the basis of the working party showed that there had to be differences between the capital and liquidity adequacies of banks, depending on the amount of risk they were incurring. It was on that basis that I could show, successfully I believe, that Giro, with its very low risk content, could meet the requirements established by the working party.
§ Mr. Michael Marshall
I am torn, in view of the speech that we have just heard. It is true that we have been calling for the attendance of a Treasury Minister, but the Financial Secretary has just done a whitewash job. The Minister of State undertook to reply on Report to questions that we raised in Committee. I accept that our trick has been trumped by the Financial Secretary answering and thus preventing the Minister of State from doing so. The Minister of State said that he would cover many of our questions, but they have not been covered. Instead, the Financial Secretary has given us a general homily about the 1969 Act. We are talking about the future development of Giro banking services and the Financial Secretary did not reply to the fears expressed.
We have had no answer to the question about the number of public service employees, for instance. In a Written Answer earlier in the week, the Minister of State confirmed to me that three officials in his Department, up to the level of assistant secretary, were monitoring the activities of the Posts and Telecommunications Division, with Giro and other activities. Three officials—I pay tribute to the work that they have done on the Bill—are a tiny number to keep a proper review of Giro's activities in future.
§ Mr. Gregor Mackenzie
I appreciate the tribute that the hon. Gentleman pays to the officials. There are about 60 people involved in the Posts and Telecommunications Division, of whom three are directly concerned with this matter. But those three hardworking gentleman have access to all the expertise of the 441 Treasury. This is not new. This has been going on ever since the inception of Giro services.
§ Mr. Marshall
The right hon. Gentleman makes my point. It is precisely because we are worried about access to this kind of Treasury expertise that we are so concerned about the Bill now. The Financial Secretary tried to reassure us that the 1969 Act will apply, but he was not willing to bend his mind to any of the problems of future development of business. He did not say what size this bank will be if Mr. Singer's ambitions to move between £7,000 million and £14,000 million are to succeed. The Government have given us no idea of the degree to which this bank will be developed. We have simply had a lot of historical chat about limitations applied in the past.
A contradictory attitude which was revealed in Committee was brought to light again today by my hon. Friend the Member for Hertfordsire, South (Mr. Parkinson). We have had no explanation of why, when the Treasury is doing a proper job in respect of the TSB, we still see in this Bill a muddled attempt to create the opportunity to go into unspecified areas of public and corporate lending.
It is incredible that we have still had no adequate answers and I hope that the Minister of State will feel free to intervene. We asked earlier for his view of the traditional business, and how Giro would seek to build up business in money transmission among Government Departments. We asked why the record of local authority business appeared to fluctuate so much from quarter to quarter. We have had no answer.
We have not been told what the size of this bank will be in future and have heard nothing about market research. I mean no disrespect to the Financial Secretary. I am grateful that he has been able to be with us today. He must have felt the pressure in respect of lack of scrutiny by the Treasury. If the Minister of State is not prepared to answer our questions, that will reinforce our worst fears that the Government are seeking to get the Bill through on a "by guess, by God" basis.
The amendment to delete Clause 1 is not a wrecking amendment. The Bill 442 is in four parts and, subject to any other decisions, the rest of the Bill may be allowed to stand. The deletion of Clause 1 would simply reflect reality.
The Financial Secretary, who bears great responsibility here, is right to advocate cautious expansion in secondary banking, taking a view of the public banking sector as a whole, but it seems ludicrous to suggest that this should not apply simply because only £150 million is involved, compared to a much vaster sum for the Trustee Savings Banks. Should not the Government stick to common principles in this area and not chop and change according to which Department is involved?
The amendment gives the Government a final chance to come to their senses, without prejudice to Giro operating in other areas. It would be typical of the present Government's thinking that a principle can be bent according to how much public money is involved—that, if a taxpayer's risk is not so large, it can be widely extended. But if that is the basis for reaching decisions, we know what this Government are really about—and it is not what the House and the country want. I urge my hon. Friends to support the amendment.
§ Mr. Tim Renton
I had not intended to intervene but I was so shocked by some of the remarks of the Financial Secretary that I felt I must comment. The more I heard of the hon. Gentleman, with his supposed knowledge of financial affairs, the more I liked the Minister of State, who lays no claim at all to knowledge of financial matters.
The Financial Secretary committed two grave errors. First, he compared a past balance sheet of Giro, which is a non-banking balance sheet, with a banking balance sheet and said that Giro held up well. But there is a world of difference between the two. The present equity structure of Giro does not provide adequate capital structure for an organisation which is setting out to be a bank.
Because he intends to do nothing about this, the Financial Secretary is destroying the concept that Giro will be going into fair competition with the banks. If it has an inadequate capital structure, there can be no fair competition.
The second way in which the Minister misled the House was in respect of the 443 Bank of England's paper about the financial requirements for banks. He said that different banks required different types of assets and qualifications but he failed to say that this is in relation to a bank's free reserves, particularly its premises. It is on this point that the Bank of England's paper made a clear distinction all along between the clearing banks and the smaller banks.
I am amazed that the Financial Secretary, when at last making an appearance
§ in the debate, should so conspicuously mislead the House on essentially financial matters of which he at least should have expert knowledge. I therefore strongly support my hon. Friend the Member for Arundel (Mr. Marshall) in suggesting that we vote against the inclusion of Clause 1 in the Bill.
§ Question put, That the amendment be made:—
§ The House divided: Ayes 222, Noes 244.447
|Division No. 68 1||AYES||6.31 p.m.|
|Adley, Robert||Fookes, Miss Janet||Macmillan, Rt Hon M. (Farnham)|
|Aitken, Jonathan||Fowler, Norman (Sutton Cf'd)||Madel, David|
|Alison, Michael||Fox, Marcus||Marshall, Michael (Arundel)|
|Amery, Rt Hon Julian||Freud, Clement||Marten, Neil|
|Arnold, Tom||Fry, Peter||Maude, Angus|
|Atkins, Rt Hon H. (Spelthorne)||Gardiner, George (Reigate)||Mayhew, Patrick|
|Awdry, Daniel||Gardner, Edward (S Fylde)||Meyer, Sir Anthony|
|Bain, Mrs Margaret||Gllmour, Sir John (East Fife)||Miller, Hal (Bromsgrove)|
|Bell, Ronald||Godber, Rt Hon Joseph||Mills, Peter|
|Bennett, Sir Frederic (Torbay)||Goodhew, Victor||Miiscampbell, Norman|
|Benyon, W.||Goodlad, Alastair||Moate, Roger|
|Berry, Hon Anthony||Gorst, John||Molyneaux, James|
|Biffen, John||Gow, Ian (Eastbourne)||Monro, Hector|
|Biggs-Davison, John||Gower, Sir Raymond (Barry)||Montgomery, Fergus|
|Blaker, Peter||Gray, Hamish||Moore, John (Croydon C)|
|Boscawen, Hon Robert||Griffiths, Eldon||Morris, Michael (Northampton S)|
|Bottomley, Peter||Grimond, Rt Hon J.||Morrison, Charles (Devizes)|
|Bowden, A. (Brighton, Kemptown)||Grist, Ian||Morrison, Hon Peter (Chester)|
|Boyson, Dr Rhodes (Brent)||Grylls, Michael||Mudd, David|
|Bradford, Rev Robert||Hall, Sir John||Neave, Airey|
|Braine, Sir Bernard||Hall-Davis, A. G. F.||Nelson, Anthony|
|Brittan, Leon||Hamilton, Michael (Salisbury)||Neubert, Michael|
|Brotherton, Michael||Hampson, Dr Keith||Newton, Tony|
|Brown, Sir Edward (Bath)||Hannam, John||Nott, John|
|Bryan, Sir Paul||Harrison, Col Sir Harwood (Eye)||Onslow, Cranley|
|Buchanan-Smith, Alick||Hastings, Stephen||Oppenheim, Mrs Sally|
|Bulmer, Esmond||Havers, Sir Michael||Osborn, John|
|Burden, F. A.||Hawkins, Paul||Page, Rt Hon R. Graham (Crosby)|
|Butler, Adam (Bosworth)||Henderson, Douglas||Parkinson, Cecil|
|Carlisle, Mark||Heseltine, Michael||Penhaligon, David|
|Chalker, Mrs Lynda||Hicks, Robert||Percival, Ian|
|Channon, Paul||Higgins, Terence L.||Peyton, Rt Hon John|
|Churchill, W. S.||Holland, Philip||Pink, R. Bonner|
|Clark, Alan (Plymouth, Sutton)||Hordern, Peter||Powell, Rt Hon J. Enoch|
|Clarke, Kenneth (Rushcliffe)||Howe, Rt Hon Sir Geoffrey||Price, David (Eastleigh)|
|Clegg, Walter||Howell, David (Guildford)||Prior, Rt Hon James|
|Cope, John||Howells, Geraint (Cardigan)||Pym, Rt Hon Francis|
|Cordle, John H||Hunt, John||Raison, Timothy|
|Corrie, John||Hurd, Douglas||Rathbone, Tim|
|Costain, A. P.||Hutchison, Michael Clark||Rees, Peter (Dover & Deal)|
|Crawford, Douglas||Johnson Smith, G. (E Grinstead)||Rees-Davies, W. R.|
|Crowder, F. P.||Jopling, Michael||Reid, George|
|Dean, Paul (N Somerset)||Joseph, Rt Hon Sir Keith||Renton, Tim (Mid-Sussex)|
|Dodsworth, Geoffrey||Kellett-Bowman, Mrs Elaine||Rhys Williams, Sir Brandon|
|Douglas-Hamilton, Lord James||Kershaw, Anthony||Ridley, Hon Nicholas|
|Drayson, Burnaby||King, Tom (Bridgwater)||Rifklnd, Malcolm|
|du Cann, Rt Hon Edward||Kitson, Sir Timothy||Rippon, Rt Hon Geoffrey|
|Dunlop, John||Knight, Mrs Jill||Roberts, Wyn (Conway)|
|Durant, Tony||Knox, David||Rodgers, Sir John (Sevenoaks)|
|Dykes, Hugh||Lamont, Norman||Ross, William (Londonderry)|
|Edwards, Nicholas (Pembroke)||Lane, David||Rossi, Hugh (Hornsey)|
|Elliott, Sir William||Langford-Holt, Sir John||Sainsbury, Tim|
|Emery, Peter||Latham, Michael (Melton)||St. John-Stevas, Norman|
|Ewing, Mrs Winifred (Moray)||Lawrence, Ivan||Scott-Hopkins, James|
|Eyre, Reginald||Le Marchant, Spencer||Shaw, Giles (Pudsey)|
|Fairbalrn, Nicholas||Lester, Jim (Beeston)||Shaw, Michael (Scarborough)|
|Fairgrleve, Russell||Lewis, Kenneth (Rutland)||Shelton, William (Streatham)|
|Farr, John||Loveridge, John||Shersby, Michael|
|Fell, Anthony||MacCormick, Iain||Sims, Roger|
|Finsberg, Geoffrey||McCrindle, Robert||Skeet, T. H. H.|
|Fletcher, Alex (Edinburgh N)||McCusker, H.||Smith, Dudley (Warwick)|
|Fletcher-Cooke, Charles||MacGregor, John||Speed. Keith|
|Spence, John||Temple-Morris, Peter||Weatherill, Bernard|
|Spicer, Jim (W Dorset)||Thatcher, Rt Hon Margaret||Wells, John|
|Spicer, Michael (S Worcester)||Thomas, Rt Hon P. (Hendon S)||Welsh, Andrew|
|Sproat, Iain||Thompson, George||Whitelaw, Rt Hon William|
|Stalnton, Keith||Townsend, Cyril D||Wiggln, Jerry|
|Stanley, John||Tugendhat, Christophei||Wilson, Gordon (Dundee E)|
|Steen, Anthony (Wavertree)||Vaughan, Dr Gerard||Winterton, Nicholas|
|Stewart, Donald (Western Isles)||Viggers, Peter||Wood, Rt Hon Richard|
|Stewart, Ian (Hitchln)||Walder, David (Clitheroe)||Young, Sir G. (Ealing, Acton)|
|Stokes, John||Wall, Patrick|
|Stradling Thomas, J.||Walters, Dennis||TELLERS FOR THE AYES:|
|Tapsell, Peter||Warren, Kenneth||Mr. Fred Silvester and|
|Taylor, R. (Croydon NW)||Watt, Hamlsh||Mr. Michael Roberts|
|Abse, Leo||Ewing, Harry (Stirling)||McMillan, Tom (Glasgow C)|
|Anderson, Donald||Fernyhough, Rt Hon E.||McNamara, Kevin|
|Archer, Peter||Fitch, Alan (Wigan)||Madden, Max|
|Armstrong, Ernest||Fitt, Gerard (Belfast W)||Magee, Bryan|
|Ashley, Jack||Flannery, Martin||Mallaiieu, J. p. W.|
|Ashtont, Joe||Fool, Rt Hon Michael||Marks, Kenneth|
|Atkins, Ronald (Preston N)||Forrester John||Marquand, David|
|Atkinson, Norman||Fowler, Gerald (The Wrekin)||Marshall, Dr Edmund (Goole)|
|Barnett, Guy (Greenwich)||Fraser, John (Lambeth, N'w'd)||Marshall, Jim (Leicester S)|
|Barnett, Rt Hon Joel (Heywood)||Gilbert, Dr John||Mason, Rt Hon Roy|
|Bates, Alt||Golding, John||Maynard, Miss Joan|
|Bean, R. E.||Gould, Bryan||Mellish, Rt Hon Robert|
|Beith, A. J.||Gourlay, Harry||Mendelson, John|
|Benn, Rt Hon Anthony Wedgwood||Graham, Ted||Mikardo, Ian|
|Bennett, Andrew (Stockport N)||Grocott, Bruce||Milien, Bruce|
|Bidwell, Sydney||Hamilton, James (Bothwell)||Miller, Dr M. S. (E Kilbride)|
|Bishop, E. S.||Hamilton, W. W. (Central Fife)||Mitchell, R. C. (Soton, ltohen)|
|Blenkinsop, Arthur||Hardy, Peter||Molloy, William|
|Boardman, H.||Harrison, Walter (Wakefield)||Moonman, Eric|
|Booth, Rt Hon Albert||Hart, Rt Hon Judith||Morris, Charles R. (Openehawe)|
|Boolhroyd, Mise Betty||Hattersley, Rt Hon Roy||Morris, Rt Hon J. (Aberavon)|
|Bottomley, Rt Hon Arthur||Hayman, Mrs Helene||Mulley, Rt Hon Frederick|
|Boyden, James (Bish Auck)||Healey, Rt Hon Denis||Murray, Rt Hon Ronald King|
|Bradley, Tom||Hooley, Frank||Newens, Stanley|
|Bray, Dr Jeremy||Horam, John||Noble, Mike|
|Brown, Hugh D. (Provan)||Howell, Rt Hon Denis||Oakes, Gordon|
|Brown, Robert C. (Newcastle W)||Hoyle, Doug (Nelson)||Ogden, Eric|
|Buchan, Norman||Huckfleld, Les||O'Halloran, Michael|
|Buchanan, Richard||Hughes, Rt Hon C. (Anglesey)||Ovenden, John|
|Butler, Mrs Joyce (Wood Green)||Hughes, Robert (Aberdeen N)||Padley, Walter|
|Callaghan, Jim (Middleton & P)||Hughes, Roy (Newport)||Park, George|
|Campbell, Ian||Hunter, Adam||Parry, Robert|
|Canavan, Dennis||Irvine, Rt Hon Sir A. (Edge Hill)||Pendry, Tom|
|Cant, R. B.||Jackson, Colin (Brighouse)||Philpps, Dr Colin|
|Carmichael, Neil||Janner, Greville||Price, C. (Lewisham W)|
|Carter, Ray||Jay, Rt Hon Douglas||Price, William (Rugby)|
|Cartwright, John||Jeger, Mrs Lena||Radice, Giles|
|Clemitson, Ivor||Jenkins, Hugh (Putney)||Rees, Rt Hon Merlyn (Leeds S)|
|Cocks, Michael (Bristol S)||Jenkins, Rt Hon Roy (Stechford)||Roberts, Albert (Normanton)|
|Cohen, Stanley||John, Brynmor||Roberts, Gwilym(Cannock)|
|Coleman, Donald||Johnson, Walter (Derby S)||Robertson, John (Paisley)|
|Colquhoun, Ms Maureen||Jones, Alec (Rhondda)||Roderick, Caerwyn|
|Conlan, Bernard||Jones, Barry (East Flint)||Rodgers, George (Chortey)|
|Cook, Robin F. (Edin C)||Jones, Dan (Burnley)||Rodgers, Wiliam (Stockton)|
|Corbett, Robin||Judd, Frank||Rooker, J. W.|
|Cox, Thomas (Tooting)||Kaufman, Gerald||Roper, John|
|Craigen, J. M. (Maryhill)||Kerr, Russell||Rose, Paul B.|
|Crawshaw, Richard||Kilroy-Silk, Robert||Ross, Stephen (Isle of Wight)|
|Crosland, Rt Hon Anthony||Kinnock, Neil||Ross, Rt Hon W. (Kilmarnock)|
|Cryer, Bob||Lambie, David||Sandelson, Neville|
|Davidson, Arthur||Lamborn, Harry||Sedgemore, Brian|
|Davies, Bryan (Enfield N)||Lemond, James||Selby, Harry|
|Davies, Denzil (Llanelli)||Latham, Arthur (Paddington)||Shaw, Arnold (llford South)|
|Deakins, Eric||Leadbitter, Ted||Sheldon, Robert (Ashton-u-Lyne)|
|Dell, Rt Hon Edmund||Lestor, Miss Joan (Eton and Slough)||Shore, Rt Hon Peter|
|Dempsey, James||Lever, Rt Hon Harold||Short, Rt Hon E. (Newcastle C)|
|Doig, Peter||Lewis, Ron (Carlisle)||Short, Mrs Renée (Wolv NE)|
|Dormand, J. D.||Lipton, Marcus||Silkin, Rt Hon John (Deptlord)|
|Douglas-Mann, Bruce||Litterick, Tom||Silverman, Julius|
|Duffy, A. E. P.||Loyden, Eddie||Skinner, Dennis|
|Dunnett, Jack||Luard, Evan||Small, William|
|Eadie, Alex||Lyon, Alexander (York)||Smith, John (N Lanarkshire)|
|Edge, Geoff||Lyons, Edward (Bradford W)||Spearing, Nigel|
|Edwards, Robert (Wolv SE)||Mabon, Dr J. Dickson||Spriggs, Leslie|
|Ellis, John (Brigg & Scun)||McElhone, Frank||Stallard, A. W.|
|Ellis, Tom (Wrexham)||McGuire, Michael (Ince)||Stoddart, David|
|English, Michael||Mackenzie, Gregor||Stonehouse, Rt Hon John|
|Evans, Fred (Caerphilly)||Mackintosh, John P.||Stott, Roger|
|Evans, loan (Aberdare)||Maclennan, Robert||Strang, Gavin|
|Strauss, Rt Hon G. R.||Varley, Rt Hon Eric G.||Williams, Alan Lee (Hornch'ch)|
|Summerskill, Hon Dr Shirley||Waiden, Brian (B'ham, L'dyw'd)||Wilson, Alexander (Hamilton)|
|Taylor, Mrs Ann (Bolton W)||Walker, Terry (Kingswood)||Wilson, Rt Hon H. (Huyton)|
|Thomas, Jeffrey (Abertillery)||Ward, Michael||Wilson, William (Coventry SE)|
|Thomas, Mike (Newcastle E)||Watkins, David||Wise, Mrs Audrey|
|Thomas, Ron (Bristol NW)||Watkinson, John||Woodall, Alec|
|Thorne, Stan (Preston South)||Weetch, Ken||Woof, Robert|
|Tierney, Sydney||White, Frank R. (Bury)||Wrigglesworth, Ian|
|Tinn, James||White, James (Pollock)||Young, David (Bolton E)|
|Tomlinson, John||Whitehead, Phillip|
|Tomney, Frank||Whitlock, William||TELLERS FOR THE NOES:|
|Torney, Tom||Willey, Rt Hon Frederick||Mr. James A. Dunn and|
|Tuck, Raphael||Williams, Alan (Swansea W)||Mr. Joseph Harper.|
|Urwin, T. W.|
§ Question accordingly negatived.