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Northern Rock

Thank you, Madam Deputy Speaker. As Members know, Northern Rock has asked for expressions of interest in purchasing the business, and has announced that it is taking forward discussions with the Virgin consortium on an accelerated basis. Let me be clear, however: no options are being ruled in or out at this stage. The hon. Member for Ludlow (Mr. Dunne) made great play of the supposed proposal to buy Northern Rock that was rejected in August. In fact, there was no firm proposal on the table but, as the chairman of the FSA said, there was an exploratory inquiry whether the Bank of England would be prepared lend an institution about £30 billion at commercial rates. Referring to the so-called offer, Sir Callum McCarthy told the Treasury Committee:"““I think it would be incorrect to regard the private sector solution as being a firm, cut and dried offer, it was still at an exploratory stage and there were a number of other issues which would have to be dealt with.””" There was no offer for the bank in August. Neither the Government nor the Bank would normally provide commercial lending of up to £30 billion for a going concern. Such a loan would be subject to approval by the European Commission. The Liberal Democrats have suggested that we should nationalise the bank. As Treasury Ministers have made clear on a number of occasions, no option is being ruled in or out at this stage. However, I think all Members agree that a proposal from a private buyer that meets the principles we have set out would be the best option, and our preference is for the company to find a private buyer. When the hon. Member for Twickenham talks about nationalisation as a temporary solution, he must mean that we should try to find a private buyer. That is exactly what we are attempting to do. I conclude by returning to the central issues of the debate: whether the Government should have provided support to Northern Rock, and how we should move forward from the current position. The alternative to the Government's authorising the Bank to provide support to Northern Rock was to allow the company to fail. I do not recall any Member of the House arguing for that option at the time, although now that the going has got tough some of them appear to be running away from the consequences of the guarantee they supported. The House should be assured that the Bank of England's lending is secured against assets held by Northern Rock, and that the FSA continues to say that Northern Rock's main asset base—its mortgage book—remains strong and secure. It is of course in everyone's interests that the situation with regard to Northern Rock is resolved as soon as possible, but it is also essential that the public interest is protected and that any proposals for Northern Rock's future meet the principles that the Chancellor has set out: protecting the taxpayer, protecting depositors and maintaining wider financial stability.