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Northern Rock

The Government, and the Chancellor when he gave evidence to the Treasury Committee—I shall come back to the words that he used in a minute—made it clear that we would get the money back. That is the commitment that the Chancellor made, and we want to hold him to account on satisfying it. The problem has become so bad that nationalisation is being discussed as a potential solution, but Labour Members should be in no doubt that nationalisation would be a signal of the Government's failure, rather than a triumph. Nationalisation has become an option only because of the litany of mistakes made by the Government: they failed to prepare for the problems in the banking sector, despite the advice of the Governor and the Financial Services Authority; they lacked leadership when the Bank became the lender of last resort; they were indecisive over guarantees; and they mishandled the sale process. We must ask ourselves every step of the way what the Government have done to get us into this mess. The first mistake that the Government made occurred when the Prime Minister—the then Chancellor—rejected the clear and unequivocal advice of the Governor of the Bank of England that reforms were needed to the rules on early intervention and deposit protection. During an interview with Robert Peston on last month's ““File on 4”” the Governor said:"““I think we would have pressed even harder than we did, and we did press pretty hard, to inject some urgency into the need for new legislation to enable there to be a procedure for pre-emptive intervention in banks and the reform of deposit insurance.””" The Chairman of the FSA said in his evidence to the Treasury Committee,"““we conducted a particular exercise with the Treasury and the Bank in February we had identified in particular the problem of having a means of dealing with banking problems and the need to deal with the question of bank insolvency problems and also the question of the compensation arrangements.””" Will the Minister tell the House what was done in response to that? Did the then Chancellor and the Secretary of State for Children, Schools and Families, who was then Economic Secretary to the Treasury, ignore that advice because it undermined the arrangements that they had put in place? Is this another example of the then Chancellor ignoring advice from outside his inner circle of advisers? When it became apparent that the credit markets were becoming tighter, what actions did the Treasury team take to examine the problems highlighted in February's exercise? Did they simply stand by and wait for things to happen?