HL Deb 02 April 1979 vol 399 cc1729-45

4.12 p.m.

Report received.

Clause 1 [Control of deposit-taking and meaning of "deposit"]:

The SOLICITOR-GENERAL for SCOTLAND (Lord McCluskey) moved Amendment No. 1: Page 1, line 17, leave out from ("deposit") to end of line 19.

The noble and learned Lord said: My Lords, I beg to move Amendment No. 1. This Amendment is associated, as your Lordships will recall from our discussions in Committee, with Schedule 1. The other Amendment to which I shall refer in this connection is Amendment No. 13 on the Marshalled List. We are discussing here the Girobank. The Government have throughout believed that Girobank must, because of its constitutional position as a nationalised industry, be exempted from the provisions of the Bill. Girobank, as part of the Post Office, is governed by the provisions of the Post Office Act 1969 and the Post Office (Banking Services) Act 1976. These place it under various statutory duties, reflecting the fact that ultimate responsibility for it lies through Ministers with Parliament. To make Girobank subject, under statute. to the Bank's supervision would confuse this constitutional position. But, as has been pointed out before, Girobank is subject to a system of supervision which is very like that set up by the Banking Bill and in which the Bank of England is closely involved. Of course, the competitive position is preserved by Girobank making contributions to the Treasury equivalent to what it would have paid under the deposit protection scheme. In the Government's view this provides effective supervision and competitive equality while preserving the constitutional position. I beg to move Amendment No. 1.


My Lords, we are grateful to the noble and learned Lord for putting again the argument which I believe does not hold one ounce of water. I am personally totally against the Amendment. I think that it is inequitable, unfair and in every way unnecessary. I feel that the situation was much better as it was originally. However, in view of the course of business that we are undertaking at present I have not much option but to accept it.

On Question, Amendment agreed to.

Lord McCLUSKEY moved Amendments Nos. 2 to 7:

Page 2, line 24, leave out ("body") and insert ("person")

Page 2, line 26, leave out ("body") and insert ("person")

Clause 2, page 3, line 22, leave out ("body") and insert ("person")

Clause 2, page 3, line 28, leave out ("body") and insert ("person")

Clause 2, page 3, line 30, leave out ("body") and insert ("person")

Clause 2, page 3, line 30, leave out ("it") and insert ("that person").

The noble and learned Lord said: My Lords, I beg to move Amendments Nos. 2 to 7. Amendment No. 2 is one of a number of associated Amendments; namely, Amendments Nos. 3, 4, 5, 6, 7 and 14. The Amendments, notably No. 14, will add stockbrokers and stockjobbers—that is, to say stockbrokers and stockjobbers in the course of business as such —to Schedule 1, thereby removing them from the ambit of the Bill. The Amendments to Clauses 1 and 2 which are effected here are merely paving Amendments to the substantive Amendment, No. 14.

During the Report stage in another place the Minister of State undertook to introduce an Amendment along these lines in this House, adding members of the Stock Exchange to Schedule 1. That is the effect of these Amendments. With leave of your Lordships I shall move Amendments Nos. 2 to 7 en bloc.


My Lords, I should like to welcome the fact that the noble and learned Lord has brought forward this matter, as an undertaking was given in another place. However, I should like to take the opportunity to mention one particular matter and to put it on record. As I mentioned on Second Reading, and in Committee, an unsatisfactory situation prevails as regards investment bankers. I think that the House probably does not appreciate the amount of loss that investment bankers can sustain as a result of being excluded from using the name "investment bankers". I raised the matter and I should like to quantify it. Although I am told, as usually is the case, that nobody will sustain any loss at all, I believe from looking at the situation that the case must be put the other way and that the City could, in fact, lose over £25 million worth of overseas business. It is just a point in passing, but something will have to be done about it later. However, I am grateful to the noble and learned Lord for bringing stockbrokers in at this stage.

On Question, Amendments agreed to.

Clause 27 [Maximum and minimum contributions]:

Lord McCLUSKEY moved Amendment No. 8: Page 27, line 4, leave out ("Subject to subsection (5) below").

The noble and learned Lord said: My Lords, I beg to move Amendment No. 8. I hope that the noble Lord, Lord Redesdale, will find it within himself, in the course of the afternoon, to welcome something I say wholeheartedly. Perhaps I may be lucky this time. Amendment No. 8 simply deletes the words: "Subject to subsection (5) below". What we are doing here is making an Amendment consequential upon the acceptance by the Government of an Amendment, Amendment No. 12, which was made against the wishes of the Government during the Committee stage in this House. That Amendment removed the power to increase, by order, the overall limit on contributions from 0.3 per cent. of the deposit base to a maximum of 0.6 per cent. As the power—which was contained in subsection (5)—has been removed, subsection (3) is no longer "subject to subsection (5) below". The Amendment therefore removes those words. Therefore, let it be quite plain that we are accepting something; and this is not the only matter—I shall refer to others. I hope that the noble Lord, Lord Redesdale, will acknowledge that.


My Lords, I make it a policy of playing hard to get! However, as regards this matter, I am most grateful to the noble and learned Lord, as it tidies up the situation. I am grateful that it has been done at this stage.

On Question, Amendment agreed to.

Clause 36 [Restriction on use of certain names and descriptions]:

4.19 p.m.

Lord McCLUSKEY moved Amendment No. 9: Page 39, line 29, leave out from ("in") to ("if") in line 31 and insert ("a country or territory outside the United Kingdom of the name under which the institution carries on business in that country or territory").

The noble and learned Lord said: My Lords, I beg to move Amendment No. 9. Considerable concern was expressed in Committee that the Bill as it stood would prevent branches of overseas llicensed institutions, other than EEC licensed institutions, from using in the United Kingdom a banking name by which their head office is registered in its country of origin. The noble Lord, Lord Redesdale, moved in Committee an Amendment—I think that it was Amendment No. 77—which, in the Government's view, was too wide in that it would have allowed certain overseas licensed institutions to use their banking name without any indication of their status as licensed institutions, and also to use banking descriptions without any restrictions. I indicated then that, while this went too far, the Government had always believed that the provision in Clause 36(8) permitting EEC licensed institutions the qualified use of their banking name should be extended to overseas licensed institutions generally.

That then is the effect of the Amendment which I now move. It would resolve any difficulty that might otherwise arise in respect of certain Australian savings banks to which the noble Lord, Lord O'Brien, made some reference in Committee. Therefore, I hope that this Amendment will be acceptable to the House. I beg to move.


My Lords, originally, I thought that the Amendment which we proposed in Committee was slightly better because the whole question was about the competitiveness of English institutions against foreign institutions. We are now at a point where that situation could continue for some time before we could finally tune it enough to be acceptable all round. Therefore, the best answer at this stage is probably to let anybody from outside come in. Of course, we must accept the point that the English institutions are at a disadvantage.


My Lords, there is one thing that I never allow to pass in this House, and that is the use of the word "English" when it means "British", and I shall not allow it to pass on this occasion.


My Lords, I am most grateful to the noble and learned Lord. However, I am President of the Royal Society of St. George and perhaps that word slipped out. I accept that it should be "British".

On Question, Amendment agreed to.

4.22 p.m.

Lord McCLUSKEY moved Amendment No. 10: Page 40, line 1, leave out subsection (10).

The noble and learned Lord said: My Lords, I beg to move Amendment No. 10. This Amendment has the effect of deleting a provision which was inserted at the Committee stage in this House, I think substantially, if not wholly, for the benefit of Thomas Cook Bankers Limited.

In moving that provision the noble Lord, Lord Selsdon, expressed concern that the New York agency of Thomas Cook Bankers Limited, and the Paris branch of Thomas Cook Bankers (France) Limited would lose their banking licences in New York and France respectively as a consequence of losing their banking names. That is not our understanding of the position. As I indicated at the time, as Thomas Cook Bankers takes no deposits, it will have no status under United Kingdom banking legislation, and this would remain a directly relevant consideration so far as the New York banking licence is concerned, even if means could be found of allowing the company to keep its name. The company will, however, be able to continue its present activities in the United States on the basis of a money transmissions licence.

So far as the deposit-taking branch in Paris is concerned, there is no reason to suppose that the loss of its banking name would in any way threaten the continuance of its French banking licence. Therefore, in the Government's view Clause 36(10) does not meet the concern about the New York banking licence and is not necessary to ensure retention of the French banking licence. As I indicated previously, the name "Thomas Cook" enjoys a high reputation in its own right and the deletion of the word "Bankers" seems most unlikely to have material implications for the company. Indeed, I understand that the United States dollar travellers' cheques in New York have recently been issued under the name of Thomas Cook Incorporated.

It is also extremely difficult to conceive of any provision that would accommodate Thomas Cook Bankers without being so tight as to be unacceptably discriminatory or even hybrid, or so loose as to open up a large loophole in the banking names policy. The terms of Clause 36(10) would, for instance, allow any subsidiaries of foreign recognised banks—whatever their status or the nature of their activities—to set up in the United Kingdom under a banking name that they enjoyed on 9th November 1978. That would be highly undesirable in itself and could raise real difficulties of discrimination against EEC institutions and our own domestic institutions. The Government therefore recommend the House to delete this provision by accepting the Amendment which I now move.


My Lords, I am very grateful to the noble and learned Lord for those remarks. We are really dealing here with a question of opinion. I have been advised that Thomas Cook probably would be adversely affected, but my hereditary inclinations make me more inclined to accept Scottish rather than English advice on this. However, I would remind the noble and learned Lord that it was a Government—not his Government—which sold Thomas Cook to the private sector with a banking licence, and goodwill was paid for that. One of the conditions at that time was that Thomas Cook should do all they could and should definitely look after the interests of their employees. If the noble and learned Lord says that there will be no loss of banking licence in France or America, that is good enough for me personally, and I hope that it is good enough for Thomas Cook. In fact, should they lose their licence, perhaps they might approach the Government again for some form of compensation.


My Lords, let me make myself quite clear. I was not saying that there would be no loss; I was saying that the result of the Bill would not produce any such loss.


My Lords, the difference between cause and effect can either be a short journey or a long and twisted one. In this case, if Thomas Cook did lose their licence it would almost certainly be on account of this Bill. However, despite its flaws, I think that it is a good Bill and I certainly withdraw my objections.

On Question, Amendment agreed to.

Clause 38 [Regulation of interest rate quotation]:

4.26 p.m.

Lord McCLUSKEY moved Amendment No. 11:

Leave out clause 38 and insert the following clause:

((1) In section 74 of the Consumer Credit Act 1974 (certain agreements excluded from Part V of that Act) after subsection (3) (certain overdraft agreements excluded only where the Director General of Fair Trading makes a determination) there shall be inserted the following subsection: (3A) Notwithstanding anything in subsection (3)(b) above, in relation to a debtor-creditor agreement under which the creditor is the Bank of England or a bank within the meaning of the Bankers' Books Evidence Act 1879, the Director shall make a determination that subsection (1)(b) above applies unless he considers that it would be against the public interest to do so"; and in subsection (4) of that section (certain agreements in writing falling within subsection (1)(b) or (c) subject to regulations as to form and content) for "(1)(b) or (c)", in each place where it occurs, there shall be substituted "(1)(c)".

(2) Nothing in sections 114 to 122 of the Consumer Credit Act 1974 (pledges) shall be taken to apply to bearer bonds and, accordingly, in paragraph (a) of subsection (3) of section 114 of that Act (exclusion of pledges of documents of title) after the word "title" there shall be inserted the words "or of bearer bonds".

(3) In section 185(2) of the Consumer Credit Act 1974 (which relates to dispensing notices given by one of two or more debtors to whom running-account credit is provided) at the end of the proviso there shall be added the following paragraph: (c) a dispensing notice which is operative in relation to an agreement shall be operative also in relation to any subsequent agreement which, in relation to the earlier agreement, is a modifying agreement".")

The noble and learned Lord said: My Lords, I beg to move Amendment No. 11. I must point out to the House that on the Marshalled List we have an Amendment No. 11 which is to leave out Clause 38 and to insert a new clause. However, with leave, I shall now move in substitution for Amendment No. 11 a typescript Amendment which has been circulated and made available to those noble Lords who are interested.


My Lords, it has not been made available to all noble Lords.


My Lords, I understand that from a sedentary position the noble Lord, Lord Redesdale, is saying that he has not seen it. However, he is now waving a typescript Amendment at me, so I think he now has it. I should explain for his benefit, so that he may quickly catch up with the rest of us, that the only difference between the Amendment which appears on the Marshalled List as No. 11 and the one which is typed is that following upon the new subsection which is numbered 3A, there are added four lines, the purpose of which I hope to explain.

Clause 38, which was inserted at Committee stage, exempts certain recognised banks from certain provisions of the Consumer Credit Act 1974. The clause appears to apply to a very wide range of agreements and, moreover, in its application only to certain recognised banks, runs counter to the principle of the 1974 Act that there should be no institutional discrimination. The Government maintain their view that for these reasons it should be removed from the Bill. The Government accept, however, that there are aspects of the 1974 Act over which the banks are seriously concerned and that these include their uncertainty over the operation of the provision on in Section 74 to exempt from Part V of that Act debtor-creditor agreements enabling the debtor to overdraw on a current account. The combination of fluctuating daily balance and fluctuating interest rate that characterise overdrafts on current accounts make it extremely difficult to apply these provisions of the Consumer Credit Act to them and, although the Banking Bill is not perhaps the most appropriate vehicle for dealing with the matter, the Government accept that on the merits of the case there should be a presumption in favour of exempting overdrafts, whether or not these are the subject of a written agreement.

It may be helpful if I were to attempt to explain how the Amendment will work. Under the Act, the provision exempting overdrafts from Part V applies only where the Director General of Fair Trading so determines. Such a determination in terms of the Act, first, may be made subject to such conditions as the Director General thinks fit and, secondly, shall be made only if the Director General is of opinion that it is not against the interests of debtors.

The clause to which I now speak—the one circulated in typescript to almost all noble Lords—requires the Director General to make such a determination where the creditor is the Bank of England or a bank within the meaning of the Bankers' Books Evidence Act 1879, unless he considers that it would be against the public interest to do so. I should perhaps explain to your Lordships, just in case some have not noticed, that in fact the appropriate section of the 1879 Act is amended by Schedule 6 to the present Bill, so that the definition of the bank is now contained in that Schedule to the 1979 Bill. This definition, as so amended, includes recognised banks, licensed institutions, Trustee Savings banks, municipal banks, the National Savings Bank and National Girobank. It is therefore non-discriminatory. It applies to all institutions likely to operate genuine current account overdrafts. The Amendment ensures that the Director General's determination will also apply to overdrafts which are the subject of a written agreement. Indeed, that is the effect of the four lines added in the manuscript Amendment.

At the same time there are other parts of new Clause 38 to which I should draw attention. The new subsection (2) is the first of these. Sections 114 to 122 of the Consumer Credit Act 1974 will, when operative, govern the taking of articles in pawn. It was never intended that these provisions should apply to bearer bonds. There is however a doubt whether "a pledge of documents of title" in Section 114(3)(a) exempts bearer bonds. The Amendment is intended to remove that doubt. It ensures that the Provisions relating to articles taken in pawn will not apply to bearer bonds.

I turn now to the proposed new subsection (3). Section 78(4) of the Consumer Credit Act 1974 will, when opera- tive, require the creditor under an agreement for running-account credit regulated by the Act to give the debtor statements showing the state of the account at regular intervals. I understand that the banks accept in principle that this is a reasonable requirement. There is, however, frequently more than one debtor under an agreement, as when there is a joint agreement for husband and wife. It will normally be wasteful for both debtors to receive separate statements. Section 185 makes provision for dispensing notices under which a joint debtor may authorise the creditor not to give him a periodical statement of account.

Section 185(2) states that, the dispensing notice shall have effect accordingly until revoked by a further notice given by the debtor to the creditor…". It appears, however, that, where an agreement is modified through, for example, the credit limit being increased, the dispensing notice will lapse. The Amendment will make certain that dispensing notices will not lapse in such circumstances. The provisions, so far as they relate to the new subsections (2) and (3), are of a technical character and I understand that they are generally welcome. I hope that your Lordships will give them the same welcome that I expect your Lordships will give to the first part of the proposed new clause. I beg to move.


My Lords, while not quite giving the Amendment a standing ovation, at the same time we are most glad that this matter has been taken care of. It proves the point that it is worth pressing and pressing despite all the difficulties that are always said to exist. It is one good part that we now have in the Bill, as well as—I hope—something which will be accepted later on. The Banking Bill now actually covers some important aspects of banking which have been neglected for some time. I am grateful for the clear explanation that has been given. I had not had a copy of this, but I knew of its contents, which was the point I was trying to make. I am grateful that the overdraft situation has been taken care of as regards the Consumer Credit Act, and for the tidying up that has been done by means of the two other bits written into this Bill. I am grateful for the trouble that has been taken, and I am glad that it is now in the Bill.


My Lords, in the unavoidable absence of my noble friend Lord Seebohm, who first raised this matter on Second Reading with my strong support, I should like on his behalf and my own to endorse the welcome given by the noble Lord, Lord Redesdale, to these changes which the Government have made. I think it shows that they have been prepared to approach this important problem in a fair and open-minded way. It is true that it could be said not to be entirely relevant to this Bill, but it was a great opportunity not to be missed. I am extremely glad that we have not missed it.

Not only will the whole banking system be grateful, but I believe that its customers will also be grateful. Among those customers of course none are more valuable than those in your Lordships' House, some tiny minority of whom may from time to time need an overdraft and will find that they can continue to secure it on the present easy terms.


My Lords, I too should like to support this Amendment. Better something than nothing, and better late than never. Many people would regard this as one of the most important parts of the Bill, although it was not intended to be part in the beginning. It is unfortunate that matters such as this should be raised by the Government so very late in the day. I am sure it was as a result not of pressure from the Cross-Benches or from this side but of logical reasoning. I would hope that in future logic may have a higher priority in Government drafting.


My Lords, in relation to that last point, of course, the point was raised not by the Government but by the noble Lord, Lord Seebohm, at Second Reading, and also at the Committee stage. The Government's view has always been, and still is, that this is not perhaps the most appropriate vehicle for this change. None the less, let me join in welcoming my own Amendment. We should be unanimous about it. It is worth doing, and it is to be done if your Lordships approve. I congratulate noble Lords on their persistence not just during the passage of this Bill but for years past, as this has a long history. I apologise to the noble Lord, Lord Redesdale, for not getting the matter to him sooner, but there has been a good deal of consultation and it was that consultation which produced the addition which required the manuscript Amendment. Better late than never. Let us hope that we have got it right this time.

On Question, Amendment agreed to.

4.35 p.m.

Lord REDESDALE moved Amendment No. 12:

After Clause 46, insert the following new clause:

Defence of contributory negligence

".In any circumstances in which proof of absence of negligence on the part of a banker would be a defence in proceedings by reason of section 4 of the Cheques Act 1957, a defence of contributory negligence shall also be available to the banker notwithstanding the provisions of section 11(1) of the Torts (Interference with Goods) Act 1977."

The noble Lord said: My Lords, I raised this on Second Reading. It is an exceptionally complicated Amendment which was argued at great length by expert and learned noble Lords. I would never dream of having the impertinence of trying to speak to this Amendment to the noble and learned Lord, Lord McCluskey, but I wish just to introduce this Amendment in the absence of my noble friend Lord Colville of Culross. I think that it is an important Amendment which takes care of something which slipped through in the Torts (Interference with Goods) Act 1977. I am most grateful that this has now had consideration, and I am also personally grateful to the noble and learned Lord, Lord McCluskey, for taking such an interest in this particular Amendment. I beg to move.


My Lords, I too am grateful that noble Lords have persisted with this. I did not, despite my training as an advocate, manage to conceal my lack of sincerity as I spoke the last time on the Government line. There is no reason why I should not go public on the matter at this late stage; no one can do me any harm now. The point was worth making, and I am happy to say that behind the scenes I managed to press the point.


My Lords, may I just raise one point on this before the noble and learned Lord sits down? I have put down a change in the Long Title which I do not think is now necessary in view of the noble and learned Lord's Amendment No. 15.

On Question, Amendment agreed to.

Schedule 1 [Exceptions from prohibition in section 1]:

Lord McCLUSKEY moved Amendment No. 13:

Page 54, line 6, at end insert— ("2A. The Post Office.").

The noble and learned Lord said: My Lords, I spoke to this in connection with Amendment No. 1. I beg to move.

On Question, Amendment agreed to.

Lord McCLUSKEY moved Amendment No. 14:

Page 54, line 19, at end insert— ("7A. A member of The Stock Exchange in the course of business as a stockbroker or stockjobber.").

The noble and learned Lord said: My Lords, I have already spoken to this Amendment as well. I beg to move.

On Question, Amendment agreed to.

In the Title:

Lord McCLUSKEY moved Amendment No. 15: Line 10, after ("deposit") insert ("to amend the Consumer Credit Act 1974 and the law with respect to instruments to which section 4 of the Cheques Act 1957 applies").

The noble and learned Lord said: My Lords, this Amendment is associated with Amendments Nos. 11 and 12. The first part of the Amendment is in respect of new Clause 38 and the second deals with the new clause after Clause 46, which creates for the benefit of a collecting banker an exception to the rule that the tort of conversion is one of strict liability. The noble Lord, Lord Redesdale, mentioned Amendment No. 16 and in my judgment he is right that if the House accepts Amendment No. 15 it will not be necessary for him to move No. 16.


My Lords, I am grateful to the noble and learned Lord for that explanation, though I am sad it should take so many words to do what I should have liked to do by using only one.

On Question, Amendment agreed to.

[Amendment No. 16 not moved.]

Then, Standing Order No. 43 having been suspended pursuant to Resolution:

4.42 p.m.


My Lords, I beg to move that this Bill be now read a third time.

Moved, That the Bill be now read 3a.—(Lord McCluskey.)


My Lords, I wish to thank the noble and learned Lord, Lord McCluskey, for his kindness and attention, and to a degree his co-operativeness, on the Bill. He was not so co-operative as I should have liked, but one cannot have everything in this world. I wish to take this opportunity to raise a couple of points and I shall do so briefly because I do not desire to delay your Lordships.

I mentioned earlier the question of the loss that will be sustained by certain organisations, and I wish to recap. on that point. First, there is the question of the investment bankers. While it may not be Lord McCluskey's opinion, I believe they will sustain loss, and unfortunately an Amendment on this point moved by my noble friend Lord Selsdon was not found acceptable by the noble and learned Lord; a pity, but we cannot go into that now.

Another aspect which must be sorted out at a later stage arises from something that was told me only this morning, and that is the question of licensed institutions. I talked at some length about banking services and about how certain members of the Finance Houses Association and other organisations will be prevented from using the words "business services" and "banking business", although they can call themselves a bank when it comes to a law case. As I pointed out, they are not allowed by law to call themselves a bank.

Now this question needs to be answered: what are they in the eyes of those important people, the Inland Revenue? I am told that in regard to licensed institutions which carry on a banking business —they are not allowed to say that, although they are providing banking services—if they provide a business overdraft, there is some question whether the interest on the overdraft will be recognised by the Inland Revenue as allowable against tax. That is one of many points that will have to be taken up at a later stage, before appointed days are made.

I have not concealed my feeling that the Bill is in some ways unnecessary. I spoke of the question of the fund and a number of other aspects, but this is not the time to go at length into those matters. I simply wish to reiterate that the Bill will allow the machinery to be set up, but much remains to be done. Again, I thank the noble and learned Lord and other noble Lords who have taken part in debating the Bill.

4.45 p.m.


My Lords, in responding briefly to the noble Lord, Lord Redesdale, I would simply say, first, in connection with the question whether an institution is a bank, that any representations made between now and any date of commencement will be considered. However, I think Lord Redesdale will find the answer to his question in Clause 36(2) where what is being provided for is that: Nothing in this Part of the Act … or elsewhere … affects the determination of any question whether a licensed institution or other person is a bank or banker"; and then we have the words: for purposes other than those of this Act". Those are the important words which I think answer his point.

On the general matter, I am grateful not only to noble Lords who have taken part in the proceedings and from whom I have received letters and to whom I have written, but to the House as a whole for the general welcome that has been given to the Bill, and for your Lordships' co-operation in getting it into this form with such speed.

On Question, Bill read 3a with the Amendments.


My Lords, I beg to move that this Bill do now pass.

Moved, That the Bill do now pass.—(Lord McCluskey.)

On Question, Bill passed, and returned to the Commons.