Northern Ireland Banknote (Designation of Authorised Bank) Regulations 2020
Baroness Penn
To move that the Virtual Proceedings do consider the draft Northern Ireland Banknote (Designation of Authorised Bank) Regulations 2020.
Baroness Penn (Con)
My Lords, in the UK, seven banks currently hold the authority to issue commercial bank notes: four in Northern Ireland and three in Scotland. One of these banks, Ulster Bank, is part of the RBS Group and is a direct subsidiary of NatWest Bank. Later this year, the RBS Group will undertake a planned restructure, which will involve the removal of Ulster Bank’s banking licence and its transfer into the NatWest legal entity. NatWest will continue to issue commercial bank notes under the Ulster Bank brand.
The issue of commercial bank notes in Northern Ireland, alongside Bank of Ireland AIB Group, trading as First Trust Bank in Northern Ireland, and Northern Bank, trading as Danske Bank, is a tradition with cultural importance that the Government support. This instrument is laid before the House to ensure its continuance.
With the consent of the Bank of England, this instrument will transfer the authority of issuance from Ulster Bank to NatWest Bank, and represents an established routine procedure that has been carried out before in 2017 to transfer the same authority between two Scottish entities of the Royal Bank of Scotland Group. As before, RBS and the Bank of England have remained in contact with Her Majesty’s Government throughout the instrument’s process and are supportive of the measures put before the House today. Importantly, this statutory instrument will ensure that any bank notes printed or issued by Ulster Bank will remain valid, with their authority transferred to NatWest, thus retaining customers’ confidence that they will receive value for the notes they hold. I beg to move.
Lord Hain (Lab)
My Lords, I thank the noble Baroness, Lady Penn, and welcome this instrument, which brings a practical reform necessary for Ulster Bank Ltd to continue to be an authorised bank issuing commercial bank notes in Northern Ireland through National Westminster Bank.
I must raise an urgent Northern Ireland issue as well. Last year, legislation which had all-party and Cross-Bench support was initiated in this House to provide modest financial payments to men and women who suffered the most horrendous physical and psychological injuries through no fault of their own during the Troubles in Northern Ireland.
Section 10(2) of the Northern Ireland (Executive Formation etc) Act 2019 imposed a statutory obligation on the Executive Office in Northern Ireland to have a scheme up and running by Friday 29 May 2020 so that claims could be made and payments quickly processed to these victims. However, not only is the scheme not operational, none of the structures to support it are in place as, again, they were statutorily required to be over three months ago, by 24 February 2020—that is, before the Covid-19 lockdown.
The Executive have palpably failed, indeed refused, to comply with the law. Even more damning is the heartless treatment of some of the most vulnerable victims of Northern Ireland’s violent past, who are now part of its living, tortured legacy. Elderly men and women, permanently disabled through no fault of their own by terrorist attacks some 50 years ago, are confined to wheelchairs or on prosthetic limbs, or are blind and live in permanent pain; and, because of underlying medical conditions as a result of their injuries, they now also live in constant fear of contracting Covid-19.
I and other noble Lords have met members of the WAVE Injured Group, whose campaigning over many years was the driving force behind the 2019 legislation initiated in your Lordships’ House. They had been expecting a pension to help them better survive in the last period of their lives, backdated to the Stormont House agreement of December 2014, but they discovered last week, only days before the scheme was due to commence, that nothing had been done—nothing had been done. As you would expect, they are devastated.
The Executive Office says that the Government should fund the scheme, and the Government say that funding should come from the Northern Ireland block grant. If that is indeed the cause of the impasse, there needs to be an urgent adult conversation to resolve it. Either way, it is completely unacceptable that the law has been flouted in this way. I ask the Secretary of State for Northern Ireland, as the sponsor of the 2019 Act, to have urgent discussions with the First Minister and Deputy First Minister of Northern Ireland to resolve this shameful impasse. I hope that the Minister will respond positively on this matter. How on earth can politics have sunk so low that a severely injured victim, maimed for life in a terrorist atrocity decades ago, has now been forced to put the devolved Northern Ireland Administration on notice of judicial action, and possible judicial review, to force them to honour their moral and legal obligations?
Lord Bruce of Bennachie (LD)
My Lords, I have, of course, supported the campaign by the noble Lord, Lord Hain, on behalf of those suffering historical injuries, but I will concentrate on the instrument in question. This is relatively uncontentious and arises as a result of the restructuring of the Royal Bank of Scotland Group, which is, of course, majority-owned by the Government. In Northern Ireland, as in Scotland, the public are attached to their own local-issue bank notes and are resistant, I would suggest, to any reduction, although the number of issuing banks has been cut over the years. So can we be assured, in the Scottish context, that there will be no move to transfer the note-issuing rights of the Royal Bank of Scotland to NatWest in Scotland? Can the Minister indicate whether the instrument will lead to any change in the number and value of Ulster Bank notes in circulation? Can the Minister tell us the current value and volume of Northern Ireland-issued notes altogether, and what proportion are held or issued by Ulster Bank? In this context, will existing notes be withdrawn and replaced with designs incorporating the NatWest logo? Given historical problems, are the Government and the Bank of England satisfied that measures are in place to eliminate fraud or counterfeiting, and that they are robust?
Although during lockdown there has been a reduction in cash transactions, will the Minister assure us that, as lockdown eases, there will be adequate supplies of cash and that Northern Ireland notes will be as freely available as before? Is there any consideration that, as the economy starts moving again, there will be sufficient cash for what might well be a much greater demand than has been the case in the past? Many will seek the assurance of cash transactions rather than credit. Is that likely to lead to raising the amount of Northern Ireland banknotes issued above the most recent aggregate, which I understand was £2.86 billion?
Will the announcement by Allied Irish Banks that it will cease to issue its own banknotes in Northern Ireland after the end of this month affect the total value of notes issued? Will other banks be able or willing to take up the difference, or will it just lead to more Bank of England notes in circulation in Northern Ireland?
As banks in Northern Ireland also operate through associated companies in the Republic of Ireland, is the Minister satisfied that resources to support bounce-back loans are adequate? What arrangements, if any, are in place between the UK Government and the Government of the Republic to underwrite these loans?
What responsibility for any of this lies with the Northern Ireland Executive and Assembly? I know that in my own lifetime—the history of note issuing in Scotland and Northern Ireland goes back way before that—issuing banks have disappeared: I remember the North of Scotland Bank and the British Linen Bank, both of which are long gone. Nevertheless, people wish to see this continued. The fact that note issuing is authorised and monitored by the Bank of England was a detail to which I referred in a pamphlet I produced when I was Treasury spokesman for my party, making the case for the operational independence of the Bank. I suggested that, as part of the reform, it should be renamed the “United Kingdom Reserve Bank”, because that is effectively what it is.
The reality is that Scotland and Northern Ireland have benefited in the past few months from massive injections of funds from the Bank and the Treasury. It has shown that we are better together and raises the question of how Scotland could have coped on its own. Northern Ireland is even more exposed. If the ending of lockdown coincides with a no-deal Brexit, the resources of all the components of the United Kingdom might be stretched to breaking point.
Lord Rogan (UUP)
My Lords, I thank the Minister for outlining the purpose of what we are discussing today. There are many reasons why Northern Ireland holds such a special place at the heart of our United Kingdom. One must surely be that the four locally based banks are authorised to issue their own commercial banknotes—beating Scotland by one.
Having read the Explanatory Memorandum that accompanies these regulations, I am pleased to learn that RBS Group anticipates that customers in Northern Ireland will continue to be served under the Ulster Bank brand following the internal restructuring of NatWest. That being the case, will the Minister tell us whether the existing polymer Ulster Bank notes will continue to be used until the end of their natural lifespans?
I say that because, as your Lordships will know, last year Ulster Bank became the first bank in the British Isles to issue vertical banknotes. Based on the theme of living in nature, the new £5 note celebrated Northern Ireland as a place that people pass through and visit, highlighting the importance of the sea and migration and featuring Strangford Lough and brent geese. The new £10 note which, like the £5 note, was also issued early last year, showcases Northern Ireland as a place of growth, in terms of both agriculture and heritage, featuring Lough Erne, the Irish hare and the guelder rose shrub. Towards the end of last year, the great people of the Province also enjoyed the chance to spend the new Ulster Bank £20 note, which features local music and culture, as well as the iconic brickwork and patterns inspired by Northern Ireland’s many redbrick tenement buildings.
If your Lordships are in any doubt about how valuable these notes have become, I offer some guidance as to their worth. A visit to the eBay website earlier today revealed that the Ulster £5 note is currently on sale for £12.50. A new Ulster Bank £10 note can be snapped up for £15. Both come with free postage and packaging. Given that the Ulster Bank polymer notes were made to last—although it may not necessarily be thought that there is a good sale on—I hope that they will be retained, given the cost of design and production as well as the environmental benefits of not issuing replacements any time soon. I support these regulations.
Baroness Anelay of St Johns (Con)
My Lords, I support the making of the regulations, but I have a couple of questions for my noble friend the Minister for clarification.
I appreciate that commercial concerns have precipitated the need for these regulations because the Explanatory Memorandum states that the restructuring of the RBS Group means that it would now not be able to issue banknotes as Ulster Bank Ltd. The use of this power in the instrument is only its second use ever, and it is therefore appropriate for the House virtually to consider the regulations carefully.
The instrument includes a provision, in Regulation 3(1), that a designation date must be determined by the Treasury and gives a power, in Regulation 3(4), for that date to be changed by the Treasury. I would be grateful if my noble friend the Minister could give an indication of the preferred designation date fixed so far by the Treasury and explain in what circumstances the Government would consider it appropriate to use the power in the instrument to change the designation date. It appears that, if the designation date were to be changed, there would be no further requirement for the Bank of England to be consulted. Can my noble friend confirm whether my understanding is correct?
There are no associated impact assessments for this legislation. Under the heading “Impact”, paragraph 12.3 of the Explanatory Memorandum states:
“An Impact Assessment has not been prepared for this instrument as no, or no significant, impact on the private, voluntary, or public sectors is foreseen.”
It is the reference to “or no significant” impact that caught my attention. My continuing concern with regard to the making of regulations is to consider the impact on the voluntary sector, for example charities, in the broadest sense of the term. That is even more important in these pandemic times when any economic impact on the voluntary sector may prove significant—perhaps the straw that breaks the camel’s back. I would therefore be grateful if my noble friend the Minister could explain how the assessment of impact on the voluntary sector was conducted in the preparation of this instrument and why it was determined that any impact was not significant, however the Government define “significant” in that sense.
I look forward to my noble friend the Minister’s response.
Lord Wood of Anfield (Lab)
My Lords, I thank the Minister for setting out this regulatory change, which I support. Some of the points that I wanted to make have already been made, but I have a couple of questions about the technical change being suggested and the operation of the unusual system of private banknote issuance in Northern Ireland.
First—excuse me if this is pedantic—I want to double- check that existing Ulster Bank notes in circulation will continue to be valid and that no problems with their acceptability are anticipated, now that Ulster Bank Ltd will surrender its trading licence. I ask for two reasons: technically, the note states that
“Ulster Bank Limited promises to pay the bearer”
and reference is made to “Head Office Belfast”, neither of which will continue to be the case, strictly speaking; secondly, in case noble Lords think that I am guilty of excessive pedantry, I ask because Northern Irish privately issued banknotes are not legal tender and therefore, as we have seen in the past with some £1 notes issued by another private bank, there are occasionally issues around the acceptability of these notes.
Secondly, as the Northern Irish £5 note is issued by only two of the four private banks certified to issue banknotes—namely, the Bank of Ireland and the Ulster Bank—can the Minister assure us that NatWest Bank plc in Northern Ireland will continue to do so? Can she also set out by what mechanism it is decided which of the four banks decides which notes to print? Is it a decision of the bank, a decision of the group of banks or a decision of the banks in collaboration with the Bank of England and/or the UK Government?
More generally, I am interested in the regulatory regime surrounding what is, in anyone’s view, an unusual and distinctive system of private banknote issuance. First, I would be interested to know what process is in place for eventualities such as this, in which a private bank decides on restructuring and that has a material bearing on the currency used in Northern Ireland. Today’s proposal is a more modest restructuring, but what process is in place for a situation in which a private bank goes out of business or withdraws its activities from Northern Ireland altogether? What obligations do issuing banks have in those circumstances and what options do the Government have?
Secondly, it is striking that within this unusual system of private banknote issuance, Northern Ireland is an island of even greater unusualness. England has a population of 56 million and one sole issuing bank, the Bank of England. Scotland has a population of 5.5 million but three private issuing banks. Northern Ireland, with a population of 1.8 million, has four private issuing banks—at least until this month, when it goes down by one. I have no agenda on this and know there is a strong attachment to the history behind this system, but—purely as a matter of information—I wonder if the Government have any plans to review the Northern Irish banknote issuance system in any way.
Lastly, can I confirm a detail? Are there any plans to revisit the deal brokered with private issuance banks in Northern Ireland and Scotland as part of the Banking Act 2009, which agreed to allow funds lodged with the Bank of England to cover note issuance to accrue interest? I remember that at the time, when I was working as an adviser in the Government, this negotiation was considered crucial to the viability of the private note issuance system. I would just like to check that it will remain in operation for the foreseeable future and that there are no plans to change it.
Lord Purvis of Tweed (LD)
It is a pleasure to follow the pedantry of the noble Lord, Lord Wood. This is the first debate in which I have participated with the noble Baroness, Lady Penn, on the Government Front Bench, so I welcome her to her position.
As the noble Lord, Lord Wood, alluded to, the UK is unique in the world in that commercial banks are able to print sterling banknotes for use in their own nation and the other three, even if they are not legal tender. Apart from the distinct advantage that when I was a student in far-flung London, I frequently received change for £5 from a similar-looking £1 Scottish banknote, the availability of paper currency in rural, sparsely populated and frequently poorer parts of the union was a vital part of economic development over the last two centuries.
Scotland and Ireland have Malachi Malagrowther, and his successful 1826 campaign to retain lower-value banknotes printed in Scotland and Ireland, to thank for this. He was the thinly veiled pseudonym of Sir Walter Scott. I am a former trustee of Abbotsford here in the Scottish Borders, so this is of particular interest. Some of my English colleagues may not be aware that Sir Walter’s image is seen to this day on every Bank of Scotland banknote.
Why the trip down trivia lane, other than simply to compete with the noble Lord, Lord Rogan, over our love for our native lands? As has been referred to, the Ulster Bank notes were some of the first to be polymer and are rare in the world in having a vertical design. They are as familiar to the pockets of people there as very different Scottish notes are here.
As my noble friend Lord Bruce said, this SI—which will receive no opposition and is procedural—is a result of the further restructuring of the Royal Bank of Scotland Group. The Office for Budget Responsibility estimates that UK taxpayers will make a loss of £32.1 billion on the £45 billion bailout of the bank during the 2008 financial crisis—an increase in loss of £4.7 billion over the Government’s forecast two years ago. At the time, the OBR expected the Government to sell £3.6 billion in shares this financial year, but that figure has now been revised down to zero. The Government said they would raise £20.6 billion by 2023-24, but now the sale has been postponed to beyond this Government’s term in office.
Can the Minister state when the Government will divest themselves of the shares and the estimate of the total loss expected? The significant increase in the losses estimated over the last two years is astonishingly high. As my noble friend Lord Bruce asked, is it not right to consider wider options—especially since we have a post-Brexit, post-Covid recovery to consider—and the calls for a different type of recovery, focusing on sustainability and more support for small operators?
To return to the principles behind why the notes we are discussing today exist—the need for support for Northern Ireland businesses and continuity of provision, even in a world of e-commerce—the Government should be able to offer reassurances to the very same businesses that face a confused, complex and costly scenario from January next year, when the reality of the Northern Ireland protocol and our exit from the European Union becomes real.
Yesterday, this House’s EU Select Committee published its report on Northern Ireland. Its chair, the noble Earl, Lord Kinnoull, said:
“It is seven months to the day until the protocol on Northern Ireland becomes operational, but we still don’t know what the protocol will mean in practice for businesses based in or trading with Northern Ireland.
He added that two weeks ago, the Government published a Command Paper to explain its approach to the protocol, but that
“while it addresses the right areas, it is almost all in the future tense.”
He concluded:
“Northern Ireland needs practical action now, not jam tomorrow.”
Can the Government give a clear timetable on when those legislative proposals will be made public and this House can scrutinise them fully?
Lord Mann (Non-Afl)
My Lords, I am certain that Walter Scott would be one of the pioneers of cashless payments and internet shopping and banking if he were around today. I suspect that the Minister, whom I welcome to her post, is not yet able to tell us what the impact of the Covid-19 crisis has been on the shift away from cash, but it seems that it will be a significant factor for the Bank of England over the next two years, as people become less reliant on cash. Currently, most retailers—though not all, in my experience—are refusing cash on health and safety grounds and want cashless payments. Psychologically, that expansion in all sectors of the community is going to be very significant for the ongoing use of cash in the country. Policy towards cash will have to be amended in time to impact on that, because none of that would take away Northern Ireland’s right to continue with its banknote tradition.
I am sure that in the sofas and settees across Northern Ireland, there are many banknotes surreptitiously hidden away or slipping away. By what date will those banknotes no longer be redeemable, once they are out of circulation because of this change, and will there be any change to that deadline, depending on the longevity of the Covid-19 crisis?
The significance of this change extends well beyond the banknotes of Northern Ireland. It is notable that we have the first woman chief executive of a major bank, something that those who have argued for greater roles for women in finance greatly welcome. Here, we see a contrast with how RBS operates. The amalgamation that led to this change is sensible business practice, compared with the recklessness that we saw under previous leaderships. I am sure that Fred Goodwin is not paid his pension literally in Scottish or Northern Irish notes—a rather large wheelbarrow would be required each month to provide that—but he is still getting a hugely significant annual pension, bigger than that of the Prime Minister and the Deputy Prime Minister put together, despite leading that bank to such a failure. Stephen Hester, who replaced him, was more than happy to promote the concept of bonuses within the bank, but it did not learn the cultural changes needed, being 62% owned by the taxpayer. Let us not redeem our purchase cheaply. Let us celebrate that there is good female management of this bank, and let us see more of it.
Lord Caine (Con)
My Lords, I very much welcome the opportunity to take part in this short debate. I too congratulate my noble friend Lady Penn on her appointment to the Front Bench. I shall keep my comments brief but, first, I associate myself with the comments of the noble Lord, Lord Hain, regarding the victims and survivors of the Troubles—an issue with which I grappled, not entirely successfully, over many years at the Northern Ireland Office. I also welcome the comments of the noble Lord, Lord Bruce of Bennachie, who said that the United Kingdom is better together. That has to include Northern Ireland.
As my noble friend made clear in her opening remarks, the SI itself is a technical requirement made necessary by restructuring at Ulster Bank Ltd and within the RBS Group, so I have no issue at all with it. Instead, I wish to refer to one issue: the continuing practical difficulties encountered by people travelling from Northern Ireland to the rest of the United Kingdom, who then try to pay for goods and services with banknotes issued within Northern Ireland.
I suspect that, with the possible exception of some noble Lords from Northern Ireland, over the past decade I have made the journey between Northern Ireland and Great Britain more than anybody else speaking in this debate. It was usually every week, and frequently more often. I am therefore well used to having Northern Ireland banknotes nestling alongside Bank of England notes in my wallet, and to the problems that one can have in using them. Thankfully, my excellent local pub in south London, the “Rosendale”, which I hope at some point I might even see again, is managed by a gentleman from Castlederg and his husband. Northern Ireland banknotes are therefore very welcome and I have disposed of many of them in there. Regrettably, at my local pub here in Yorkshire, which I also hope to visit again soon, that is far from the case; they are simply not accepted.
The immediate retort from people who are refused is usually to say that these notes are legal tender. As the noble Lord, Lord Wood, pointed out, they are not legal tender but they are of course legal currency. Herein lies the problem. In Great Britain, Northern Ireland banknotes are too often met with bewilderment and a complete lack of understanding as to their status. A few years ago, a Which? survey found that over half the respondents had experienced difficulties spending Scottish or Northern Ireland banknotes in England and Wales, and over one quarter had been refused service altogether. I can remember once trying to change a Northern Ireland tenner for a Bank of England note in a branch of Lloyds Bank in Leeds, only to be asked by the cashier whether I knew the exchange rate as she could not find it listed. I could share many other anecdotes, but I think I have made the point.
Might my noble friend therefore ask her Treasury officials and the Bank of England to look at whether anything more could be done to clear up some of the confusion that exists? While I fully appreciate that this might not be the most pressing issue facing the Treasury at the moment, once life returns to a more normal pattern it is something that many people in Northern Ireland would appreciate. With that, I support the regulations.
Baroness Ritchie of Downpatrick (Non-Afl)
My Lords, I welcome the Minister to her position. I too would like to be associated with the comments of the noble Lord, Lord Hain, in relation to the non-implementation of the victims’ pension scheme, which should have been put in place last week. In fact, I have a Private Notice Question tomorrow, where I will be pursuing the spokesperson for Northern Ireland in your Lordships’ House on this matter.
I have some questions in relation to these regulations as somebody who lives in Northern Ireland. Ulster Bank has been issuing commercial banknotes since 1929 under Governments’ permission, along with the Bank of Ireland, the Allied Irish Banks and the Northern Bank—now known as Danske Bank. We have been told that this is partly to do with the restructuring of the Royal Bank of Scotland. As it is part of the RBS Group, is the restructuring therefore due to the previous recession in 2008? There are also the difficulties and challenges posed, back in about 2013, by the banks within the RBS Group in relation to their computerised system. People were then unable to obtain banknotes through the ATMs because of computer error. I remember distinctly going up to the Strand for a meeting in the RBS headquarters, as a then MP, with other Northern Ireland MPs to discuss that issue.
Banknotes issued by Northern Ireland banks, including Ulster Bank, have a particularly distinctive quality. They are polymer and they carry the landscape and tourism features of Northern Ireland, such as the Giant’s Causeway and the big crane. Of course, one particular banknote carried Northern Ireland’s probably most celebrated footballer, George Best. If such new notes are issued by NatWest with, as I understand it, maybe an Ulster Bank brand, will they still include Northern Ireland-specific features?
There is also a north/south dimension in the island of Ireland. Ulster Bank has many branches throughout the island of Ireland. In fact, there are two separate legal entities: Ulster Bank Ltd and Ulster Bank Ireland. The group headquarters is in Dublin and the official headquarters is in Belfast. I want to find out about the nature of that relationship. Does this new issuing of banknotes for commercial purposes have any impact on that relationship, particularly with Brexit? The Republic of Ireland remains in the European Union and Northern Ireland will be leaving, although it has rights within the customs union for agricultural purposes and manufacturing in terms of trade. What will that impact be? What discussions have been held with the Treasury, the Bank of England and the Revenue Commissioners in the Republic of Ireland regarding this matter? What will be the designation date? What will be the method of publication to businesses and the general public?
I have a certain fondness for the existing banknotes. I know that they will remain legal tender until the end of their useful life, but what will the new ones look like?
Lord Trimble (Con)
What the noble Lord, Lord Hain, said, is really quite shocking. Legislation has been enacted, clearly stating dates by which things should be done, yet as those dates come up we discover that nothing has happened. That is very disconcerting. The Northern Ireland Executive have quite enough on their plate at the moment and one can understand some of the difficulties there might be there, but to not comply with the legislation that they have themselves enacted is very disturbing.
I also noted that the noble Lord, Lord Wood, was a little surprised about the arrangements we have here regarding banknotes. It goes back to the formation of the banks, which came into existence in the early 1800s. They were issuing notes. When various mergers took place, the Bank of England was quite ready to put a regime in place so that the four Northern Ireland banks and the three Scottish banks could continue their practice without disturbing what happened at a national level. There is occasional amusement about seeing these provisions but, as my noble friend Lord Caine said, there have been occasions when it has been difficult to get those notes accepted. I thought that that problem had diminished over recent years, but maybe I just have not come across it all that much.
On the detail of this legislation, the regulations are clear about the future. The Treasury has to determine a designation date and from that date Ulster Bank Limited will no longer be authorised to issue banknotes in Northern Ireland. That is very clear. Next, the regulations state that National Westminster Bank will be authorised to issue banknotes in Northern Ireland. We are therefore getting to a lovely arrangement where it appears that while National Westminster Bank is authorised to issue these bank notes, it is likely to issue them in a way that makes them indistinguishable from Ulster Bank notes, and I am delighted to hear that.
The other major provision is not in the regulations but is mentioned in Scottish & Northern Ireland Banknote Issuance Annual Report 2019. Paragraph 20 refers to AIB Group (UK) plc and what it says came as a bit of a surprise to me:
“On 13 February 2019 AIB Group (UK) plc announced its intention to cease issuing its own banknotes in Northern Ireland from 30 June 2020, and instead to dispense Bank of England notes through its branch and ATM network from this date onwards.”
That will be a considerable change in Northern Ireland because southern notes, as we call them, which are AIB notes, are as frequently found as Ulster Bank or other Northern Ireland banknotes. However, according to that report there will be a simplification, I suppose, in that AIB will no longer be dispensing its notes in Northern Ireland and will instead be dispensing Bank of England notes through its branch and ATM network. We will more often find ourselves with Bank of England notes in our hands, and that will be a good thing.
Baroness Kramer (LD)
My Lords, this is also my first opportunity to welcome the noble Baroness, Lady Penn, to her position. I agree with many noble Lords who have spoken that this statutory instrument is not contentious. This is a time of change for banknotes and coins, and consequently I have three questions for the Minister. The first is very simple: are polymer notes meeting the expectations of acceptance, ease and durability?
More significantly, how have Covid and lockdown impacted on the use of cash? I think earlier this year, before the virus struck, cash was used for around 28% of transactions across the UK. I cannot find a separate number for Northern Ireland, but perhaps the Minister knows. That is part of a trend of rapidly reducing cash use. Can the Government assure us that they will support easy access to cash for those who wish to continue to use it? We lost several thousand free-to-use ATMs in the UK in 2018 and 2019, and rural areas of Northern Ireland were the hardest hit. Has Covid made that any worse, especially as many small post offices have been closed? Will the Government make sure that any contraction in access to cash is rapidly reversed?
Lastly, I have a more esoteric question, but it is important. As cashless transactions grow, the Bank of England, like other central banks, is considering a fiat, or a central bank digital currency. The Bank of England is focused particularly on the retail use of such a currency. Such a currency could advance financial inclusion, especially if it was based on a token system, but there are many complexities, from privacy and the stability of the banking system to international power and trade politics. In the context of Northern Ireland, how would such a switch towards a digital currency impact on some of the unique cultural aspects represented in the current Northern Ireland banknotes? The same would apply to Scotland.
The Bank of England has been consulting on this, but of course its consultation has overlapped almost entirely with lockdown. Will the Minister therefore commit to an update on the Government’s thinking on this and give us the opportunity for a proper debate in the House on the issue? The ramifications are, quite frankly, sweeping.
Lord Livermore (Lab)
I am grateful to the Minister for introducing this statutory instrument, and I join others in welcoming her to her position. I have listened with great interest to the points made by other noble Lords during this debate. My noble friend Lord Wood of Anfield made a characteristically interesting speech, and I strongly support the very powerful words of my noble friend Lord Hain. As the Minister explained and the Explanatory Memorandum details, this is a minor technical change to take account of a recent restructuring within the RBS Group. I will therefore be very brief in my comments.
It seems that people in Northern Ireland should notice no practical difference as they go about their day-to-day business, and that is certainly welcome. Paragraph 2.1 of the Explanatory Memorandum states:
“The RBS Group anticipates that customers in Northern Ireland will continue to be served under the Ulster Bank Limited brand”,
albeit with its assets and liabilities having been legally transferred to National Westminster Bank plc. As I understand it, Ulster Bank has close to 100 branches across Northern Ireland, with a slightly higher number operating across the Republic. Is the Minister able to give any additional detail about the discussions that her department had with NatWest about the future use of the Ulster Bank brand? How strong were the assurances given, and will the number of bank branches remain broadly the same?
As well as printing cash, the bank plays an important part in distributing it. On several occasions your Lordships’ House has discussed the decline in cash and the difficulties that some communities have in accessing it. Lastly, therefore, as part of the Treasury’s conversations with the RBS Group—to reiterate a point made by the noble Baroness, Lady Kramer—I ask the Minister whether any commitments were made on maintaining free-to-use cash machines across the region.
Baroness Penn
I thank all noble Lords for their warm words of welcome. I am grateful for the debate on this matter, which has sometimes been extremely detailed, and I hope to address as many points as I can in my response.
I start by addressing the points made by the noble Lord, Lord Hain. He spoke very movingly about the issue of compensation payments to victims of atrocities in Northern Ireland, and many noble Lords added their voices in support of his words. It is slightly beyond the scope of this debate—as the noble Baroness, Lady Ritchie, noted, there will be a Private Notice Question on this issue tomorrow—but we pay tribute to the noble Lord for his work on this and for bringing forward his amendment last year. Now that the Northern Ireland Executive are up and running after the New Decade, New Approach agreement, we expect them to fulfil the commitments made under that legislation, and it is disappointing that they have not yet done so.
The noble Lord, Lord Hain, raised the issue of funding. The only thing I would say on that is that the New Decade, New Approach agreement that restored the Executive in January was accompanied by a £2 billion funding package, which included £1 billion of new funding to help Northern Ireland meet its obligations, including victims’ payments. I am disappointed that we have not seen the progress required so far, and I am sure we will hear more about this at the Private Notice Question tomorrow.
I turn now to a number of the detailed questions asked by the noble Lord, Lord Bruce. I will start by reassuring him that there are no plans to bring in further changes to the issuing authorities in Northern Ireland—or in Scotland, which he mentioned specifically. He asked about changes to the number and value of Northern Ireland bank notes in circulation and whether this change or the change announced by AIB bank would affect that. The value of existing notes will not be affected, and the number issued is driven by demand. I can tell him that currently some £2.51 billion-worth of notes are in circulation in Northern Ireland.
On the design, which several noble Lords spoke on in some detail, I can reassure all noble Lords that the intention is that new notes will be issued under the Ulster Bank brand. There will be a small change, in that the promissory clause will be noted as NatWest, which is in very small writing on the note; the promise to pay the bearer will have the name of NatWest. However, again, the design and the branding will be Ulster Bank. Obviously, because this is the commercial issuance of bank notes, it is down to Ulster Bank under the Royal Bank of Scotland to design the notes, but I anticipate that it will want to continue with the tradition which many noble Lords have spoken about, drawing on many of the unique features of Northern Ireland in its design.
Several noble Lords raised questions about access to cash. I can reassure them that the UK has a resilient cash supply system and that the cash industry has a well-developed contingency arrangement in place. On access to cash by members of the public, the Government announced at Budget 2020 that they will bring forward legislation to protect access to cash to ensure that millions of people can get the cash they need when and where they need it. Finally, on the issue of the name of the Bank of England, all I will say is that I am a committed unionist, but I will refrain from commenting on this, given the Bank’s independence.
The noble Lords, Lord Rogan and Lord Purvis, and the noble Baroness, Lady Ritchie, asked about the unique design of the current bank notes issued by Ulster Bank, and specifically whether those bank notes would continue in circulation. I can confirm that they will.
My noble friend Lady Anelay raised two specific points. The first was on the impact of this change on the voluntary sector. These changes are taking place to maintain existing issuance rights. The continuation of the Ulster Bank brand means that there will be little practical impact on individuals or organisations as customers, including the voluntary sector. It is rather that the impact of not enacting this statutory instrument would impede the ability of the RBS Group to carry out the structural changes that are driving it. The Better Regulation guidance led the Treasury to conclude that an impact assessment would not be required in this case.
My noble friend also asked about the anticipated designation date and any potential changes to it. We expect these changes to come into force to enable RBS Group to make the transfer in early November, but it could be as late as February 2021. The SI allows the Government to designate a date for these changes to come into force, and the reason that a date is not specified is that court approval is needed for RBS’s wider restructuring plans. Once that court approval has been gained, the Treasury will work to agree a date to implement this. The flexibility offered by the statutory instrument also allows the Government to work with the RBS Group and the Bank of England to find a practicable date that will allow for all the other changes that RBS will be making.
Turning to some of the detailed questions asked by the noble Lord, Lord Wood of Anfield, I have already confirmed that existing Ulster Bank notes in circulation will continue to be valid. He also raised the issue of Northern Ireland notes being legal tender. It is right that this statutory instrument deals with quite an unusual circumstance, in which a commercial entity issues bank notes. In many countries, bank note issuance is usually a function reserved for the central bank. We are unusual in allowing commercial banks to issue their own bank notes.
On the intricacies of legal tender, I will make a few points, but I am not sure how much detail to go into. Bank of England bank notes are legal tender in England and Wales but not in Scotland and Northern Ireland. Scottish and Northern Irish bank notes are not legal tender anywhere in the UK, and UK coins are legal tender throughout the UK, in most cases up to certain specified amounts. The point made by the noble Lord, Lord Wood, and my noble friend Lord Caine about legal tender being something of a red herring is correct; for example, many transactions are taken by way of debit or credit card or cheque, none of which is legal tender. That these notes are not legal tender should not inhibit their acceptance by your local pub—in the case of my noble friend. On his frustration at Northern Ireland and Scottish notes not being widely recognised, he is right that, where the notes are in wider circulation or people have greater knowledge of them, these issues do not arise or tend to arise much less. However, I will take back his point about doing anything that can be done to increase awareness of the status of those notes and their acceptance outside Scotland and Northern Ireland.
I do not intend to go into detail on the Government’s stake in RBS as it goes beyond the scope of this statutory instrument. The noble Lord, Lord Purvis, was right that we have delayed the divestment of further shares from RBS. That is entirely right with the financial markets as they are.
I believe that I have covered some of the points raised by the noble Lord, Lord Mann, but he also raised the issue of women in finance. He may not be surprised to hear that I am a big advocate of having more women in finance, and I will continue to be so. The noble Lord raised a contrary view on the availability of cash, noting that some businesses have moved away from cash during the lockdown. The noble Baroness, Lady Kramer, asked about digital currency and the Bank of England’s consultation on it. Again, that goes slightly beyond my remit in responding on this statutory instrument, but I will take her representations back to the Treasury.
I reassure the noble Baroness, Lady Ritchie of Downpatrick, that these changes relate only to Ulster Bank Ltd. On the design, I have said that, as these are commercially issued notes, it is for the issuers to decide, but they will be under the Ulster Bank brand and I am sure that it will want to continue the tradition that it has applied so far. The noble Baroness asked also about the designation date and where it would be announced. As I have indicated, we expect and anticipate it to be in November, but it could be as late as February 2021. It will be publicised through a notice in the London Gazette and the Belfast Gazette.
My noble friend Lord Trimble raised concerns about the AIB no longer dispensing notes in Northern Ireland. I reassure him that this SI is specifically to protect the ability of Ulster Bank to continue to issue notes in Northern Ireland, despite the changes that RBS is making to its broader structure. Ulster Bank-branded notes will continue to be issued, albeit under the issuing authority of NatWest.
I do not have any further information for the noble Baroness, Lady Kramer, on how widely polymer notes are accepted. I think I have covered access to cash, which I agree is extremely important, particularly for people in rural areas. That is why we announced in Budget 2020 that we would bring forward measures to ensure that people continue to have access to cash—I know that the noble Lord, Lord Livermore, also raised that issue.
I hope that I have covered the vast majority, if not all, of the points made by noble Lords that were pertinent to this statutory instrument. The debate has been broad-ranging and I have not been able to cover issues that go slightly beyond my scope.
In conclusion, the issuance of commercial bank notes in Northern Ireland is an important cultural tradition that the Government are keen to support. The noble Lord, Lord Wood, asked whether there were any plans to review that tradition. There are none, nor are there plans to change the ongoing basis of interest being paid on the reserve against these notes in issuance. This statutory instrument allows the Ulster Bank to continue to issue bank notes in Northern Ireland while the RBS Group carries out important structural changes to its corporate governance arrangements. That is why the Government are bringing this measure forward.
The Deputy Speaker (Baroness McIntosh of Hudnall) (Lab)
The Virtual Proceedings on this Motion are now complete. The day’s Virtual Proceedings are now complete and are adjourned.