§ 1.15 p.m.
§ The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth) rose to move, That the draft order laid before the House on 25th November be approved. [4th Report from the Joint Committee.]
§ The noble Lord said: My Lords, this order withdraws the exemption in the Restrictive Trade Practices (Services) Order 1976 for certain agreements relating to the supply of banking services in Northern Ireland. The effect of the order will be to require that existing and future restrictive agreements relating to the provision of banking services in Northern Ireland must be furnished to the Office of Fair Trading and entered on a register. The Director-General of Fair Trading will then consider whether an agreement contains restrictions which are of such significance as to call for investigation by the Restrictive Practices Court. If there are no significant restrictions the Secretary of State, acting on a representation from the Director-General, can give a direction that the agreement should not be referred to the court: otherwise, unless the agreement is terminated or the restrictions in it abandoned, it must be referred to the court for a judgment as to whether or not the restrictions are in the public interest.
§ The Restrictive Trade Practices Act has applied in this way to banking services in Great Britain since 925 services generally were brought within the scope of the Act in 1976. The decision not to apply the Act at that stage to banking services in Northern Ireland was taken against the background of the traditionally close relationship between the banking systems in Northern Ireland and the Republic of Ireland. Those relationships had led to a degree of harmonisation of banking services on both sides of the border. In particular, the Northern Ireland banks had entered into agreements on such matters as interest rates and closing hours which mirrored those in operation in the Republic of Ireland. It was then argued by the banks concerned that application of the Restrictive Trade Practices Act would lead to the dismantling of those arrangements, with a consequent risk to the financial stability of the banking system in Northern Ireland.
§ The Government share the concern expressed by the National Consumer Council in its 1983 report on banking services, that the cartelisation of banking services in Northern Ireland denies consumers in the Province the advantages of greater choice and more efficient and innovative service that have accrued in open competition between banks elsewhere in the United Kingdom. We believe that the exemption of restrictive banking arrangements from registration and judicial scrutiny under the Restrictive Trade Practices Act is no longer justified. In the Government's view, there are no compelling economic reasons for the banks in Northern Ireland to agree one with another on the terms on which each does business. The building societies in Northern Ireland and the Trustees Savings Bank of Northern Ireland have offered banking services outside the cartel arrangements for some considerable time. Indeed the banks themselves have now voluntarily abandoned their agreement on interest rates, and other agreements are under review.
§ We believe, therefore, that withdrawal of the exemption will reinforce the steps taken towards a more competitive banking system and those already taken by the Northern Ireland banks. Any risk that open competition between the banks will have a destabilising consequence is now less than it was in 1976, and it will be further substantially reduced by the measures proposed in the Government's White Paper, Banking Supervision, which was announced in your Lordships' House by my noble friend Lord Belstead earlier this week. The Government have given the Northern Ireland banks a long period of notice of their intention to bring them within the scope of the Restrictive Trade Practices Act. The Northern Ireland Bankers' Association has consulted the Department of Trade and Industry and the Office of Fair Trading over the past year, so as to clarify the effect of the Act on the residual agreements of its members. We believe that the banks concerned are now reasonably prepared for the withdrawal of the exemption.
§ Moreover, when the order has come into effect there will be a three months' period of grace within which existing agreements which have become registrable must be furnished to the Office of Fair Trading. The banks will be able to continue to operate those agreements after registration, unless and until any of the restrictions in them are struck out by the Restrictive Practices Court. I should inform the House 926 that the order was considered by the Joint Committee and was passed without comment.
§ In conclusion, I would emphasise that the order does no more than extend to banks in Northern Ireland the competition disciplines that have applied to banking services elsewhere in the United Kingdom for the last 10 years. It is a modest measure which reinforces the Northern Ireland banks' own efforts to operate on a more competitive basis and is likely to be of benefit to consumers and industry alike. I commend the order to the House. My Lords, I beg to move.
§ Moved, That the draft order laid before the House on 25th November be approved. [4th Report from the Joint Committee.]—(Lord Lucas of Chilworth.)
Lord Bruce of Donington
My Lords, we should like to thank the noble Lord for having explained the reasons that lie behind the laying of this order and also its practical consequences. The noble Lord will, of course, understand that our consideration of this order must be without prejudice to our consideration at a later stage in the current Session of the Banking Bill, which we have been promised, and also the Financial Services Bill, which will come before your Lordships in due course.
But in the meantime we see no objection whatsoever to this order. We entirely support its passage through your Lordships' House. Since this is the last time that I shall be confronting the noble Lord opposite in the current Session, may I offer him my personal felicitations for the Christmas celebrations, tempered by perhaps warning him that we are due for very arduous labours on other matters in the new year.
§ Lord Lucas of Chilworth
My Lords, I am most grateful to the noble Lord, Lord Bruce of Donington, for his reception of this order. Of course, I appreciate that we are dealing this afternoon with the order as it stands, without prejudice to any current or forthcoming legislation. That takes me very neatly into being able to thank the noble Lord very much for his kind good wishes for Christmas, which of course I reciprocate. As for the new year, shall I say that he and I will both enjoy debating—because that is what he and I do—those measures and those matters upon which we do not always have total agreement. But we have never failed to come to some kind of agreement at the end of those debates, and I shall look forward, as he does, to next year.
§ On Question, Motion agreed to.