§ 2.51 p.m.
§ Lord Spens asked Her Majesty's Government:
§ Whether, in the light of the explanations in the 1993 annual accounts of the Bank of England, there is any continuing support for "small banks". and whether the provision against loss already provided in the accounts of £115 million is likely to be increased for the current year.
The Minister of State, Department of Transport (The Earl of Caithness)My Lords, this is a matter for the Bank of England. The Bank made a public statement on 25th March 1993. Since then it has published its annual report and accounts for 1993 and the Banking Act Report for 1992–93, copies of which have been placed in the Library of the House and which contains more detail.
§ Lord SpensMy Lords, I thank the Minister for that parsimonious reply. Does he agree with me that the whole purpose of this undisclosed support operation by the Bank of England was to persuade depositors that all was well with their chosen banks and to induce them not to move? Does he further agree that a deliberate policy decision was taken riot to disclose this massive support operation or the perceived £25 million provision for losses in the accounts of the Bank of England for 1992, which is the year previously? Has the Treasury considered the implications of a prima facie breach of Section 47 of the Financial Services Act 1986 which, whether the Treasury likes it or not, is the law of the land and applies to the Bank of England just as much as it applies to the rest of us? May I remind the noble Earl—
§
Lord Spens: My Lords, does the noble Earl understand that the relevant ingredients of Section 47 are:
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Any person who … makes a statement … which he knows to be misleading, false or deceptive … for the purpose of inducing … another person … to enter into, or to refrain from entering into … an investment agreement"?
§ Lord SpensMy Lords, that person is guilty of a criminal offence. In the circumstances—
§ Lord SpensMy Lords, in the circumstances will the Minister instruct the Crown Prosecution Service, in the public interest, to investigate, with a view to initiating proceedings against the Bank of England, its directors and officers—
§ The Lord Privy Seal (Lord Wakeham)My Lords, I believe that the noble Lord is at the end of his question and that the House would like to hear the reply.
The Earl of CaithnessMy Lords, the matters to which the noble Lord refers are, as I said in my original Answer, for the Bank and its auditors. The purposes of the support operations which the Bank conducted were and are to avert more widespread difficulty in the financial sector, which would impact on other institutions, their depositors, businesses and the economy more generally. I shall, of course, look into some of the detail which the noble Lord mentioned in his many supplementary questions. As far as we are aware there is no reason to question the Bank's judgment.
§ Lord RichardMy Lords, will the Minister confirm that in 1991 the Bank faced losses in this area of £25 million and that last year it faced losses of £90 million? We do not know what the losses will be this year. While the Minister can take refuge in saying that it is a matter for the Bank of England, is not the Treasury at least concerned that the Bank of England can make a miscalculation costing £115 million?
The Earl of CaithnessMy Lords, that is a separate question from that on the Order Paper. I would not agree with the terminology used by the noble Lord the Leader of the Opposition in describing the operation. It is, of course, a matter for the Bank and the auditors.
§ Lord RichardMy Lords, with great respect, it really is not a separate question; it flows naturally from the Question on the Order Paper and the Answer which the Minister gave. Therefore, I ask him yet again whether the Government are not concerned by the fact that the Bank miscalculated, which cost it £115 million.
The Earl of CaithnessMy Lords, I would not agree with the noble Lord's terminology of "miscalculated". The Bank undertook a support operation, which is quite in order under the powers granted to it by the Act of Parliament and described lucidly in the Bingham Report.