CONTRIBUTORY INSTITUTIONS AND GENERAL PROVISIONS AS TO CONTRIBUTIONS

HC Deb 14 February 1979 vol 962 cc1213-4

Mr. Ian Stewart

I beg to move amendment No. 12, in page 25, line 2, leave out 'five' and insert 'two'.

The point of the amendment, which follows a debate in Committee, relates to the length of deposits which should be excluded from the deposit base of a bank or a licensed institution for the purpose of assessing its contributions to the deposit protection fund.

In Committee I suggested that it would be unfortunate if we introduced for varying purposes different lengths of time of deposits which would be excluded for one purpose or another. In suggesting two years in this context, I had in mind that two years rather than five is the time limit of the deposits which qualify for being included in the interest-bearing eligible liabilities in the banking system, which have become such an important part of monetary control and the money supply.

In my experience in banking, deposits of more than two years in length are pretty exceptional. Therefore, it would not greatly affect the operation of the deposit protection scheme if two years were substituted for five. On the basis that we should try to have the same length of time for as many purposes as possible, I think two years is preferable. Computers must be programmed to throw out exceptions to any rule, and if deposits over five years for one purpose are to have an importance and deposits over two years are to have an importance for another purpose this leads to complications.

The Minister said that he would reconsider this matter. In his letter of 12 February he said: I have considered whether the term to maturity under which deposits would be excluded from the deposit base and from protection should be reduced to two years, but in the absence of conclusive arguments I prefer that the present wording should stand. The Minister has reported his view, which I thought it was proper to place on the record. It is not a matter which we would want to press, but we still prefer two years to five.

Mr. Denzil Davies

These cases are always difficult. I have considered this again with advisers from the Bank of England and the Treasury. There is no great issue of principle here. On balance, my advisers prefer five years to two. I accept entirely what the hon. Member has said. I try to be as accommodating as possible, but in this case I should accept the advice of my technical advisers. I prefer therefore to stick to the period of five years.

Amendment negatived.