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Northern Rock

It is a pleasure to follow the hon. Member for Newcastle upon Tyne, Central (Jim Cousins), given his experience of the circumstances surrounding Northern Rock on his constituents. I should like to focus on the Government's decision making throughout the process and conclude with some comments on nationalisation, following up on what the hon. Gentleman said. It is clear that the origins of the crisis extend way beyond this country and the confines of Northern Rock, and lie in the difficulties in global credit markets and the inability of Northern Rock in particular to achieve its regular securitisations in order to provide funding. However, the problem was identified in January this year by the FSA in its remarks on the state of credit availability and the implications for liquidity around the world. They were also endorsed by the Bank of England in its quarterly review in April, yet individual financial institutions in this country were slow to react, to put it mildly. Northern Rock continued with, and in some areas even increased, its pace of lending, increasing its share of the mortgage market in the first half of the year to 20 per cent. There are many reasons for that, which we could go into. It is fitting that we are having this debate on the day when Northern Rock is being removed from the FTSE 100 index, to mark its demise from its previous position in our financial services sector. The business model was clearly flawed, and the executives in the bank were carried away, partly as a result of their lack of experience. Northern Rock's board appeared before the Treasury Committee, and it is notable that the chairman, who was acknowledged not to be a banker and who had quite properly offered his resignation to the senior non-executive when the crisis struck, has been replaced by somebody else who is not a banker. He has recently been non-executive director of a major bank, but his entire career was spent in the oil industry. The chief executive of the bank, who was responsible for the rapid growth in its lending, is still there, as we heard earlier. The chairman of the audit committee—the same person as the chair of the risk management committee—who oversaw the explosion of lending was the only member of the board who was a recognised banker. As emerged earlier today, he was Sir Derek Wanless, the man who was appointed by the Prime Minister to review the finances of the national health service.