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Northern Rock

My Lords, smugness is a particularly irritating character trait, and therefore I will avoid the temptation to say too loudly, ““We told you so””, about the need to nationalise Northern Rock. It has taken the Government more than three months to get where they ought to have got to in the autumn, but they have now taken the right decision. Public ownership must be preferable to a bad private sale that left the risks and liabilities with the Government and the profits with the private bidder. I fear that the Conservatives appear to have a very poor grasp of history when it comes to banking sector nationalisation. Can the Minister confirm that the last nationalisation of a privately-owned bank occurred in 1994, when the National Mortgage Bank was nationalised by the Conservative Government, who paid the private owners the princely sum of £1 in compensation? Does the Minister agree that in reality there is no third way between private and public ownership? Does he agree that the Conservative proposal that the bank be run down by the nationalised Bank of England is simply nationalisation by another name? If the Tories find themselves fulminating angrily to cover their lack of a realistic policy for Northern Rock, the Government still have plenty of difficult issues to answer themselves. First, what steps are they proposing to take to establish the quality of the underlying assets to be taken over? Will the Government insist on a full independent audit of the Northern Rock loan book? Will they accept that we can have no faith in the FSA to be the sole arbiters of the strength of that loan book? What instructions have the Government given Mr Sandler about the commercial policies that Northern Rock must now adopt? Can we have an assurance that the imprudent lending policies that played such a part in Northern Rock’s demise will stop and that in future the bank will adopt a more prudent lending policy? Will he ensure that such a principle is embodied in either the primary or secondary legislation that will come forward in the next few days? When, as they must, the Government submit Northern Rock’s business plan to Brussels, can the Minister give an assurance that Parliament will be given sight of it so that we can be reassured that taxpayers’ money is being adequately safeguarded? Have the Government yet made any estimate of the contractions in Northern Rock’s operations that are likely to be required and the number of jobs involved? We recognise that this decision by the Government will bring considerable pain to shareholders. When the Government talk about ““appropriate compensation”” do not the tests of appropriateness in fact mean that no compensation will be paid at all? We were pleased to hear that some measures were being taken to safeguard the situation of the Northern Rock Foundation. How have the Government arrived at the figure of £15 million rather than any other figure? How in reality do they intend to safeguard the position of the Northern Rock Foundation when the bank returns to private ownership? Many Northern Rock stakeholders have been alarmed in recent days by indecision on the one hand and on the other hand being unsure of the consequences of the decision that has been taken. Can the Government give an assurance that adequate effort and energy are being used to ensure that staff, depositors and mortgage holders in Northern Rock are adequately informed about the situation and are reassured that their personal circumstances will not be adversely affected in the very near term? In our view belatedly, the Government now have the opportunity to repay the taxpayers’ loan, to recoup any costs through a profitable sale in better market conditions in due course and to provide a positive future for the bank. We on these Benches will support the legislation when it comes to your Lordships’ House later this week, but equally we want to ensure that the Government’s stewardship of Northern Rock is more effectively exercised in the future than it has been over the past six months.