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Northern Rock

My Lords, I thank the Minister for repeating this Statement on Northern Rock. I wish that I could say that I welcomed it, but I do not. I am sorry for the Minister for having to read it, as, indeed, I am sorry for the Chancellor, who is out of his depth and a puppet for a failed Prime Minister—a Prime Minister who created the conditions for the failure of Northern Rock in the first place. This Statement is the third that we have had from the Government since the crisis began attempting to justify the Government’s handling of the Northern Rock fiasco and the wider effects that their policy has had on the United Kingdom’s financial services industry. We have gone from bad to worse. This Statement marks the final nail in the coffin for the Government’s reputation for economic competence. Government dithering and delay over the past five months have led to a complete failure of their policy. We now face the first nationalisation of a bank in modern times. We on these Benches are opposed to the nationalisation of Northern Rock. In particular, we are opposed to the methods by which the Government wish to achieve that. Noble Lords will have seen the 17-clause Bill, published today, to allow the nationalisation of any bank or building society in the United Kingdom. The Government intend to allow just 20 hours of scrutiny on this Bill across both Houses of Parliament. With £100,000 million of taxpayers’ money committed to Northern Rock, that comes out at £83 million a minute. What possible justification is there for such a flagrant disregard of parliamentary scrutiny? In the past, this House has, with reluctance, agreed to hasten legislation dealing with Northern Ireland or terrorism, but where is the terrorism angle here? Given that this policy has been five months in the making and that a large Bill is ready, what is the conceivable case for acting in this way? There is no problem about managing Northern Rock; Mr Sandler is already in there. There is no market sensitivity; the facts are out there. Indeed, the only thing that is likely to trouble the markets internationally are the immense bank-grabbing powers in the Bill. What the Government are proposing will double the taxpayers’ liability to Northern Rock from £55 billion to £110 billion, and will place responsibility for the eventual repayment of this liability, as well as the ongoing running of Northern Rock’s mortgage book, in politicians’ hands. How can they possibly justify such an expansion of the taxpayers’ liability and such a blow to the United Kingdom’s reputation abroad? Can the Minister confirm that the Bill gives the Government power to alter any Act of Parliament applying to banks in the United Kingdom by order? Can he confirm that it gives the power to backdate regulations applying to banks and building societies? Why has the Treasury flung so much money at this company when with, say, Equitable Life, it slunk past on the other side of the road? What is the difference between one financial institution with an over-ambitious business plan and another? The Government have failed to explain how they intend this nationalisation to proceed. They claim that it will be temporary but give no timeframe for how long they expect the bank to be in public ownership. With such a huge public liability the Government must undertake to publish full accounts to Parliament every quarter. We should see immediately an audit of the assets and liabilities and the advice provided by Goldman Sachs. After all, we taxpayers will own all the assets, we will bear all the liabilities and we are paying for the advice. There is no credible explanation of how nationalisation will affect the running of Northern Rock. The Chancellor has made great claims of arm’s length government and business as usual but has glossed over the inevitable distortion that a nationalised bank will have in a competitive banking system. It is even unclear whether to continue in this way will be legal under EU law. Indeed, is this proposal compatible with EU rules on state aid? Why do the Government expect the European Commission to allow these proposals without providing for a run-down of Northern Rock’s lending and deposit-taking operations? How will the Prime Minister respond to criticism from the EU of protectionism and state subsidisation—the very crimes he has accused it of? If the Government tell the EU Commission that Northern Rock was fundamentally viable, why should that argument not be used against them in litigation by shareholders? How can Ron Sandler continue business as usual when the business model has been shown to have failed? Will Northern Rock continue, with government assistance, to offer 125 per cent mortgages, 0.5 per cent bonuses for existing savers and 6.49 per cent savings rates? If so, will it not be arguable that it has an unfair advantage over its competitors, and what will the consequences be? Will the Government really manage to keep at arm’s length if Northern Rock starts to foreclose on mortgages? How will they respond when their direct appointee sends in the bailiffs, forecloses on mortgages and sacks staff? There is nothing in the Bill to stop the Government from directing every aspect of Northern Rock’s business and they have said nothing in this Statement or elsewhere about the details of how Northern Rock strategy is to be decided. The Government must allow proper parliamentary scrutiny of the running of Northern Rock to ensure that public assets are handled responsibly. The Minister stated that the framework agreement would be published shortly. Does this mean before the Bill is debated here or will the details of this nationalisation be decided at the Government’s convenience after the Bill has been rammed through? Does anyone believe there will not be a hotline burning between the Prime Minister and Mr Sandler? There are two other small issues. Northern Rock currently sponsors Newcastle United—hardly a winner either, right now. Will ““UK taxpayer”” be put on the lads’ shirts next week? Will the Minister assure us that taxpayers will not be sucked into sponsoring football? In view of the public concern over expenses in another place, will the Government now require all Ministers to register any loans or savings accounts they have with Northern Rock? I again put forward our preferred solution for Northern Rock. As my honourable friends in another place have repeatedly stated, instead of reverting to Labour practices of the 1970s, the Government should set up a Bank of England-led reconstruction. Such an administration would not extend the taxpayer’s liability and certainly would not make the taxpayer responsible for paying back the wholesale depositors who enjoyed a premium to take the risk of investing in Northern Rock. Instead, the Bank of England, as a court-appointed special protective administrator, would be responsible for running down Northern Rock in an orderly way, protecting both depositors and the taxpayer. As under a normal administration, shareholders’ rights would be suspended until these creditors were repaid, and would eventually own whatever value was left if Northern Rock were to exit the administration. Administration would keep politicians away from the management and protect the United Kingdom’s reputation abroad. Indeed, it is mystifying why the Government are not taking this route. The Government intend to implement administrative provisions for future crises. Why are they not pursuing this route for the current one? Do the Government expect further bank failures to justify the immense powers that they are taking? What is this Bill but Mr Tony Benn’s dream Bill of the nationalisation of banks, which went into old Labour’s infamous programmes of 1976 and 1983? What place does nationalisation have in a modern Britain?