Bank Resolution (Recapitalisation) Bill [Lords]

Debate between Kit Malthouse and Caroline Nokes

2nd reading
Wednesday 22nd January 2025 Commons Chamber

[Kit Malthouse]

That is useful information about the Bank’s decision making. However, the Bank still decided to go for insolvency prior to a resolution mechanism. I find it hard to see that, within that 36-hour period, it had not canvassed whether there was a market for the bank. My point remains: if I were an investor or an overseas bank trying to establish and invest significant funds in a UK branch, I would like to understand why the Bank of England makes these decisions, and the criteria and parameters by which it is likely to make a decision either way. Then, of course, the final decision was taken to sell or transfer the bank to HSBC—for a minimal consideration, I think. I really want to understand what value was placed on that bank going to HSBC, as opposed to any of the other banks that might have been bidding for it.

At the heart of this is my worry about competition. When a bank is put in this resolution position, obviously it needs to move to another bank that has significant assets and can fulfil the rightful demands of its depositors to withdraw their funds. That will naturally be a bigger bank, and there is a possibility—although hopefully this will not happen, as we will not use resolution very often—that small, higher-risk challenger banks will find themselves unable to obtain short-term funding from the Bank of England because of their size, and will therefore be gobbled up by the leviathans of the banking system. Over time, there might be a natural move back towards where we were prior to all these challenger banks appearing—to having four or five massive banks that dominate the system in an uncompetitive way.

I am asking the Minister not necessarily to change the legislation, but to consider setting out in a code of conduct what consideration the Bank of England has to give to the competitive landscape when it is resolving a bank. When it transfers one small bank to another small bank as part of a resolution, for example, that wheel might be oiled with a bit of short-term funding, in the interests of maintaining that competitive landscape. The cost of that should not fall on the taxpayer; effectively, it should be a loan for repayment. One of the benefits, if you like, of the 2007-08 crash—one of the silver linings of that cloud—is that we have a much more diverse banking landscape than before. There was recognition that having these huge organisations that crash the entire global economy if they fail was dangerous for the western economy, and that a much more diverse landscape was therefore desirable. The problem with that, obviously, is that there is more inherent risk in those smaller banks. If there is more inherent risk, we are likely to see more resolution, and in time we may end up back where we were.

I support the Bill. I think that resolution is exactly the right way to go, and we should obviate the risk to the taxpayer. There are also negatives to the system, though, so I hope that the Minister, who I am sure will do the job with aplomb, will think carefully about the impact on the world of the Bank of England’s decision making and predictability; about what the Bank can do to provide transparency, whether through a code of conduct or indicators of practice; and about the impact of resolution on competition.

[Madam Deputy Speaker (Caroline Nokes)]

I call the shadow Minister.

Point of Order

Debate between Kit Malthouse and Caroline Nokes

Tuesday 3rd September 2024 Commons Chamber

[Kit Malthouse (North West Hampshire) (Con)]

On a point of order, Madam Deputy Speaker. On 25 July, the main estimates were laid before the House and passed without debate or vote. On 29 July, the Chancellor came to the House and made a statement about the public finances, and laid a further document called “Fixing the Foundations”, which showed a wildly different picture of the public finances from that which had been presented to us just one working day before.

Naturally, that raised concerns in the House. I and a number of Members questioned the Chancellor of Exchequer about it at the time. The fact that she was evasive in the debate and, frankly, look rattled raised further concerns. Today, a letter from the Cabinet Secretary to my right hon. Friend the shadow Chancellor has been leaked. It explains that officials knew at the time that the estimates laid by the Chancellor were incorrect. I also have a letter from the Office for Budget Responsibility in response to a freedom of information request that I made prior to the recess. It explains that the OBR was shown the contents of that document two days before the estimates were laid before the House. Indeed, the OBR was given the “Fixing the Foundations” document in order to fact-check it on the day that the estimates were laid before the House of Commons.

That raises a number of issues for the House, but the one that I am most concerned about is whether the Chancellor of the Exchequer has knowingly misled the House of Commons on the state of the public finances and her knowledge at the time. Knowingly misleading the House is a breach of the ministerial code, and I want your guidance, Madam Deputy Speaker, on what the appropriate course of action might be for the House. If we cannot rely on the financial information laid before us, but trust that it is accurate and wave it through, we are in a very difficult place indeed.

I have notified the Chancellor of the Exchequer of my intention to raise this point of order. Obviously, once an independent adviser on the ministerial code is appointed, I can make representations to them, but in the meantime we are faced with a situation where either the estimates or the “Fixing the Foundations” document was knowingly wrong. In either case, the House may have been significantly misled, and I would be interested to hear your guidance on what we can do about it, Madam Deputy Speaker.

[Madam Deputy Speaker (Caroline Nokes)]

I thank the right hon. Gentleman for his point of order and for advance notice of it. He indicated that he has informed the Chancellor of his intention to make the point of order, which of course is the correct thing to do. There are two separate points here. The first is one of privilege. He should write to the Speaker to make the point that he is concerned that the Chancellor may have misled the House. The second is about the accuracy of the estimates. That is not a matter for the Speaker, but it may be something that the right hon. Gentleman chooses to raise with the Chair of the Public Accounts Committee once they are elected next week.

Public Spending: Inheritance

Debate between Kit Malthouse and Caroline Nokes

Monday 29th July 2024 Commons Chamber

[Madam Deputy Speaker (Caroline Nokes)]

The hon. Member will know that the Chair is not responsible for the content of contributions made by Ministers, but I am sure that his concern has been heard on the Government Benches. I am sure that if an error has been made in this instance, the Minister will seek to correct it as quickly as possible. It is for the Government to decide on the estimates that they put before the House.

[Kit Malthouse]

Further to that point of order, Madam Deputy Speaker. The Chancellor of the Exchequer made certain assertions about timing during her statement. However, we know from the media that the contents of the statement were briefed to The Guardian at 8.58 pm on Thursday, just after the estimates had been voted on. While I understand that the Chair is not responsible for the content of what is said at the Dispatch Box, the Chair is responsible for the integrity of documents that are laid before the House and on which we vote and rely. May I ask whether this is a matter for the Prime Minister in his governance of the ministerial code, or for the Commissioner for Standards in his upholding of standards in the House? Prima facie, in the absence of any evidence from the Chancellor, it looks as if we have all been misled.

[Madam Deputy Speaker]

The right hon. Member will know as well as I do that that is not for the Chair to decide. It is for the Government to decide what they put in their estimates and in documents that are published.