Northern Ireland Banknote (Designation of Authorised Bank) Regulations 2020

Baroness Penn Excerpts

Tuesday 2nd June 2020 Lords Chamber

Moved by

[Baroness Penn]

To move that the Virtual Proceedings do consider the draft Northern Ireland Banknote (Designation of Authorised Bank) Regulations 2020.

The Motion was considered in a Virtual Proceeding via video call.

[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.

--- Later in debate ---

[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.

Motion agreed.