§ 2.57 p.m.
§ Lord Stodart of LeastonMy Lords, I beg leave to ask the Question standing in my name on the Order Paper.
§ The Question was as follows:
§ To ask Her Majesty's Government whether there are any legal barriers to making Scottish banknotes available in England.
§ The Parliamentary Under-Secretary of State, Department of Health and Social Security (Lord Glenarthur)My Lords, the note issuing powers of Scottish banks under the Bank Notes (Scotland) Act 1845 are confined to Scotland. By virtue of Section 1 of the Currency and Bank Notes Act 1954, together with Section 11 of the Bank Charter Act 1844, only the Bank of England may issue notes in England and Wales.
§ Lord Stodart of LeastonMy Lords, if my noble friend accepts the fact that there is a fairly widespread disappointment at the withdrawal of the £1 note, might he not consider that legislation which was introduced 130 years ago might not be totally relevant to present-day circumstances? Does he not regard it as slightly absurd that branches of Scottish banks in London or elsewhere in England are allowed to accept Scottish notes and give English ones in return, but are not allowed to re-issue Scottish notes? People might want them because they are slightly cleaner than the English ones and made of better paper. Would he not, finally, agree that it is surely the philosophy of this Government that if there exists a demand and somebody is ready to supply it, that supplier should be encouraged?
§ Lord GlenarthurMy Lords, coming, as I do, from Scotland, I share some of my noble friend's concern. But the answer to his first question is no, I am afraid not. Such a measure as he suggests would represent a radical departure from the long established policy of supporting the Bank of England's supervisory role in the banking system. The Government's interest is in the effective management of the currency as a whole. I do not think that any useful purpose would be served by allowing Scottish banknotes to be issued south of the Border.
With regard to the issue of Scottish notes through the head offices, or whatever offices they may be, of the Scottish banks in England, the answer is, no. The restructured group will, in the case of the Royal Bank of Scotland, be able to issue its own notes only in Scotland and only the Bank of England can issue notes in England. So I am afraid I cannot offer much help to my noble friend.
§ Baroness Burton of CoventryMy Lords, reverting to my original Question on 22nd November, when the noble Lord told the House that the Government had 277 consulted no consumer organisations on this matter of ceasing to issue the £1 note, can he give us some further information? Does he recall that in the debate last Monday the noble Lord, Lord Barnett, asked a question to which I do not think the Minister replied? Does he recall that the question from the noble Lord, Lord Barnett, concerned the system in the Treasury known as "roundings"—a description of the system used in the Treasury by which each line of figures was rounded up to the nearest million? The noble Lord, Lord Barnett, thought that the estimated extra cost of £3 million in issuing the £1 notes could well be swallowed up in these roundings. For the benefit of those of us not so well versed as the noble Lord, Lord Barnett, will the Minister reply?
§ Lord GlenarthurMy Lords, I am not sure that I can give the noble Baroness the answer that she wants on rounding now. I am sorry that she was not able to take part is that particular exchange herself. So far as consultation is concerned, the main point, I think, is that the consultation took place before the coin was actually issued. I cannot add more to what I have already said in reply to the questions raised on this issue, because the consultations did take place before the coin was first issued. There was, as I say, no consultation before the decision to withdraw the note was announced.
§ Lord O'Brien of LothburyMy Lords, is the noble Lord the Minister aware that the issue of banknotes is a highly profitable activity and that, in so far as the Bank of England derives profits from its issue of notes, they accrue to the Exchequer? Is he also aware that the issues of banknotes by the Scottish and Northern Ireland banks are very small, controlled by law and a survival of many private issues of banknotes in earlier days? Does he not agree that it would be entirely inappropriate to enlarge the powers of those private banks to issue banknotes in order to supplement the circulation in this country?
§ Lord GlenarthurMy Lords, yes. I agree with what the noble Lord, Lord O'Brien, says. There is the added fact of what one might call an interest free loan to the Exchequer through meeting the backing requirement that is necessary in the case of the Scottish notes.
§ Lord BeswickMy Lords, if the noble Lord says that he agrees with the noble Lord, Lord O'Brien, will he tell the House how he reconciles the statement of the noble Lord, Lord O'Brien, that it is profitable to issue £1 notes, or notes, with the statement that there will be a loss of £3 million if we continue to issue them?
§ Lord GlenarthurMy Lords, the cost relates to the returning of the notes to the bank, because, as we discussed the other day, they get extremely tatty and require to be replaced. That was the point that I made in the first place.
Lord Campbell of CroyMy Lords, as the notes issued by the three Scottish banks are legal tender south of the Border, have the Government arranged, perhaps through the Bank of England, for an increased production of these notes? Because there is no doubt that if the present plan is carried forward a great many will be brought south of the Border.
§ Lord GlenarthurMy Lords, that is a matter for the banks in Scotland themselves.
§ Lord LeatherlandMy Lords, will the noble Lord the Minister send me a few of these notes so that I can see what they look like?
§ Lord GlenarthurMy Lords, in exchange for coin, certainly.
§ Lord HughesMy Lords, will the Minister be pleased to hear that not every Scot will be dissatisfied with his original Answer? If what the noble Lord, Lord Stodart of Leaston, was asking did take place, Scottish banknotes, like Scottish beef, might be easier to find south of the Border than in Scotland.
§ Lord GlenarthurMy Lords, I note what the noble Lord says, as I am sure does my noble friend also.
Lord InglewoodMy Lords, can my noble friend say what is the position in respect of the Isle of Man paper? Does it circulate south of the Border like Scottish notes? Or is it different?
§ Lord GlenarthurMy Lords, not without notice.
§ Lord TordoffMy Lords, is it not a fact that the Isle of Man is producing plastic notes?
§ Lord GlenarthurMy Lords, yes. They have produced a plastic note, but that is another question.
§ Lord GlenamaraMy Lords, why do the Government persist with this change-over which apparently no one except the Treasury wants, particularly in view of figures published by the banks a few days ago which show that their additional costs in handling coins will far outweigh the alleged saving to the Treasury? In view of this, will not the Government reconsider the matter?
§ Lord GlenarthurMy Lords, no. I think that the facts speak otherwise. The circulation of the coin has increased by 25 per cent. in the last year.
§ Lord Stodart of LeastonMy Lords, may I encourage the noble Lord opposite who asked if he could see a Scottish banknote? If it is of interest to him, I may say that the last time that I showed 10 Scottish banknotes to an American I was able to get ten guineas from him in return.