§ 1.13 p.m.
§ Lord HOY
My Lords, I beg to move that this Bill be now read a second time. In case there should be any misunderstanding about the Title of the Bill, it does in fact apply to Trustee Savings Banks. The Trustee Savings Banks find themselves today in the unfortunate but unintended position of being debarred from carrying out certain services as a result of the passing of the 1974 Act. Trustee Savings Banks, which have existed in this country for over 160 years and operate 995 throughout the United Kingdom, are public sector financial institutions of the highest repute and integrity. Their activities in the keeping of deposit and current accounts, the investment of the funds held therein and the rates of interest which may be paid thereon are strictly controlled and regulated by the Treasury through the National Debt Office, in accordance with the Trustee Savings Banks Act 1969.
Until the present time the Trustee Savings Banks have always been permitted to keep solicitors' clients' and trust moneys. There was never any intention on the part of the Law Society to exclude Trustee Savings Banks from this role. Indeed, there was support from the Trustee Savings Banks when the Law Society took action under the 1974 Act to preserve and look after moneys of this kind. One simply could not allege that there was any means by which the Law Society, at any time throughout the very long period taken by this legislation, could have known that finally the list of approved banks would automatically exclude the Trustee Savings Banks. However, the Trustee Savings Banks felt that the Treasury, quite reasonably, ought to have realised that among the Trustee Savings Banks in England and Wales there would in all likelihood be held a considerable number of solicitors' clients' and trust accounts. This is exactly what has happened. At the present time the Trustee Savings Banks in England and Wales hold a considerable number of client and trust accounts, amounting to some millions of pounds.
Since March, when it became apparent to the TSB Association from the silence of official channels that it seemed unlikely that any rectification would be instigated by them, and with time running against the Trustee Savings Banks, immediate action was imperative to avoid the compulsory loss of these accounts by 1st May 1975, when the solicitors' new accounts rules would become effective. Once lost, it was felt that these accounts would never return to the TSBs. I should like to put it on record that the Trustee Savings Banks Association is most grateful to the Law Society for their good will and co-operation during the last few weeks. Indeed in the Law Society's Gazette of 996 16th April the following paragraph appeared:It may be noted that the Trustee Savings Banks do not appear in the above list. Since the Solicitors Act 1974 was passed, it has become known that they are unqualified by virtue of the constitutions to be admitted to the list, as a result of which the possibility of separate statutory recognition is being investigated and it is hoped that by this means the unfortunate exclusion of the Trustee Savings Banks will be remedied.That is exactly what this Bill hopes to achieve. The Trustee Savings Banks have reason to believe that the goodwill and co-operation of the Law Society will extend during the period from 1st May until this Bill becomes Law. I hope I have convinced your Lordships that this matter is indeed a very urgent one and I respectfully submit it for your approval this afternoon. I beg to move that this Bill be now read a second time.
§ Moved, That the Bill be now read 2a.—(Lord Hoy.)
§ 1.19 p.m.
§ The LORD CHANCELLOR
My Lords, I have much pleasure in expressing the support of the Government for this Bill. As my noble friend Lord Hoy has so clearly explained, the purpose of this Bill is to remedy an oversight which occurred during the passage of the Solicitors (Amendment) Act 1974. Section 16 of that Act provides that the rules relating to clients' accounts and trust accounts, which have to be made by the Council of the Law Society with the concurrence of the Master of the Rolls, must require these accounts to be kept at the Bank of England or a banking or discount company recognised by the Department of Trade for the purpose of exemption from the Protection of Depositors Act 1963. The effect of that provision is preserved in the Solicitors Act 1974 (a Consolidation measure). Section 32 of that Act deals with the making of accounts rules and the requirements about banks; and Section 87 restricts the meaning of the term "bank" in the way I have indicated.
The main motive for restricting the classes of banks at which solicitors' accounts may be maintained was to protect the client from any loss which might result from the failure of a bank which might in some way be weak or suspect. I hasten to assure the House that Trustee 997 Savings Banks were not excluded deliberately. On the contrary, as I have said, it was an oversight which I regret. I do not think anyone would question that they are eminently secure and convenient repositories for clients' funds. The Government would not wish to inhibit solicitors in their choice of a bank so long as the field of choice is restricted to banks which satisfy stringent tests of reliability whereby the client is given adequate protection. There can be no doubt that the Trustee Savings Banks amply satisfy those tests. They are under close statutory control by the National Debt Office, with whom they place their deposits. These deposits are paid into the Fund for Banks for Savings which is invested in gilt-edged securities.
There is a further reason why this Bill is welcome to the Government. I am advised that there are at present a very substantial number of solicitors' client and trust accounts with Trustee Savings Banks with balances ranging from a few hundred pounds to £1,000. The withdrawal of these accounts could involve the Trustee Savings Banks in losses of millions of pounds and deprive them of a valuable source of continuing investment. Substantial withdrawals would weaken the position of the banks and therefore would be something much to be deplored.
I do not think I need trouble the House with a detailed account of the Government's policy for the future of Trustee Savings Bank, but perhaps I could say a few words about it. The House will be aware that the whole position of these banks was reviewed by the Page Committee, whose Report was published in 1973. In July of last year the Paymaster General announced in another place the Government's policy that the Trustee Savings Banks should be empowered to develop along the lines recommended in that Report. One of the Committee's main recommendations was that these banks should be freed from a number of Government controls and enabled to provide a full range of personal banking services. The Government believe that the development of the Trustee Savings Banks in this way will not only contribute to the general competence and efficiency of the banking section but bring financial benefits to many millions of depositors.
998 My Lords, the process of change in the Trustee Savings Bank system is, it is thought, likely to occupy some 10 years or so, and as part of the process it is important that they should have healthy and adequate financial reserves. This means that they need to retain the funds of existing depositors and to attract new funds. The Bill which my noble friend Lord Hoy has introduced will be of great assistance in this respect, for, as I have indicated, the funds represented by solicitors' accounts are very substantial. The Government are indebted to the noble Lord for his initiative in introducing this Bill, and I warmly commend it to the House.
§ 1.24 p.m.
My Lords, this must be, I suppose, one of the shortest and simplest Bills to be introduced into Parliament, and I would congratulate the noble Lord, Lord Hoy, on introducing it. It is only right that I should declare an interest. I am a vice-chairman of the East Anglian Trustee Savings Bank; but I hasten to add that that is an interest but not a pecuniary interest, as of course such positions are honorary.
The noble Lord quite rightly explained in fairly careful detail the reasons for this Bill. In short, it was proved necessary because of many of the fringe banks "going up the wall '', and it was decided that those people who left their money with solicitors, and so forth, should be liable to a certain degree of protection. This was entirely right, but the curious fact is that somebody somewhere, to use an un-Parliamentary phase, made a "bog" and inadvertently excluded the Trustee Savings Banks from the places where solicitors could put their trusts or clients' money. Obviously this is wrong because the Trustee Savings Banks are rigorously controlled, as to not only what they invest their money in but also the rates of interest they are permitted to pay. They are controlled by the Treasury through the National Debt Office, and indeed the very purpose of their existence was to give a safe place for ordinary people to leave their money. Trustee Savings Banks were virtually so controlled by Government that they are, as it were, a gilt-edged bank. For solicitors, who in turn have to guard their clients' money, to be told they cannot invest it in a Government regulated and controlled bank, which the Government 999 virtually underwrite, is clearly an absurdity. Therefore, we are grateful to the noble Lord, Lord Hoy, for introducing this Bill to put right this anomaly.
The only point I would add is that it is slightly surprising that the Government did not see fit to bring in this legislation themselves. It was in February this year that the Treasury and the National Debt Office told the Trustee Savings Banks that they were considering how amending legislation could be introduced as quickly as possible. In fact, nothing was done, and the trouble is that it is left to a Private Member to introduce a Bill which, as everyone knows, will be subject to all the vicissitudes, anomalies and hazards to which Private Members' Bills are subjected. I was glad to hear the noble and learned Lord the Lord Chancellor say that this Bill had the Government's blessing. I very much hope it will also have the Government's blessing in another place and that the Government will see fit to ensure that adequate Parliamentary time is allowed there so that this Bill does not drop by the wayside.
§ 1.27 p.m.
§ Lord HALE
My Lords, there is no need for me to say anything, and so I propose to speak rather more briefly than is usual. The final words of the noble Earl, Lord Ferrers on the Front Bench opposite, are the vital words. I am a little afraid. We have the utmost respect for the great ability and knowledge of the humble and faithful Commons, and for their sincerity and complete lack of animosity and personal interest. although those who do not know them as well as I do might in reading recent debates have arrived at a different, and wrong conclusion. The real problem I find about the debate today is that there have been so many encomiums on the Bill that if I added any it would jeopardise its chance in another place. Yet I have to declare an interest. After spending something like 20 years in the House writing to the Law Society and saying sadistically that the electors of Oldham returned me to Parliament not because I was a solicitor but in spite of that fact, and that the cotton workers were my primary concern, I have had two excellent lunches from the Society 1000 in the last six months and whatever hatchet there ever was has been buried. I therefore consulted them about this matter to obtain their views, which have already been fully expressed, with admirable encomiums, by all the three previous speakers, including the noble and learned Lord the Lord Chancellor.
My noble friend Lord Hoy has apologised for the Title. I thought we were going to have a Bill with a tribute to Sir Robert Mark's criticisms, and go on for a wholesale improvement of members of the profession. Few today can deny the fact that humanity itself is capable, we hope, of improvement. But it has been a disappointing day. I thought, when I was summoned to attend on a Friday, that I was being summoned in accordance with Her Majesty's personal Writ to discuss the urgent matters which are now afflicting the Realm, and not lotteries, which I think are secondary in fact. I do not criticise the noble Lord's Bill; it is a short one. There is however one problem about it. He has referred to Clause 87 and there is a procedure whereby this could easily have been implemented without introducing a Statute. There is a procedure for designation.
So far as I know, no one in his senses would object to the Bill. It is approved by everybody concerned. Nobody has a word to say about the Trustee Savings Bank. However, in the course of the last few days some extraordinary views have been expressed about other institutions. The very production of a Bill of this kind makes it possible for anybody in either House to move a series of Amendments adding other institutions which, under the limitations which are imposed upon our discussions, we should then have to discuss when the Bill was returned from the other place. It is a fact that our financial situation has gone down regularly since 1910 when the Lords were deprived of their control over expenditure. That is a fact, whether it be post hoc or proctor hoc. In the circumstances, I still hoped that it would be possible to deal with this subject without special legislation. But if special legislation is necessary, then it is an admirable Bill and admirably proposed. It is in excellent hands and I shall refrain from introducing, as a reprisal, a rider to the Solicitors (Amendment) Bill.
§ 1.31 p.m.
§ Lord HOY
My Lords, I am grateful for the reception which your Lordships have given to this Bill. May I say to my noble friend Lord Hale that I accepted solicitors' advice, and was advised that this was the one and only way by which the job could be done, and that is why I undertook it. Perhaps I ought to declare an interest. Like the noble Earl, Lord Ferrers, my interest is that I am an honorary office bearer of the Trustee Savings Banks Association. I have one other association, in that I have held an account with a Trustee Savings Bank all my life and I am very proud to have done so.
I am grateful for what has been said by the noble and learned Lord on the Woolsack. To have Government support for a Bill of this kind is valuable. I agree with the noble Earl that we must take great precautions to ensure that it does not get lost in the other place. However, I am fortified by a previous experience. In another place I had the job of introducing a Bill that had come from your Lordships' House, which allowed depositors in Trustee Savings Banks to have cheque books for the first time in their lives. The other place was very accommodating and understanding, and in the minimum amount of time it became an Act of Parliament. I can only hope that the other place will repeat their previous performance on this occasion.
§ On Question, Bill read 2a, and committed to a Committee of the Whole House.