HL Deb 04 May 1999 vol 600 cc673-4

10.53 p.m.

Lord McIntosh of Haringey rose to move, That the draft regulations laid before the House on 30th March be approved [15th Report from the Joint Committee].

The noble Lord said: My Lords, these regulations are part of a series of six that accompany the transfer of responsibility for the Central Gilts Office (CGO) from the Bank of England to CRESTCo. Their purpose is to ensure that investors in certain local authority stocks can continue to use the CGO system to transfer their holdings after the merger has taken place. They amend the Local Authority Stock and Bonds Regulations 1974 and are necessary because the 1974 regulations contain a definition of the CGO which assumes that it is the responsibility of the Bank of England.

I would not normally expect to have to trouble your Lordships with what is by any standards a routine and technical matter. However, the power to amend the 1974 regulations was repealed in 1989 when the law relating to the raising of capital by local authorities was changed. The repeal was understandable at the time but leaves the Government in the awkward position of needing to amend the 1974 regulations but not being able to use the negative resolution power under which the regulations were originally made.

The only option now is to use the wide-ranging powers to amend the law relating to security settlement which the Treasury has under Section 207 of the Companies Act 1989. Because these powers are wide ranging they are quite properly subject to the affirmative resolution procedure. I am pleased to be able to say, however, that the regulations themselves are mercifully short and simple and seek to do two things only. First, they omit a definition of the CGO which will be redundant after the merger; secondly, they amend the definition of those who are entitled to use the CGO service to one that is consistent with it being the responsibility of CRESTCo. I commend the regulations to the House.

Moved, That the draft regulations laid before the House on 30th March be approved. [1.5th Report from the Joint Committee]. —(Lord McIntosh of Haringey.)

Lord Higgins

My Lords, there is no limit to the versatility of the noble Lord, Lord McIntosh of Haringey. At the beginning of business today he was discussing whether or not 70 year-olds should be allowed to hire cars. He concludes with these regulations having survived a large number of exchanges in the course of the day. Indeed, I am beginning to wonder who was responsible for the regulations in 1974. It depends where they were in relation to the general elections of those days. I myself may have been responsible.

I have one or two points to put to the noble Lord. Essentially, as 1 understand it, the regulations transfer responsibility for these matters from the Bank of England to CRESTCo Limited. I am not clear what the statutory status is of CRESTCo as against the Bank of England, which obviously has a unique position. But what concerns me particularly—it is always helpful when the explanatory note is longer than the order itself—is that the arrangements made effectively switch the transfer of these stocks from a situation where they may be transferred in writing to one where they are transferred by computer. I believe that that is one of the implications of the regulations. If so, one should be a little concerned, given all the problems associated with the millennium bug.

Many problems may arise in that context. If the only record of whether a stock is owned by a specific organisation or person is on a computer, which may go wrong at the millennium, many difficult questions are raised. If that is so, is there a case for at least some written record to he printed out of the computer just ahead of the year 2000? That is my only major concern. Other than that, the noble Lord referred to six other orders. Perhaps he can give some indication of what they are going to cover.

Lord McIntosh of Haringey

My Lords, I am grateful to the noble Lord for his comments. CRESTCo is the corporate security settlement service which was recommended by the Bank of England security settlement priorities review and received near unanimous support from the market. The Government were not involved in the setting up of the Central Gilts Office and legislation necessary to facilitate its setting up was not expressed in terms which required a continuing operational involvement by the Bank.

CRESTCo is a recognised clearing house under the Financial Services Act 1986 and is the operator of the relevant system approved under the uncertificated securities regulations of 1995. The public interest in CRESTCo is catered for by the appointment of Mr. Mike Williams, the chief executive of the debt management office, and Mr. Alastair Clark, an executive director of the Bank of England, to the board of CRESTCo.

The noble Lord referred to the fact that the settlements tend to take place by computer nowadays and the consequent risk of the millennium bug. I can assure him that hard copy records will be maintained. I am not saying that nothing will go wrong; I never say that about the millennium bug. But the noble Lord's specific fear about the lack of hard copy is covered in the plans.

Does the noble Lord really want me to read out the other five orders? They have terribly complicated names. They were listed in the House of Commons procedures on 21st April which the noble Lord can inspect if he so wishes. I commend the regulations to the House.

On Question, Motion agreed to.

House adjourned at eleven o'clock.