POST OFFICE (BANKING SERVICES) BILL

HL Deb 18 March 1976 vol 369 cc402-26

5.13 p.m.

The PARLIAMENTARY UNDERSECRETARY of STATE, DEPARTMENT of INDUSTRY (Lord Melchett)

My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved, that the House do now resolve itself into Committee.—(Lord Melchett.)

On Question, Motion agreed to.

House in Committee accordingly.

[The Viscount GOSCHEN in the Chair.]

Clause 1 [Extension of power of Post Office to provide banking services]:

Lord ABERDARE moved Amendment No. 1:

Page 1, line 12, at end insert— (3) The words "banking services" in this section shall not include the issue of credit cards without the approval of the Secretary of State and the Treasury. The noble Lord said: This is the first of seven Amendments, none of which is very revolutionary. They are all intended to be along the lines and in the spirit of Lord Melchett's words on Second Reading, and I hope that some of them at any rate will appeal to him and he will be able to accept them. The noble Lord stressed in his Second Reading speech that Clause 1 is largely a matter of clarification and for the removal of doubt in respect of the main Act, the Post Office Act 1969. He hoped we would not exaggerate the significance of this particular Bill. In his own words, he said that it represents a slow, cautions advance and removes a technical and obscure qualification. If we thought this was all it really did, I do not think we should be so worried about the Bill. In order to help us and set our fears aside, I hope that this Amendment, and one or two others I shall be moving, follow the Government's objective of a slow and cautious advance.

Under the Bill as it stands at the preent moment, the Giro will be able to issue its own credit cards. Is that consistent with a slow and cautious advance? So far as the history of credit cards is concerned, I do not think it is. This is confirmed because both Access and Barclaycard have proved extremely expensive. We are now dealing with public money and anything that could lead to the losses that both Access and Barclaycard have experienced does not seem to be consistent with a slow, cautious advance. It has been reported that the cost of setting up the Access operation, for example, was some £10 million, and I doubt whether that has yet made a profit. Barclaycard is also currently reported to be making losses.

So why do the Government suggest that Giro should risk public money in such a hazardous venture? In another place there was an Amendment on these lines which would not have allowed Giro to issue credit cards at all. I have not gone so far as that; I have merely suggested that before they do so they should at least receive the approval of the Secretary of State and the Treasury. I doubt whether Mr. Singer of Giro wishes to launch his own credit card; I should imagine that the difficulties would be overwhelming, particularly with the Consumer Credit Act now on the Statute Book which, in Section 51, makes it an offence to give a person a credit token if he has not asked for it. That would make it very difficult for him to launch a credit card of his own. I should have thought that this Amendment, which is only erring on the side of caution, would have been perfectly acceptable to Giro. I beg to move.

Lord CACCIA

I must first declare an interest: I am a director of the National Westminster Bank. I do not speak for that Bank or any part of the banking system; I speak entirely personally, as is proper in your Lordships' House. I hope that the Government will be ready to consider the points that are being put forward, and will be put forward, in the interests not of inhibiting Giro from entering into these various activities, but in the interests of slow and cautious progress.

As the noble Lord, Lord Aberdare, has already said, the clearing banks and others who have started credit cards in this country and elsewhere know that the launching years are apt to be expensive. In addition to that, a great number of credit cards are now available in this country, and it is a question of judgment whether this is an appropriate time to launch another such activity on behalf of Giro, as part of the banking services which it might wish to have. But it is not suggested in this Amendment that it should be prevented; merely that caution should be shown about the decision taken, and the Secretary of State and the Treasury should be known to support it, thereby bringing some further element of public accountability into the operation of Giro.

Therefore, once again, may I say that, like the noble Lord, Lord Aberdare, I hope that the Government might think it in the interests of Giro itself to have this kind of backing behind any extension of its activities that may be contemplated with credit cards.

Lord BANKS

When an Amendment somewhat similar to that to which the noble Lord, Lord Aberdare, has already referred was discussed in another place, the Minister of State said that there were no plans to introduce credit cards, which I recognise is not an argument against this Amendment. He went on to say that if Giro wants to bring forward proposals of this kind it will have to put them to the appropriate authorities. What he meant by that was not very clearly explained, and I am wondering whether the noble Lord, Lord Melchett can clarify that for us when he replies to the discussion on the Amendment. To what extent if at all, would the 1969 Act, the present Bill and the legislation which I understand is promised to control the banks and Giro, affect the situation if Giro decided to go ahead with a proposal for credit cards?

This Bill provides for Giro to compete on more equal terms with the clearing banks and, having agreed the principle, I would look very carefully at any proposal to restrict its application, even though there may be no plans to develop in that field at the moment. The Amendment is clearly not to protect the public as a whole, because that would have to cover all people who offer credit cards; nor to protect the economy, because the same would apply there. It is not that credit cards ar regarded as undesirable, because, as has already been pointed out, this Amendment does not cut them out altogether. I think the Amendment arises from a fear about the alleged lack of expertise, or lack of commercial wisdom, of the management of Giro. It seems to me that it passes the ultimate commercial decision to the Secretary of State and the Treasury, but I wonder what evidence there is that the Secretary of State and the Treasury will be more expert in making a commercial decision than the management of Giro. I must confess that I find it a little difficult to accept the doctrine that the gentlemen in Whitehall know best.

5.24 p.m.

Lord MELCHETT

I am very grateful for the spirit in which the noble Lord, Lord Aberdare, introduced this Amendment and the other Amendments which stand in his name this afternoon. I accept that he moved the Amendment very much in the general spirit in which I spoke to the Bill on Second Reading. I must say that I found some favour with the remarks of the noble Lord. Lord Banks, as I did when he spoke on Second Reading, and agreed with a lot of it. I hope that I shall be able to answer the questions which he asked me, and meet the fears which have been expressed by the noble Lords who supported the Amendment.

I know that some peopie do not like credit cards very much at all. Indeed, I believe my honourable friend the Minister of State in another place said that when he was given a credit card he cut it up into small pieces and sent it back again. The noble Lord will know that I, coming from a banking family, would not sneeze at somebody who was prepared to give me up to 60 or 90 days' credit at no charge at all, which, if one pays one's bill promptly to at least some of the credit card companies, is what one is getting and I think it is a very useful service. So that my honourable friend and I do not see eye to eye on the merits of credit cards in general.

But, as the noble Lord, Lord Banks, pointed out, that is not what the Amendment is directed to. It is the Government's view that Giro account holders are no less entitled to the facility of credit cards than account holders with other banks. However, the Government have had no substantive discussions with Giro about the introduction of credit cards; neither has Giro put forward any firm detailed proposals so no firm views have been formulated about the timing of the introduction of credit cards by Giro. We have done no more than agree in principle to the introduction of credit cards. This enables Giro to explore the potential and prospects for such a service. If and when a time comes for Giro, in the light of its own commercial judgment, to submit firm proposals, they will he considered very carefully by the appropriate authorities, but I would stress—as I think the noble Lord, Lord Banks, said—that in the first instance this is a matter of the Giro management's own commercial judgment.

I certainly would not follow the noble Lord, Lord Aberdare, and I hope he would not expect any Member of this Government to follow him, in his rather stringent comments about the private sector credit cards—Barclaycard and Access. I do not have any figures on their profitability, but I am sure that in this field, as in others, the private sector is doing very well. We have stressed during the passage of the Bill that before the introduction of any new services by Giro, or before the extension of existing services, Giro will have to seek the approval of my Department, which is the Department of Industry, and of the monetary authorities—the "monetary authorities" being the umbrella term which I understand includes the Bank of England and other Government fiscal and monetary authorities. So I hope that that is clear. I do not believe that writing a statutory requirement into the Bill, as this Amendment would do, would add very much and I suggest that we should hesitate before putting such a statutory obligation uniquely on Giro of all financial institutions.

Lord CACCIA

Before the noble Lord sits down, he has not explained very clearly who the "appropriate authorities" are, but I accept his statement on that. But if they came to a decision about a new development such as this, would Parliament be informed? As I said earlier, this is a matter for public accountability and in some other cases, such as the nationalised industries, one of the troubles has been that the public accountability side comes to light very long after the event. So I should have thought it was in the interests of clarity from the beginning that an announcement was made in Parliament when such a decision was taken.

Lord MELCHETT

It might be convenient if I responded to that point, as the noble Lord phrased the question before I sat down. If I may, I should like to take this away and check on it and possibly write to the noble Lord. I am not clear whether he is asking me about credit cards in particular, or about any extension of Giro's services, but one can see that it would be very difficult and time-consuming to come to Parliament every time Giro proposed some minor change; and, indeed, very restrictive on its commercial ability to compete fairly with the banks. My view is that, unless some change in Giro's financial structure or arrangements was necessitated by an extension of services, it would not be obligatory upon the Government to come and inform Parliament. The noble Lord may have seen that there has been some reporting in the Press of Giro's discussions with Barclaycard about this matter, no doubt prompted by the passage of this Bill through Parliament, so I think it is very unlikely that any extension of this kind in Giro's services would be undertaken without the public being aware. As I have already said, we have given agreement in principle for Giro to explore the possibilities of a service, so Parliament is being informed at a very early stage.

Lord ABERDARE

I should just like to explain, particularly for the information of the noble Lord, Lord Banks, the reason why we have put down this Amendment. It is entirely to protect the taxpayer. It is public money that is involved here, for this is a public sector banking operation. If credit cards were to be issued, money would be put at risk. What we on these Benches are concerned about—I should have thought it would be astonishing if the Liberal Party were not equally concerned about it—is that there should be some Parliamentary control over this investment. In the case of a public sector operation, the only way we can control investment is through the Secretary of State. Heaven knows, we do not like giving more powers to the Secretary of State than are necessary! But there seems to be no other alternative in order to control the operations of Giro. It may be that there is another alternative but I have not yet understood it.

The noble Lord, Lord Melchett, has told us—and this would put some of my fears to rest—that before Giro goes into credit cards or into any new field of operation, it would have to obtain the approval of the Department of Industry and the financial authorities. If I could be told where this is laid down and why it has to happen—I take it that these are the appropriate authorities that the noble Lord, Lord Banks, asked about—and could be sure that this is so, and if I could also be told where it is to be found in any legislation, I should be perfectly happy to withdraw this Amendment. However, it was because we could see no way in which Giro could be coil-trolled and no way of ensuring that Giro moved in a slow, cautious way that these Amendments have been put down.

If the noble Lord can satisfy me about where the control lies, I shall be very pleased to withdraw this Amendment.

Lord MELCHETT

I think I can give the noble Lord that assurance. There are probably three sources of control. In the first case, I am advised that it is almost certain that under Section 41 of the Post Office Act the Treasury's statutory powers would be engaged were Giro to issue credit cards. It is hard to envisage the operation of a credit card scheme without the existence of a banking fund to meet debts as they accumulated. Such a fund would be required to be set aside as an asset under Schedule 2 to the Act and would require the Treasury's designation under paragraph 17 of Part II of that Schedule. As I said to the noble Lord, Lord Caccia, if financial rearrangement, restructuring or new funds were concerned, certainly this would have to be made public.

I am sure that the noble Lord, Lord Aberdare, knows better than I do that in the banking world these things are not done simply by people having recourse to their statutory powers. I understand that bankers are civilised people who consult each other, in particular the Bank of England, when measures such as the introduction of a new credit card are contemplated. Even if he has not met Mr. Singer, I am sure that the noble Lord would not expect him to undertake something like this without coming along to the Government and the Department of Industry and consulting the Bank of England. I understand that the Bank of England Act 1946 gives reserve powers to the Bank which, given the way people operate, are unlikely to be used but would enable them to call upon Giro to provide information and tell them what they were doing, were Giro not to behave in the way in which I am sure we all know it will behave.

Lord ABERDARE

Did the noble Lord say that there were three sources of control? He mentioned Section 41 of the Post Office Act and the Bank of England Act. Is there another one?

Lord MELCHETT

I hope that all my references to the gentlemanly way in which such business is normally conducted constitute by far the most powerful kind of control, and it is the third limb of my argument.

Lord ABERDARE

I suppose that this is the best we can do. I am not very happy with the "gentlemanly" argument. It may be all right but it is not the kind of thing on which one usually relies when considering legislation. If, indeed, there are restrictions under Section 41 of the Post Office Act, if the Bank of England have powers, if necessary, under the 1946 Act, and if the noble Lord gives me his assurance that these two provisions effectively mean that Giro could not issue its own credit cards without prior consultation with the Treasury—this does not cover the Department of Industry point, but I am rather more concerned that the Treasury should have the right to approve—then I am prepared to accept the noble Lord's assurance and beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

5.35 p.m.

Lord ABERDARE moved Amendment No. 2:

Page 1, line 12, at end insert— (4) The words 'banking services' in this section shall not include foreign exchange transactions where such transactions are not authorised by account holders without the approval of the Secretary of State and the Treasury.

The noble Lord said: I beg to move Amendment No. 2. In the way it is phrased this Amendment is on similar lines to Amendment No. 1. Again it follows on an Amendment which was tabled in another place but seeks to go a little less far. Instead of preventing any kind of foreign exchange transaction from being undertaken by Giro, it says that such transactions can be authorised only with the approval of the Secretary of State and the Treasury. Again this Amendment is put down with the idea that there should be some control and that Giro should proceed slowly and cautiously. It worries many of us that there should be the possibility of Giro dabbling in the foreign exchange market, at least without Treasury approval. I appreciate that Giro may have to carry out foreign exchange transactions in the course of dealing with its clients' business and I have no objection to that. We have sought to exclude that point from the Amendment by saying: where such transactions are not authorised by account holders". I do not understand, however, why it is necessary for Giro to have any further powers with regard to foreign exchange transactions.

When the matter was debated in another place, the Minister said that already Giro carries out a certain number of transactions of this kind in making settlements with other Giro services in Europe. Presumably the need for these settlements with other Giro services arises from transactions which have been authorised by account holders. In other words, Giro account holders have undertaken pertain transactions in other European Giro operations and there is a need for the two Giro authorities to deal together. That would be covered by my exclusion of: where such transactions are not authorised by account holders". If this is not so, where else do these foreign transactions arise? We are very sceptical about the need for Giro to operate in foreign exchange. It is a very dangerous field, as the noble Lord, coming from the banking family that he does, will appreciate. While allowing Giro to conduct the transactions which are absolutely necessary for the normal conduct of its business, we thought it would be rather more cautious to have certain restrictions placed upon Giro when it comes to investment in foreign exchange, or speculation (although "speculation" is rather an unpleasant word) and putting its own money, which I repeat is public dividend capital, into foreign exchange transactions when that is not strictly necessary. Once again this Amendment is designed to implement that cautious approach which the noble Lord, Lord Melchett, has rightly stressed. I beg to move.

Lord CACCIA

May I support this Amendment, introduce just one other argument, and comment also on what the noble Lord, Lord Banks, has said, with which I have some sympathy.

Surely the difference between Giro and a private bank is that Giro is acting for the community. It is that aspect, and the public accountability aspect, which to my mind suggests that certain special caution is desirable in the interests of Giro itself. Obviously there are certain foreign exchange transactions which one does not have to be in the banking business to know about: one has had only to read the newspapers in the course of the last year or two to know that they have been extremely expensive. That is one thing for a private bank, but it would be looked at rather differently if it were done by a bank acting for the community. Therefore, I shall be interested to hear what the noble Lord, Lord Melchett, says as to why the community in this case—the Giro itself perhaps—does not need a little special protection and care.

Lord MELCHETT

I am having an interesting afternoon; having spent time on the first Amendment standing up for Barclaycard and Access I was staggered to hear the noble Lord say that the difference between Giro and the others was that Giro was acting for the community. My understanding was that the role which the major clearing banks see themselves as playing was just that acting for the community. But if the noble Lord means that public money is in Giro I take the point, although I stress that all the banks are acting for the community, at least in one sense.

My understanding is that Giro is already involved in foreign exchange transactions of the kind which the noble Lord, Lord Aberdare, wishes to make subject to the approval of the Secretary of State and the Treasury. In view of what the noble Lord said about not wishing to extend the power of the Secretary of State more than was necessary—and indeed that certainly rings a bell in connection with the discussions which we had on the Community Land Act when it was passing through this House, and cries from noble Lords opposite that the powers of the Secretary of State should not be extended—I hope we shall be able to agree that the position as it is now is probably the best. It is not the Secretary of State who operates control of the Giro but the Bank of England. As I believe the noble Lord said, Giro needs foreign exchange currencies to enable it to make overseas payments on behalf of its customers. Giro also operates reciprocal account arrangements with other Giros overseas under the terms of the Universal Postal Union agreements. These transactions require Exchange Control consent which Giro has received from the Bank of England. The terms of these consents are restricted by the types of transactions and by the usual strict limits on daily holdings of foreign currency.

Those noble Lords who have experience of foreign exchange transactions will know that it is not possible to conduct business on a fully "covered" basis. Currency has to be purchased in round amounts as a result of the pattern of overseas transactions, but as I have explained Giro has to keep within strict limits imposed by the Bank of England. Should there be further developments in the foreign exchange activities of Giro, they will be subject to close control and scrutiny by the Bank of England, to whom Giro makes returns of its transactions in foreign currencies.

I hope the noble Lord will agree that the fact that the Bank of England is exercising this close and strict control over the activities of Giro in foreign exchange will be seen as preferable to the alternative which he has suggested; that is, that the Secretary of State and the Treasury should be responsible.

Lord ABERDARE

The noble Lord appeals to a soft spot in my heart, because I prefer the Bank of England to the Secretary of State. I am satisfied with that explanation and I think it is in line with my Amendment because the two types of business which the noble Lord said were already being conducted by the Giro in the foreign exchange field were either on behalf of customers, which presumably in my Amendment is covered by the words, where such transactions are…authorised by account holders", or reciprocal arrangements with other Giros overseas, which again could arise only because there were transactions undertaken and authorised by account holders. That satisfies me that what is happening at the moment in the Giro is what my Amendment would enforce upon the Giro. Therefore, if any new kind of operation in the foreign exchange field is subject to exchange control consent (which is what the noble Lord said) and the Bank of England has the controlling power over it, then I accept that assurance and I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 1 agreed to.

5.45 p.m.

Lord ABERDARE moved Amendment No. 3:

After Clause 1, insert the following new clause:

Duty to comply with Government directions

". It shall be the duty of the Post Office to comply with such directions as may be given to it in respect of its banking services by the Secretary of State with the approval of the Treasury."

The noble Lord said: This Amendment is again designed to try to discover from the noble Lord who were the so-called "appropriate authoritiess" who were to ensure the cautious and limited approach of Giro. During the Second Reading debate we heard much about the cautious and limited approach that Giro would be making in its future development and that it would be under the control of the monetary authorities. The noble Lord then sought to reassure us that we were totally wrong in thinking that there would be a sudden surge into the banking field.

I drew the attention of the noble Lord to the contrast between the Government's actions in regard to the Trustee Savings Banks and their actions in regard to the Giro. The Trustee Savings Banks are to be subject to a 10-year period of control by the Government which will be gradually relaxed until they have reached the full status of the existing clearing banks. Presumably what is right for the development of the Trustee Savings Banks would also be right in order to follow the advice of the noble Lord, Lord Melchett, and make sure that the Giro also moves forward in a cautious and limited way. When I tabled this Amendment I had certainly not understood who the authorities were which would ensure this and I could not see that there was anything in the Bill that gave anybody power to ensure that they only developed slowly and cautiously. Therefore, I tabled this Amendment.

In the course of discussing Amendment No. 1, we have heard that there are certain powers under the Post Office Act and under the Bank of England Act which can allow the so-called "appropriate authorities" to have some control over what Giro is doing. However, I should like to have an explanation of how the Department of Industry and the Treasury control the development of Giro. For example, in the course of the Second Reading debate, the noble Lord told us that at the moment personal loans are limited to £2 million and overdrafts to another £2 million. This is the sort of restriction and slow development which one would think was perfectly right; but where are these powers that enable the Secretary of State and the Treasury to enforce such limits? It may be that they are the same powers as the noble Lord mentioned in discussing the first Amendment. I tabled this Amendment because I could not find where the powers were to restrain Giro and to make sure that its development was cautious and slow. I beg to move.

Lord BANKS

It seems to me that the powers requested in this Amendment are too sweeping and that inevitably they must lead to day-to-day interference with the working of the Giro. Surely the 1969 Act, the present Bill as it now stands and the promised legislation to control the banks and the Giro will he sufficient, particularly in the light of the explanation of the working of this framework which was given by the noble Lord, Lord Melchett, although like the noble Lord, Lord Aberdare, I would welcome any further explanation that he is now able to give.

Lord MELCHETT

I think I have already dealt with the financial controls exercised by the Bank of England, normally by the usual processes of consultation and discussion, and the powers under the Bank of England Act, if that is called upon. My reluctance to mention that is the understanding that it is such an unheard of idea that anyone would have to have recourse to statutory powers, that it would not be normal to mention it. But, of course, in addition there are three powers of direction affecting Giro in the 1969 Post Office Act, under Section 11: the Secretary of State may give directions of a general character in the national interest; secondly, the Secretary of State may give directions, again of a general character, in order to remedy defects in the general plans or arrangements in the Post Office, and thirdly, the Secretary of State can give a specific direction relating to national security or external relations with other countries. That is a superficial summary of a quite lengthy passage in the Act of 1969, as I am sure the noble Lord, Lord Aberdare, knows. It is set out in Section 11, subsections (1), (2), and (3).

These powers already operate in respect of the banking services of the Post Office. Under Section 11(5) the Post Office is required to comply with them. The noble Lord, Lord Banks, touched on the possibility that this Amendment could give the Secretary of State power to make specific directions to the Post Office about Giro operations. I would agree with him if that was intended, but from the introductory remarks of the noble Lord, Lord Aberdare, I think it probably was not. But if that were intended, and the Amendment were included, it would be something very regrettable, and would, I agree with the noble Lord, Lord Banks, run the risk of leading the Secretary of State to interfere in a very detailed way with the Giro and in a way which would be quite unprecedented in the Statutes of the nationalised industries.

Lord ABERDARE

It was not intended in any way that the Secretary of State should interfere. It was intended, as the noble Lord realised, to make sure that there were powers so that Giro could not go headlong into banking services without some control, and someone being able to ensure that it moved cautiously. I think the noble Lord has satisfied me that these powers exist in the Post Office Act. Therefore, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 2 [Financial objective]:

Lord ABERDARE moved Amendment No. 4: Page 1, line 14, leave out ("concurrence") and insert ("approval").

The noble Lord said: This is a very simple Amendment. It is to leave out the word "concurrence" in the second line of Clause 2 and to insert the word "approval". At the moment, the Secretary of State from time to time may determine, after consultation with the Post Office, and with the concurrence of the Treasury, financial objectives to be achieved. Later on, in Clause 3(7), we have another reference to the Secretary of State acting with the approval of the Treasury. I do not know whether the words "concurrence" and "approval" mean exactly the same thing. If they do, I have no objection. But I have a feeling that "concurrence" is slightly weaker than "approval"; that you can act with someone's concurrence if in fact they do not object, but you cannot act with their approval unless you seek their approval first. Therefore, in order to strengthen this provision I hoped that the noble Lord, Lord Melchett, would accept the word "approval" instead of the word "concurrence". I beg to move.

Lord MELCHETT

As usual, the minds of the Parliamentary draftsmen are a mystery to mere mortals! I must say my first reaction was to agree entirely with everything said by the noble Lord, Lord Aberdare, but I am advised that there is absolutely no difference between "approval" and "concurrence", and indeed "consent", which I understand is also a similar term used in Statutes. Why one term is used in one place in the Bill and a different term in another, I do not know, but I can assure the noble Lord that there is no difference in the meaning, or difference in the control which will be exercised as a result of using one word or the other. I suggest that on that basis there is no real need to amend this particular word in the Bill.

Lord ABERDARE

In that case, I should have thought it would have been quite easy to accept my Amendment if there is no difference. However, rather than cause a lot of reprinting, and having been given the assurance that "concurrence" means "approval", I will beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

5.55 p.m.

Lord ABERDARE moved Amendment No. 5:

Page 1, line 20, at end insert— (2) It shall be the duty of the Secretary of State to inform both Houses of Parliament as soon as possible of any such determination. The noble Lord said: This may seem a rather strange Amendment to be moving in this House, but I was rather worried about subsection (1) of Clause 3, which reads: The Secretary of State may from time to time pay to the Post Office out of moneys provided by Parliament such sums, to be used by it for the purposes of its banking services, as he thinks fit. In the course of the discussions we have had on this Bill—which have been exhaustive in another place—we have discussed the question of public dividend capital, and particularly the matter of fair competition between the Giro and the present clearing banks. Obviously it is important that if that competition is going to be fair, they must operate pari passu so far as capital-structures are concerned. It seemed that, under this subsection, the Secretary of State was completely free at any time to increase the public dividend capital available to Giro without any reference at all to Parliament which, in this case, because it is a financial matter, is obviously applicable only to another place. I am talking to the wrong Amendment; I have been talking to Amendment No. 6.

Lord MELCHETT

Perhaps we can take Amendments Nos. 5 and 6 together. If the noble Lord, Lord Aberdare, would like to do this to make things move more quickly, I am happy.

Lord ABERDARE

I do not know whether that is allowed, because Amendments Nos. 5 and 6 relate to different clauses. I do not think I can do that, but I will make my remarks shorter when I come to Amendment 6.

Amendment No. 5 is a very much more simple matter. Clause 2 allows the Secretary of State to determine financial objectives for the Giro. Already we have been told that for the first three years of Giro—that is, the years up to 1977/78—on average the Giro growth is expected to obtain a return of 12½ per cent. on its public dividend capital. Obviously, it is of great importance so far as fair competition with the private sector is concerned if at any time the Secretary of State can alter that financial objective. It seems to us only right that, if he were to act under this clause and make a new determination, he should inform both Houses of Parliament as soon as possible after he had made such a determination. After all, Parliament has a responsibility here. This public dividend capital is provided by the taxpayer, and the return on it is of vital importance so far as fair competition is concerned. Therefore, surely if under the Bill the Secretary of State is able to make new determinations, he should inform both Houses of Parliament.

I am not asking for any control. I am not asking that either or both Houses of Parliament should agree, but simply that they should be informed every time a new determination is made. I beg to move Amendment No. 5.

Lord MELCHETT

I am afraid that this Amendment would single out the Post Office for special treatment in a way that I understand is not precedented in other Statutes for nationalised industries. In the nationalised industries legislation, only that relating to the British Steel Corporation and the British Airways Board contains provisions relating to return on capital. Neither Statute contains a provision such as the noble Lord, Lord Aberdare, has in mind in this Amendment.

Having said that, of course I fully recognise the legitimate interest and concern of Parliament. Indeed, in announcing during the Second Reading debate in another place the initial financial objective of 12½per cent.—and I reiterated it during the Second Reading in this House—and in announcing that objective well in advance of enactment, I think we can fairly claim to have met the spirit of the noble Lord's Amendment already. Certainly the House should know what progress the Post Office Giro makes as a bank, and this will be reported in the Post Office Report and Accounts, which I think we deal with in a later Amendment. In addition, I am happy to give the noble Lord an undertaking that we will inform Parliament if we decide to change the 12½ per cent. objective we have announced. I hope with that clear undertaking the noble Lord will consent to withdraw this Amendment.

Lord ABERDARE

I am quite content with that assurance. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 2 agreed to.

Clause 3 [Government investment in Post Office's banking services]:

6.1 p.m.

Lord ABERDARE moved Amendment No. 6: Page 2, line 1, after ("may") insert ("with the consent of the House of Commons").

The noble Lord said: I think I pretty well finished my speech on Amendment No. 6 when speaking to the previous Amendment. The object of this Amendment was simply to give Parliament, in this case the House of Commons, control over money which can evidently be given to the Post Office at any time by the Secretary of State. Admittedly, it is money that has already been provided by Parliament, but it is money which can well affect the matter of fair competition between the public sector Giro and the private sector banks, and it would seem to me that the House of Commons should have some say before this money is given to Giro. I beg to move.

Lord MELCHETT

The Post Office will receive its initial tranche of £13 million of public dividend capital under Clause 3(6) of the Bill. After that we have no further issues of public dividend capital in mind. Notwithstanding the pitfalls foreseen by the noble Lord in the field of credit cards and currency speculation, Giro's banking services are intended to be self-financing, and no future capital requirements directly linked with the extension of its banking services are foreseen The noble Lord may argue that that is all the more reason for accepting this Amendment. On the other hand, such a requirement to secure the consent of the House of Commons is not provided for in the other Acts that deal with public dividend capital which I mentioned, the Iron and Steel Act 1969 and the Civil Aviation Act 1971. Once again I think it probably would be undesirable to depart from those precedents. It would be singling out Giro in some particular way. I think I would need to be convinced of the justification for any particular treatment of Giro in this respect.

Moreover, any future issues of public dividend capital, if there were to be any—and, as I say, it is not our intention at the moment that there should be—would be provided for separately in a specific sub-head in one of my Department's Votes in an Estimate or Supplementary Estimate, and would thus be subject to the normal procedures in another place. The House of Commons will therefore be free to exercise its full rights over any future Departmental provision for this purpose. Lastly, noble Lords will note that in Clause 5 we provide for payments of PDC or dividends on that PDC to be reported to the Comptroller and Auditor-General, and through him to both Houses of Parliament. So I would suggest to the noble Lord that sufficient safeguards and scrutiny by another place do exist under the existing arrangements.

Lord ABERDARE

I am grateful to the noble Lord for that explanation. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 3 agreed to.

6.4 p.m.

Lord ABERDARE moved Amendment No. 7:

After Clause 3 insert the following new clause:

"Report

.—(1) It shall be the duty of the Post Office to make to the Secretary of State as soon as possible after the end of each accounting year a report dealing with the operations of its banking services during that year.

(2) It shall be the duty of the Secretary of State to lay before each House of Parliament a copy of each report received by him under this section."

The noble Lord said: I beg to move Amendment No. 7. The noble Lord has on two occasions, on the last two Amendments, quoted precedents, and he is obviously very keen on following what has happened in the way of precedent. I can only tell him that the wording of this new clause is drawn directly from the industry Act, with which he is very familiar, and I can only presume that on the basis that it is a perfectly good precedent he will accept the Amendment without further ado. But if that does not impress him sufficiently, I would also wish to argue that this is an important Amendment in its own right, because if the Giro is to move into the provision of all banking services it surely is right that those who are making use of those services, as well as Parliament, should be able to study a proper statement of accounts and an annual report. I know that the noble Lord will tell me that there is a section in the present Post Office report which is devoted to Giro, but I would suggest that rather more than that is required if the Giro is to take on this very special rôle. If it is to become a full hank, if it is going to compete, as the noble Lord has told us, with the clearing banks, then I think that the least it should do is to publish its own annual report and accounts separately from those of the Post Office.

After all, this Post Office Report is a very bulky document, and there will be many people who are interested only in the Giro account that is given in that large Report. Many of the customers of Giro particularly will not be in the least interested in the general Post Office Report; they will only want to know what progress Giro itself is making. I should have thought that in the interests of economy the noble Lord would not wish that every time anybody wanted to see what Giro was up to they would have to be sent this enormously bulky and costly document through the post, at considerable cost in postage. If the noble Lord is not able to accept this Amendment, I hope he will at least consider the point that the Giro section of this Report should be separate, or at least it should be separable, so that everybody who wants to see the Giro report and accounts does not have to receive the full bulky document. I beg to move.

Lord CACCIA

May I intervene for one minute to support that proposal made by the noble Lord, Lord Aberdare. During the course of this debate the noble Lord has shown much understanding and sympathy with the spirit of the Amendments. He may say that as there is a Commission already looking into the future of the Post Office, and as one of the items in that Commission's terms of remit may be the question of whether the postal services and the telecommunications services should be divided, this is not the moment to hive off another activity before these matters have been generally considered. All the same, I hope that he will give at least some sympathy to the last part of what the noble Lord, Lord Aberdare, said, that there might be a detachable portion, or some report which is not necessarily part of the longer Report of the Post Office, with postal services, Giro and telecommunications all lumped into the same Report.

In response to one of the noble Lord's earlier interventions, may I say that I am delighted that he, as a member of a banking family, accepts that the clearing banks provide a community service. That, I think, is not in question. There is a separate question though, and it is a serious one, and it is what has really moved the noble Lord, Lord Aberdare, and certainly moved me, to intervene here. That is the public accountability of a new service being offered for and by the community. As there have been other cases of nationalised industries where this public accountability has become a matter of public debate and question, then it is surely necessary—and I think the noble Lord has accepted this and shown that it will be carried out—that very great care should be taken in expanding the services of the Giro, so that these kind of subsequent criticisms may not arise.

Viscount BARRINGTON

Although not knowing a great deal about this matter I rise briefly to support this Amendment on me grounds which the noble Lord, Lord Aberdare, has put forward. From the little that I have heard of this question it seems that when we consent to a thing, when we approve of it, and when we concur with it, makes no difference. But one is frequently asked in this House to consent to things one does not necessarily approve of, and I agree that the less print one has to wade through in order to know whether one approves of a thing or not, the better. I should like to support the proposition that, if it is possible for this report referring to Giro to be separable, that would be an excellent idea.

6.11 p.m.

Lord MELCHETT

I had better set the Record straight. When the noble Lord comes to study Hansard tomorrow he will find that I was saying that it was my understanding that the clearing banks viewed their role as serving the community. I was not expressing any view of the Government on that, but merely sticking up for them as I felt that the noble Lord had, by implication, rather done them down. He has now put me straight on that. It was not my intention to pray in aid the Carter Committee and the fact that it is looking into the Post Office at the moment. I have not used it in defending the Government's position on any of these Amendments, and I do not intend to on this one.

I think that the noble Lord, Lord Aberdare, has a good point—certainly if he quotes the precedent of the 1975 Industry Act, although I am not sure that that is quite as applicable as the precedents in the other nationalised industries Acts that I was quoting; he has my considerable sympathy. In the White Paper on this Bill the Government said that they will require the Post Office to publish separate Giro profit and loss accounts and balance sheets, and the White Paper pointed out that that has already been done in respect of 1974–75. By "separate" I mean a distinct presentation of Giro's performance within the Post Office's annual report and accounts.

The requirement on Giro to produce separate accounts is not specified in this Bill because, in our view, sufficient statutory provision already exists in Section 42(1) of the Post Office Act 1969. Indeed, that may well be why we have not followed the excellent precedent set in the Industry Act in this matter. The noble Lord is no doubt familiar with the provisions of the 1969 Act which provide that the accounts and the descriptive commentary should be made available to the public, and therefore I shall not go into that in any detail. The noble Lord had economy very much in mind, and of course that is very much in the forefront of everyone's mind at the moment. The noble Lord suggested that with that in view Giro should publish a separate, self-contained report and accounts and not have them included in, or at least have them separable from, the Post Office's own overall presentation. I agree that that might be desirable, particularly in the future if and when Giro expands, as I hope it will.

I should like to take up one remark which the noble Lord made in passing when he said that I had said that Giro would be competing with the clearing banks. I think that even the staunchest advocates of Giro's prowess would not pretend that Giro on its own at its present size is competing with all the major clearing banks as an equal partner. Our concern during the passage of the Bill has been to ensure that Giro is in a position to compete fairly with the clearing banks, and that it should not be subject to extra or onerous burdens of control, or other burdens, which the clearing banks do not have to face. It is in that sense that we have seen Giro as competing with the banks. It may well be a sensible and desirable move for Giro to publish separate report and accounts when its banking business has grown. It might well be right to meet the specialist interest in its banking services by publishing separately an expanded extract from its accounts which are presented in the Post Office's annual report, where I think they would always have to be presented.

While it would reduce costs not having to send out the Post Office's own report when somebody merely wanted to see how Giro was doing, I think that the noble Lord would agree that there is a counter-argument, that to produce separate report and accounts for Giro would increase the costs. I certainly do not rule out the production of a separate report and accounts, and it may well be something which Mr. Singer himself would welcome. I would suggest to the noble Lord that this is something which I could undertake to draw to the attention of Mr. Singer and the Chairman of the Post Office. He has very rightly raised it and I have considerable sympathy with it myself, as long as there is shown to be a clear demand for what the noble Lord is suggesting and it is not going to be too costly. However, I hope that, if I will undertake to draw it to the attention of Mr. Singer and the Chairman of the Post Office, the noble Lord will not feel it necessary to press the Amendment this afternoon.

Lord ABERDARE

I am grateful to the noble Lord. I think that that would be perfectly satisfactory. I would only suggest that the section on Giro should be separable so that at least it can be sent out separately, but not that anybody should go to the great expense of producing an entirely separate report from that in the major Post Office report. I should like to thank the noble Lord for the assurances that he has given me on various Amendments, and the trouble he has taken with these Amendments. I should also like to thank the noble Lord, Lord Caccia, for his support and assistance in the course of this quite interesting little Committee stage. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Remaining clauses agreed to.

House resumed: Bill reported without amendment.