§ '(1) The repeal by the Banking Act 1979 (the "1979 Act") of the Protection of Depositors Act 1963 (the "1963 Act") shall not affect, and shall be deemed never to have affected, the application of the following provisions of the 1963 Act to unexempted companies on and after the commencement of Parts I and III of the 1979 Act, that is to say—
- (a) sections 6 to 17; and
- (b) so far as relevant to the operation of those sections, sections 5 and 22 to 27.
§ (2) In this section "unexempted company" means any company within the meaning of the 1963 Act which is not excepted by section 2(1) of the 1979 Act from the prohibition on the acceptance of deposits imposed by section 1 of the latter Act.'.—[Mr. Eyre.]
§ Brought up, and read the First time.
§ 4.8 pm
§ The Under-Secretary of State for Trade (Mr. Reginald Eyre)
I beg to move, That the clause be read a Second time.
The purpose of this new clause is to remedy an omission from the Banking Act 1979, which was enacted by the Labour Government, which among other things provides for the repeal of the Protection of Depositors Act 1963. The Protection of Depositors Act 1963 restricts and regulates advertisements for deposits and requires companies subject to the Act to deliver to the Department annual and half-yearly accounts. These accounts are examined by the Department to ensure compliance with regulations made under the Act and to check the companies' general financial position.
The Banking Act 1979 was enacted to improve the control of banks and deposit takers. It provides for the recognition of certain banks and for the licensing of other deposit-taking institutions by the Bank of England.
It was originally envisaged that, fairly soon after the bringing into force of the major provisions on 1 April 1980, it would be possible to repeal the 1963 Act. The position would then be that deposit takers 1156 could take money from the public only if they had a licence under the 1979 Act. Unfortunately, account was not taken of the continuing need to keep an eye on deposit takers which failed to obtain a licence under the 1979 Act and which, while therefore unable to continue to seek deposits from the public, continued in existence making use of money deposited with them earlier. Repeal of the 1963 Act will remove all control from such deposit takers with possible risk to their depositors; on the other hand, failure to repeal the Act will mean that deposit takers licensed under the 1979 Act will have to make returns both under that Act and under the 1963 Act.
Accordingly, it is proposed to keep the relevant provisions of the 1963 Act alive to control the 60 or so unlicensed companies which continue to hold deposits. This will protect people who have money deposited with those companies; and it will not hamper the express repeal of the 1963 Act in respect of licensed deposit takers.
Although the 1963 Act has not yet been expressly repealed, I am advised that it is possible for repeal to have come about by implication on bringing into force the major provisions of the Banking Act, on the reasoning that the provisions of the later Act are so inconsistant with, or repugnant to, the provisions of the 1963 Act that the two cannot stand together: hence, as a safeguard, the retrospective nature of this amendment.
§ Mr. John Fraser (Norwood)
At the end of the previous Parliament, the Banking Act was passed so quickly that Homer did not merely nod; he was knocked over in the rush. It is important that the 1963 Act provisions as to unexempted companies should be preserved.
Although the Minister is restoring many of the sections of the 1963 Act, he expressly retained in the repeals section 17, which gives the Department of Trade the power to see documents to discover whether there has been any breach of the 1963 Act, and section 18, which provides for search and entry. I should like to know whether Homer nodded again or whether it is a deliberate act of Government policy to leave out the provisions for the production of documents, search and other powers to obtain information. Those powers are important. If there is 1157 to be the protection of depositors, the powers of entry and obtaining information must be preserved. Why have those been omitted in the restoration of the repeal of certain provisions of the 1963 Act?
The second question is one that perhaps the Minister would like to think over and consider whether something should be done in another place by way of an amendment to the the new clause. I refer to the way in which the law is stated. It is difficult if someone reads the Banking Act and comes to the same conclusion that the Minister came to—that the 1963 Act is repealed—and then finds tucked away in the Companies Bill of this year a provision saying that the repeal did not take place but was restored. It is an unsatisfactory position. I am not sure whether the law will now he stated with the clarity that it should be stated. I doubt whether people can easily see that that which was intended to he repealed, or which was repealed by implication, is not now repealed. Perhaps the Under-Secretary would like to think about that point.
§ Mr. Eyre
In basic principle, we retain such powers as we believe are necessary for the continuing supervision of the limited number of companies which will continue to retain deposits for a period in the manner that I explained.
The Department is willing to discuss with these unlicensed companies their new position and its implications for the future. The hon. Gentleman need have no fear in respect of the continuing supervision of the function of these companies. It may well be that this will be only a transient stage as moneys are withdrawn from those companies, or they make other arrangements. Perhaps the unlicensed company will merge with another licensed company. For that reason, this is probably a transitional arrangement which we believe will adequately deal with the present situation.
§ Question put and agreed to.
§ Clause read a Second time, and added to the Bill.