Mr. Mark Hoban (Fareham) (Con): On a point of order, Mr. Martlew. I would be grateful for clarification on this debate this afternoon and the proceedings on the Floor of the House later on. The Committee has yet to report its view to the House, yet there is a motion on the Order Paper for consideration, after the main business, of the matters that we are debating this afternoon. That will enable the House to express its own view on them. Is it not rather presumptuous of the Government to have placed the motion on the Order Paper for this evening when the Committee has yet to debate the merits of the order?

The Chairman: I do not think so. We will come to a decision today, whatever it is.

The Exchequer Secretary to the Treasury (Angela Eagle): I beg to move,

May I say what a pleasure it is to serve under your chairmanship, Mr. Martlew?

Hon. Members will be well aware of the background to the order. Events in the American sub-prime mortgage market last summer led to Northern Rock having severe problems in accessing the financing on which its business model relied. Once the extent of the problems became clear, the Government had two options: to let the bank go under, or to provide support.

Letting the bank go under would have risked instability spreading and serious consequences for the UK’s financial system and wider economy. It was because of the risk to stability, rather than the risk to shareholders, that the Government chose to save the bank by authorising the Bank of England to provide special liquidity support, and by putting in place guarantee arrangements for retail and wholesale depositors.

As the providers of support to Northern Rock, we then had to decide how to help to resolve the situation while meeting the three clear principles that the Chancellor has consistently set out: protecting the taxpayer, protecting depositors and maintaining financial stability. I believe hon. Members will agree that it was right to explore every option to achieve that.

Earlier this year, two serious private sector proposals were made. They were based on a refinancing of Northern Rock that would have involved a Government-guaranteed bond issue. We considered the proposals in detail, but, as we did, it became clear that both would have involved a degree of risk for taxpayers and a significant implicit subsidy from the Treasury. In the Government’s judgment, a subsidy on that scale would not have provided the best value for the taxpayer, and, given that the private sector would have secured the vast majority of value created over the period ahead, the arrangements would have been a poor reflection of the balance of risk borne by the two sides.

Mr. Mark Field (Cities of London and Westminster) (Con): I apologise for interrupting the Minister in full flow. I entirely agree about the balance between risk and reward. The deals on the table, particularly the Virgin deal, in which, in effect, £200 million was being put up for £50 billion worth of guarantees, clearly were never runners, and I accept that. However, the Minister did not elaborate on her initial statement. The one thing she did not discuss was the potential in the short or medium term for the Government to have been involved in Northern Rock going into administration. She presented a dichotomy—letting the thing go under or rescuing it—but surely there was at least a prospect of allowing the company to go into some sort of administration for a period of time.

The Chairman: Interventions should be short.

Mr. Field: Thank you, Mr. Martlew. Perhaps the Minister could discuss why that option—that third way—was not taken.

Angela Eagle: I am anxious not to repeat the debates that we had on the Floor of the House when what is now the Banking (Special Provisions) Act 2008 was debated, but to try to stay within the confines of the order, which is about valuation. I elaborated a bit on the background because I think that it is important to explain why there are certain provisions in the order which the valuer will be asked to take into account. We could have interesting debates, but I am not sure that it would be in order to go back over all the issues in this debate on a compensation order.

Mr. Field: The issue of administration is relevant, insofar as Northern Rock could have continued as a going concern. There has never been any request from the Bank of England to repay loans, for example, or, in any sense, to withdraw any of the guarantees that were given between September and the point of nationalisation. It is specifically with that in mind that I ask why the option was not pursued. It clearly must have a bearing on the question of compensation.

Angela Eagle: The hon. Gentleman now seems to be arguing that the bank was a going concern, whereas five seconds ago he was arguing that it should have been in administration.

Mr. Field rose—

Angela Eagle: Perhaps the hon. Gentleman can make his own speech on the order when the time comes. I would like to be allowed to set out its background, after which I shall happily answer his questions.

Under public ownership, the Government will secure any net proceeds from the future sale of the business, in return for bearing the risks during the current market instability. Last month, the Government brought forward the Banking (Special Provisions) Act 2008 and the Northern Rock plc Transfer Order 2008, under which Northern Rock was brought into a period of temporary public ownership on 22 February with shares transferred to the Treasury solicitor as nominee for the Treasury. Hon. Members have had an opportunity on several occasions to discuss the Government’s decisions on Northern Rock and will be able to debate the transfer order on the Floor of the House.

The compensation order before us is narrow and is made under section 5 of last month’s Act. In the event of the Act being used to transfer shares or to extinguish share options, section 5 requires the Treasury to establish a scheme to determine the amount of any compensation payable to shareholders or holders of share options. Hon. Members will recognise the need for a fair and proper way of assessing the amount of any compensation that should be paid under such circumstances. The crucial point is that any compensation must be fair, which means that it should be based on a realistic assessment of the shares’ value without public support.

Mr. Peter Atkinson (Hexham) (Con): As the Minister knows, those of us with seats in the north-east represent many with shares in the company who are not typical shareholders. I have a letter from an 80-year-old woman who writes:

that the shares

She and many others are asking why, if the Government want a fair valuation, the valuer is being told to assume that the company is unable to continue as a going concern and is in administration, when clearly it is a going concern and not in administration.

Angela Eagle: I shall come on to that later.

The Act makes it clear, therefore, that in assessing the amount of any compensation two assumptions must be made: first, that all financial assistance provided by the Bank of England or the Treasury is withdrawn; and, secondly, that no further public assistance, beyond ordinary market assistance, from the Bank of England will be provided. In addition, and as provided for by section 9 of the Act, the order specifies that it should also be assumed that Northern Rock would be unable to continue as a going concern and would be in administration.

It is clear that, were it not for the financial support from the Government and the Bank of England, not only would Northern Rock have been unable to continue as a going concern, but it would have been placed in administration, at best. As has been shown by the extensive research undertaken by Northern Rock’s management, with the support of the tripartite authorities, it was not possible to find a private sector solution that met our three principles, particularly that about protecting the taxpayer. If the financial assistance provided by the Government and the Bank of England had been withdrawn, it is clear that Northern Rock would have been unable to secure the substantial amount of alternative funding that would have been required.

As a result, it is only fair to make the assumption, when determining the amount of any compensation, not only that public support has been withdrawn, but that without that support Northern Rock plc would not be a going concern and would have been placed in administration.

Mr. Doug Henderson (Newcastle upon Tyne, North) (Lab): Following on from the points raised by the hon. Member for Hexham (Mr. Atkinson), I also have many constituents with a special interest in the matter before us. I think that they understand that, had the Government not taken action, things would have gone on as they were and there would probably have been dramatic consequences. I am often asked whether, given the criteria in paragraph 6(a) and (b), the valuer will value the shares on the date on which they were brought under public ownership, on the date on which the Government first announced the scheme for depositors or on some other date. Will the Minister explain how the valuer will cover those issues?

Angela Eagle: My hon. Friend makes a perfectly reasonable point. The order ensures that the assumptions I mentioned a moment ago will have to be taken into account by the valuer. Clearly, that means that the valuation will have to take place when the shares have been transferred and using the assumptions that all public support has been withdrawn, and that Northern Rock would not be a going concern and would have been placed in administration. As well as those assumptions, the order sets out that the amount of compensation payable will be determined by an independent valuer appointed by the Treasury.

Mr. Alan Beith (Berwick-upon-Tweed) (LD): What does the Minister say to those of my constituents who were shareholders and who take the view that the recognised failure of the Financial Services Authority to deal with the business model problems that the directors were pursuing ought to be taken into account by the valuer? If he cannot consider it, where can it be taken into account?

Angela Eagle: He or she cannot take such issues into account simply because the FSA does not run banks. The people who have responsibility for running banks appropriately are those who are paid to run and manage them. The FSA is the regulator.

If the Committee and the other place agree to the order, we will advertise for expressions of interest in the position of independent valuer shortly. The Treasury will make an appointment in consultation with the Institute of Chartered Accountants in England and Wales. We will be looking for someone who is independent of all interested parties, and who has extensive company valuation skills and the ability to handle the range of relevant stakeholders. When an independent valuer has been appointed, they will need to appoint staff and decide what process should be followed. They will then decide the amount of compensation that is payable, based on the assumptions that I mentioned. When that assessment has been made, anyone who has been affected may ask the valuer to reconsider his or her determination, and a revised assessment could then be made.

Mr. Hoban: How long will the Government and shareholders have to object after the valuation has been produced?

Angela Eagle: We are discussing appointing an independent valuer, and I do not want to be too prescriptive ahead of their selection. I do not want to tell them in advance how they should run the operation, but it would have to be done expeditiously. There would have to be a reasonable amount of time between the valuation and the point at which a shareholder would have to appeal. It will also be up to the valuer to ensure that all shareholders are aware of that system. I do not intend today to second-guess a valuer who has not even been appointed, except to make that general point. Anyone affected who is dissatisfied with a revised assessment will be able to refer the matter to the Financial Services and Markets Tribunal.

I hope that I have explained clearly the background to the order and its purpose. I repeat that it is right to establish a fair way of assessing the amount of compensation payable to people who have lost their shares, or have had their share options or other rights extinguished as a result of the transfer. Any compensation must be fair and must not over-value Northern Rock on the basis of public support. Without such support, Northern Rock would not have been able to continue as a going concern, and would be in administration. If it had not been for the Government’s support since September, that would have been the case long ago. It would certainly have been the case when the transfer was made. I therefore believe that the way forward proposed in the order is the fairest. It is fair that the value of any compensation should be determined by an independent valuer and not only on the assumption that public support was no longer available. The order allows for that to happen in a clear way and allows for review of the valuer’s decision. I hope that the Committee will support the order.

Mr. Hoban: It is a pleasure to serve under your chairmanship, Mr. Martlew. As the Minister said, the order sets out the basis on which compensation will be paid to Northern Rock shareholders. It flows from sections 5 and 9 of the Banking (Special Provisions) Act 2008, which was passed by both Houses last month.

As we have heard from colleagues, hon. Members from all parties have received e-mails about the measure from small shareholders. We can all understand their frustration and anger. Many received their shares on demutualisation and are clearly disappointed to see them lose so much of their value. It is particularly hard for Northern Rock employees, who are already uncertain about their future and whose shares have now been devalued, and I sympathise with them. Fewer tears will be shed for institutional investors, but I suspect that they will ultimately cause the biggest headache for the Government.

Mr. Charles Clarke (Norwich, South) (Lab): Can the hon. Gentleman clarify an issue about the two groups of shareholders? On one hand, there are shareholders such as those mentioned by the hon. Member for Hexham (Mr. Atkinson) and my hon. Friend the Member for Newcastle upon Tyne, North, and we all feel great sympathy for them; on the other hand, there are speculators who arrived at a particular time. Does the hon. Gentleman accept that they will nevertheless have to be treated the same?

Mr. Hoban: The right hon. Gentleman is absolutely right, and I congratulate him on the speech that he made yesterday in the debate on Northern Rock. He made a number of telling comments about the process that has taken place during the past five months. He is right that in theory, all shareholders will be treated equally, but I shall come to my concerns that that might not be the case, due to treaties that the Government have entered into. I shall elaborate on that later.

The order makes three assumptions. The first, following section 5(4) of the Act, is that the bank is deemed to have withdrawn financial support or would not provide further assistance. Will the Minister explain why that must be in the order, given that it is already in the Act and must be factored into the valuation? The next two assumptions are that the bank is not a going concern and that it is in administration. Again, those assumptions are in the Act, in section 9(2). However, subsection (2) has three assumptions: the two that I just mentioned, and a third assumption that the bank is being wound up. What would the consequences have been if that assumption had been included in the order, and why was it excluded?

Members have mentioned that shareholders are asking why Northern Rock should not be treated as a going concern. We know that its assets exceed its liabilities—at least, that is what the Chancellor has assured the House—but due to market conditions it is unable to repay its debts as they fall due. However, that has been dealt with by the provision of funding by the Bank of England and the Treasury. Small shareholders are saying, “Well, it must be a going concern. It’s still trading, selling mortgages and accepting retail deposits.” They are slightly perplexed that the facts do not bear out the assumption.

The Government’s argument is that Northern Rock is not a going concern because section 5(4) of the Act says that it is not. The subsection assumes, despite facts shown to the contrary, that support either has been withdrawn or will not be provided. The Government and the Act say that it should be deemed that the Bank of England has withdrawn its facilities, but again, small shareholders will say that it has not and that those facilities are still in place. Why should the Government assume that that has happened? As far as small shareholders are concerned, the facts of Northern Rock as they see them do not back up the assumptions underpinning the order. They are right to be confused about that. Clarity is needed.

Angela Eagle: The hon. Gentleman is rightly putting a case for small shareholders. Does he support that argument, or is he just advocating for the worries of small shareholders?

Mr. Hoban: It is important that the Committee take this opportunity, the only one that we have, to scrutinise the order. Representations have been made by small shareholders to virtually every Member of the House, I expect. It is important that their concerns should be articulated and that the Minister should respond. The Act itself makes clear the basis on which the valuation should take place.

Let me turn to the other assumption. Northern Rock is a going concern in the eyes of many shareholders, who will also say that it is not in administration. In fact, the Chancellor fought shy of the administration option for Northern Rock, despite proposing it for future banking crises. Shareholders might ask how it can be treated as if it is in administration. They will perhaps also say that the Chancellor believes that Northern Rock will be sold back to the private sector, and presumably thinks that nationalisation is a more attractive option than administration. Perhaps they will ask why it is right for shareholders to be bought out at a knock-down rate, given that the Government expect a possible windfall when the period of temporary ownership ends.

Hon. Members can see why small shareholders are concerned, because to their minds the facts do not bear out the assumptions that are made.

Mr. Clarke: I am sorry to press the point again. The hon. Gentleman seems to be making the case on behalf of small shareholders, which I understand because many people are in a terrible position as a result of what happened. Will he make it clear whether he and his party believe that small shareholders should be treated differently from the large shareholders who came in at the time of difficulty in order to make a profit? Does the hon. Gentleman’s party believe that there should, or could, be any difference in treatment of those two types of shareholders?

Mr. Hoban: I will clarify the position again for the sake of the right hon. Gentleman; I thought that I did so adequately before, but clearly I did not. We do not believe that different classes of shareholders should be treated differently. However, I will suggest why some investors might be protected in a different way from small shareholders.

I want to explore for a moment what the Government mean by “administration” in this context. Schedule 16 to the Enterprise Act 2002 contains three clear objectives of administration, which are ranked in descending order: first,

secondly,

and thirdly,

The outcome of the valuation would depend on which of the three objectives of administration the valuer believed was appropriate to Northern Rock's position. The valuation on the basis that the company could be rescued as a going concern is different from one based on realising property to make a pay-out to a secured creditor.

Will the Minister clarify the basis that the valuer should adopt when looking at Northern Rock, assuming that it was in administration? The Government believe that Northern Rock is capable of being rescued as a going concern—otherwise, perhaps they would not have nationalised it. Indeed, our preferred option—rather like the Chancellor's position on future banking crises—is for a form of administration, the purpose being the first objective of trying to rescue it as a going concern, rather than its being wound up. I suspect that with hindsight, the shareholders might feel that they would have got a rather better deal from that than from the options discussed to date. Will the Minister confirm whether she would be happy if Northern Rock were valued as if it were capable of being rescued as a going concern, reflecting the Government’s public policy, or does she expect it to be valued as a fire sale?

I should like to discuss what might be distributed to the shareholders and on what basis the compensation is to be decided. The Chancellor said that Northern Rock has net assets and that in administration, shareholders would receive any remaining assets after all creditors had been paid. Does the Minister think it reasonable for shareholders to expect to receive the net asset value on the date of transfer as a minimum distribution? Perhaps she can help the Committee and shareholders by saying when Northern Rock will actually publish its results, so that shareholders can take a view about what that net asset position might be at the end of December.

Mr. Henderson: I am intrigued by the concept of net asset value at the point of nationalisation. If there was a negative net asset value—in other words, liabilities—would the hon. Gentleman believe that there should be no compensation payable whatsoever?

Mr. Hoban: That is an interesting point but it is purely hypothetical, because I understand from the reassurances given by the Chancellor in the House that there are net assets and that there would be net assets at the date of transfer. I do not think that anyone has ever suggested that there are net liabilities in Northern Rock. If that is the suggestion, it implies a cost to the taxpayer that has yet to be disclosed to the House.

Mr. Henderson: My point is that unless there is an attempt to measure the assets and liabilities, one does not know. The values could change backwards or forwards, but were there to be a negative net asset at that point, is the hon. Gentleman arguing that the shareholders should receive nothing? If that were the case, would that be the principle?

Mr. Hoban: It is an intriguing argument, and the answer depends on the valuation basis adopted by the valuer whom the Treasury appoints. If the assumption were that the organisation was not a going concern and we went through the process of winding it up, the shareholders would be entitled to nothing at the point when it was wound up. If the assumption were that it was not a going concern and it should be wound up, and there were a surplus, ordinarily, under those procedures, the surplus assets would be distributed to shareholders. If the argument were, however, that Northern Rock was still essentially a going concern and could trade out of its current problems, compensation would be calculated on a very different basis. That is why it is important that the Government, for the purposes of clarity, explain to the valuer and this Committee the basis that they think appropriate for the valuer to use when examining Northern Rock as if it were in administration.

Mr. Henderson: Does the hon. Gentleman accept that in financial terms, there is a difference between a business having a negative net asset and its still being a going concern? It could be a going concern, because the future would bring other things, but if it were put into administration at a particular point in time and wound up, it might have negative net assets at that time.

Mr. Hoban: I do not disagree with any of that. If a business had negative net assets but was seen as a going concern in the future, it would be valued on a different basis than if it had no future. The valuer would determine the compensation on whichever basis was appropriate. That is why I am very keen for the Minister to establish the right basis for the valuer to adopt when looking at Northern Rock. Will it be treated as if it were going to be wound up, or should it be treated as a going concern? Clearly, the Government believe that it should be a going concern, because they are betting taxpayers’ money on its being so.

Angela Eagle: The assumptions that the hon. Gentleman asks me to make clear are in the order, and I dealt with them in my opening remarks: that all public support has been withdrawn, that Northern Rock is not a going concern and that it is therefore in administration.

Mr. Hoban: I accept that the Minister pointed out exactly that basis, but if she looks at schedule 16 to the Enterprise Act 2002, she will see that there are three different purposes for administration. The first purpose is for the business to be rescued as a going concern, so the Minister must give the valuer some clarity about the appropriate basis for valuation on the assumption that Northern Rock is in administration. Is she saying that the valuer should assume that Northern Rock is being wound up in a fire sale? If that is what she believes, I hope she will put it on the record today, because it would give clarity—[Interruption.] I am not sure what the Minister said from a sedentary position, but I will happily give way.

The Chairman: No, it is all right. Carry on.

Mr. Hoban: I am just keen to help the Committee and those who might be interested in the proceedings by getting the Minister’s answer on the record, but perhaps she will return to the issue during her winding-up speech.

In the context of net assets, I want to address an issue about which there has been considerable debate during the past few weeks: the position of Granite. I shall not go into the detail of Granite, but it is important to establish what is in Northern Rock and what the valuer seeks to value. In Northern Rock’s 2006 accounts, Granite was consolidated into the company’s results. The accounts state:

Northern Rock accounts include the gross assets, securitised in Granite, and they also highlight the fact that the value of the loan notes issued is exceeded by the securitised gross assets. That provides a buffer in the event of a default within the pool of mortgages.

Can the valuers assume that the excess—that buffer—should be treated as part of the assets of Northern Rock in determining the value? Does the Minister believe that the Office for National Statistics was right to say that because the risks and rewards of Granite accrue to the company, it should therefore be assumed to be part of Northern Rock’s debts? Alternatively, does she support the Chancellor’s view that Granite should be outside of Northern Rock, and that it has not been nationalised? Again, for the purposes of the valuation it is important to have clarity as to what the Government believe is appropriate.

One issue that has been raised is what has happened to Northern Rock since the lender of last resort announcement was made in September, and what impact that might have had on the value of the business. Indeed, the Treasury Committee’s report said about the handling of the four days between lender of last resort status being granted and the guarantees being issued that

Is the valuer allowed to consider such a factor? It would appear that the Government’s actions detracted from the company’s value rather than enhancing it.

I turn to the issue raised earlier by the right hon. Member for Norwich, South—the treatment of various classes of shareholder. I agree that in principle all shareholders should be treated alike. That is the equitable solution. However, I note that section 9(7) of the 2008 Act provides for different procedures to apply in different circumstances. Will the Minister elaborate on how that applies in the case of Northern Rock?

However, I am sure that the Minister will be aware that the Government have bilateral arrangements with a number of countries to protect investors when assets are expropriated by foreign Governments. Clearly, that is an important protection for investors operating in challenging markets. However, I understand that those agreements are reciprocal. They apply also when assets owned by foreign investors are expropriated or nationalised—or taken into temporary public ownership—by the UK Government. In those circumstances, the compensation claims are not settled by the valuer, who is to be appointed on the outcome of today’s debate, but by international arbitration.

For instance, our agreement with Hong Kong states:

that is, either country—

it permits nationalisation—

If I were an investor in Hong Kong and I owned shares in Northern Rock, I imagine that I would be treated rather differently from a small shareholder living in the constituencies of the hon. Member for Newcastle upon Tyne, North, my hon. Friend the Member for Hexham (Mr. Atkinson), the right hon. Member for Berwick-upon-Tweed (Mr. Beith)—or even in my constituency.

I am keen to put to bed the issue raised by the right hon. Member for Norwich, South. Will the Minister explain how it would apply in respect of Northern Rock? Does the order before the Committee negate those international agreements? If not, how many territories will be affected? It would appear that shareholders based overseas have better rights to compensation than those based here. That is the matter of the different classes of shareholders to which I alluded in response to interventions from the right hon. Member for Norwich, South.

I conclude with some detailed questions. I assume from the Minister’s response on the process of appointing the valuer that the Government will be appointing an individual and not a firm. Under paragraph 8, who will bear the cost of work that the valuer and his staff do? Will it be the Treasury or the company, or will it be taken out of the compensation payable to the shareholders?

What is the basis on which, under paragraph 12, shareholders or the Government can challenge the assessment notice produced by the valuer? I am surprised that in an area that is important for shareholders’ certainty there is not more detail on how long shareholders will have to respond to the assessment. That is a point on which I intervened on the Minister earlier. I am slightly concerned about how vague and woolly that part of the order is.

On paragraph 13, what actions can be taken by shareholders or the Government to appeal against the decision taken by the tribunal? Can an appeal be made to higher courts?

On one level, the order looks quite straightforward, but I am afraid that nothing to do with Northern Rock is straightforward, as we have seen over recent months. The compensation process will come up against the resentment of shareholders, whether they be institutions or individuals, as we have discovered from some of the e-mails and letters that we have received. I suspect that the matter will be dragged through the courts.

The Minister has an important responsibility this afternoon to explain clearly and precisely to Northern Rock’s shareholders why the company should be valued on the basis that it is in administration and not a going concern.

Mr. Clarke: I want to make a different point from the earlier one, which I think that the hon. Gentleman has addressed. On his comments on the valuation assumptions in paragraph 6, does he acknowledge on behalf of his party that if his approach were followed, it might well lead to the public sector paying much higher compensation bills than if the proposals in the order were followed? Does he acknowledge that that could be the impact, and has he thought through the effect of that on his party’s overall public spending considerations?

Mr. Hoban: The right hon. Gentleman makes a point. I raised the issue of the basis of evaluation with the Minister for clarification. I am sure that she is as mindful as we all are of the public spending constraints under which the Government are operating, and I am sure that the Government have chosen an aggressive and tight wording for the valuation basis to reduce the impact on public spending. However, it is important for the Minister to make clear what sort of outcome the valuer can consider when determining the value to be placed on Northern Rock within the definition of administration. That is not a proposal; I merely want to indicate the ambiguity that the order creates by mentioning administration but not being much more specific about whether it should be considered as a rescue of the company as a going concern or, as the Chancellor has said, as a fire sale.

Mr. Clarke: I understand that the hon. Gentleman is speculating and inviting the Minister to respond to him. Do the official Opposition not want to make a proposal to change the wording in paragraph 6? Is that because he acknowledges the reality of such a change—that it would have significant potential public expenditure implications that he is not ready to take on?

Mr. Hoban: The order cannot be amended anyway, so, even if I had proposals, I would not actually be able to put them into practice. The issue is slightly hypothetical.

I am here to act as a guardian of public spending by pointing out to the Minister that perhaps the wording of the order commits a valuer to take a rather liberal view on how public money should be spent. The problem, I am afraid—actually, I am rather grateful—is not mine. It is the hon. Lady’s and the Chancellor’s, and they have to resolve the issue, not us.

The challenge that the Minister faces is that shareholders in Northern Rock find it hard to reconcile the assumption that underpins the order—that Northern Rock is in administration and not a going concern—with the fact that it is still trading. The Government expect it to be privatised in the future, and, presumably, they expect to make a profit on that privatisation. They need to explain more clearly than the Minister has done so far how they reconcile that contradiction, so that we can explain to our constituents the basis on which the order is proceeding today.

Mr. Jeremy Browne (Taunton) (LD): I am grateful to you, Mr. Martlew, for calling me to participate in this important discussion. It is worth noting at the outset that the sorry saga of Northern Rock has many different and varied victims. First among those is the taxpayer. Calculations vary, but a ready reckoner that many accept is that the whole episode has so far cost each British taxpayer something in the region of £3,000—in effect, an additional mortgage on top of the ones that many of us in Committee and elsewhere are servicing already.

The employees of Northern Rock constitute a second group of victims. Although the Government have not made it explicit, it is fair to assume that down the track the number of employees will decrease. Of course, those who work for the company will be anxious about their prospects. The third group of victims consists of the Prime Minister and the Chancellor of the Exchequer, who I think have been found wanting and certainly indecisive by many observers throughout this saga.

The victims being discussed this afternoon are the shareholders of Northern Rock who have been badly let down by the company’s directors. I was rather surprised by the Minister’s assertion that the Financial Services Authority was an innocent bystander in this episode and did not bear direct responsibility. Many regard it as culpable to some extent.

Angela Eagle: The hon. Gentleman must not put words in my mouth. In response to a question, I said that the FSA is not responsible for driving Northern Rock into the situation that it got itself into with its business model. Those who were in charge of running the bank are responsible.

Mr. Browne: The Minister was quick to intervene before fully absorbing the meaning of my words. I accepted that the directors were directly responsible for the failure that has led to this discussion, but clearly there was a regulatory failure as well. Most people would accept that if we think that the regulatory regime was perfect in every regard, we need to look again at the systems in place. This is a model example of how the regulatory regime failed to protect shareholders, employees, depositors, the wider economy of the north-east, the Government’s reputation and all of the other groups that I have been through.

As we have discussed, there is widespread sympathy, particularly for some of the smaller shareholders—I think that everybody in the Committee accepts that point. The hon. Member for Hexham (Mr. Atkinson) quoted from a letter that he received that was entirely typical of the difficulties that some small shareholders—in some cases, they are former employees or their relatives—are facing as a consequence of the difficulties that Northern Rock has experienced. They perhaps felt that they were in a position where they could rely, and have a degree of financial dependency, on their shareholding in Northern Rock. Of course, that security has now been taken away from them. I think that people make a distinction—perhaps a moral, rather than legal distinction—between the plight of people in the position that he outlined and that of the more speculative, larger institutional shareholders.

We must remember, of course, that shareholding comes with no guarantee that shares will always increase in value. It is worth considering the housing market, which is another part of the economy in which people seem to proceed on a similar basis—that house prices always go up. Of course, shares and house prices, as with every other aspect of a capitalist economy, are subject to downturns as well as upturns. We cannot proceed on the basis that shareholding is always to the benefit of the shareholder, but at the same time, any downsides are not the responsibility of the shareholder either.

On the consequential action that we must take, I do not mean to be excessively critical, but I think that the Conservative party spokesperson sought to give the impression that he was going into bat on behalf of the shareholders without necessarily coming to a conclusion any more beneficial to them than the one proposed by the Government. My view, and that of many others, is that the bank could not have continued to trade without immediate Government support and would have failed back in August if it had not received that support. There would then have been no possibility of any shareholders receiving a return on their shares. Northern Rock did continue to trade, but only because of the substantial support injected into the company by the taxpayer at that point.

Mr. Hoban: Does the hon. Gentleman not think that part of the purpose of these proceedings is to scrutinise the Government, rather than to simply roll over and have our tummies tickled? Does he not agree that we are here to ask questions and get answers?

Mr. Browne: I do think that the role of Opposition parties is to scrutinise the Government. I will not go too far off the beaten track, but, on that subject, my hon. Friend the Member for Twickenham has further enhanced his reputation by suggesting, many months before the Government decided on this course of action, a way in which the Government could go some way towards salvaging their reputation. Such a constructive line of criticism and advice has not been forthcoming from the Conservative party.

I take the point made by the hon. Member for Fareham. We are here to discuss the issues, probe the Government, and to try to improve the suggestions and proposals that they have made. However, we ought to avoid creating the impression for people who read the text of our discussions that we are on their side and are seeking to assist them more than the logical extension of the policy that we are proposing. I suggest only that there is the potential danger that some people who read the hon. Gentleman’s speech may conclude that he is arguing that taxpayers should, to a large extent, fund shareholders in Northern Rock. As I understand it, that is not the position of the Conservative party.

Mr. Hoban: The hon. Gentleman should pay closer attention to what is being said. In response to the intervention from the right hon. Member for Norwich, South, I said that I wish to protect taxpayers’ interests and to clarify the Government’s valuation assumptions—not to propose valuation assumptions of my own. I want to ensure that the taxpayer achieves the goal that I think is right: for this debacle to cost as little as possible.

Mr. Browne: I am grateful for that clarification; we are as one on the subject. I am pleased that shareholders who choose to read this debate will not be given the impression that anything else was the case.

On the situation that arose in late summer, the Government stepped in to prevent damage to the banking system. They did so first by guaranteeing depositors and then by becoming the lender of last resort, as the company at that point could not access funding from the markets. It could have been argued that shares in Northern Rock should have been suspended some months previously. My belief and that of my party is that it is appropriate for an independent valuer to determine what if any—I stress if any— compensation should be available to shareholders. Such a determination can only be on the basis that Northern Rock is a “gone” concern, rather than a going concern.

The bank effectively went bust—not because it was insolvent, but because it could no longer trade without the intervention of the Government. It was only because of the Government support provided to secure the financial markets overall that it was able to continue trading. In our view that should be excluded from any calculation of the residual worth of the business.

Mr. Field: For the sake of clarity, will the hon. Gentleman say whether it is correct that the Liberal Democrats’ will not be standing up for small shareholders, other than on the basis that the bank was a “gone” concern from the end of August or the beginning of September—I am thinking particularly of those marginal seats in the north-east that we will be fighting for?

Mr. Browne: I am not entirely sure that I am grateful for that intervention. I wish there were more marginal target seats for the Liberal Democrats in the north-east, but we are making much progress. I am next to my right hon. Friend the Member for Berwick-upon-Tweed (Mr. Beith) who converted a marginal seat in the north-east into a safe seat after winning it 35 years ago; he is an example to us all.

We want to ensure that as fair and reasonable a deal as possible is secured for shareholders, but that has to be reconciled with the interests of the taxpayers. In conclusion, the valuer has to make the decision. It might be unwelcome news to some or all of the shareholders, but the taxpayer’s interest has to be paramount, because Northern Rock would not be a viable entity had the taxpayer not poured substantial sums of money into the bank to keep it afloat. We have put that as a primary consideration. However, shareholders wish to raise legitimate concerns and interests, and I agree with the hon. Member for Fareham that those concerns need to be taken into account by the valuer, the Government and others. They have a legitimate case, which they are already putting, but the bottom line is that the taxpayer’s interest must come first.

Mr. Field: I want to associate myself with the comments of my hon. Friend the Member for Fareham, who summed up the position well. The Government have to make some difficult decisions; in political terms, there is always the thought, “There but for the grace of God—” when this sort of problem arises on someone else’s watch. However, in relation to the order and the explanatory memorandum, we need to know much more about the basis of assumptions from which the valuer will make his valuation. To a large extent, we seem to be giving a carte blanche.

There are issues to consider in relation to the Enterprise Act 2002. I sat on the Standing Committee for that Bill, and I remember that the Government made great play of the fact that we were trying to introduce an insolvency regime similar to chapter 11 in the United States, which allows companies to continue trading as a going concern. My hon. Friend rightly pointed out that administration is not the same as liquidation. There seems to be almost a presumption that involving an administrator leaves a company one step away from liquidation, if not actually at that point, but the state of affairs is very different. I accept that we do not have chapter 11 powers here, and the assumptions in section 5(4) of the Banking (Special Provisions) Act 2008 are clear and separate, but it is not clear which valuation, in relation to administration, is relevant in this case.

My hon. Friend rightly said that the order requires the valuer to assume that Northern Rock is unable to continue as a going concern and is in administration. As I tried to point out in an earlier intervention, neither of those criteria apply in this case: Northern Rock was never in administration, and it was regarded at all times as a going concern. I do not agree with the observations of the hon. Member for Taunton about the situation that has surrounded the company since September. There is no doubt that the Bank of England, which is independent from the Government, arranged for loans and guarantees, but it has never asked for any repayment of those loans. Neither have any Treasury guarantees been withdrawn.

Mr. Beith: Does the hon. Gentleman think that Northern Rock could be regarded as a going concern if those guarantees were withdrawn?

Mr. Field: That is open to much speculation, but I suspect not. The hon. Member for Newcastle upon Tyne, North made some interesting observations on whether there are ongoing net liabilities or assets. Obviously, the trigger date for when the valuation shall be deemed to have taken effect has already gone, but there can be little doubt, I hope, that there are net assets—otherwise, the Treasury will have been very guilty of misleading Parliament regarding the valuation of Northern Rock’s assets and liabilities. However, the ongoing debate that would have taken place had we gone down the administration route would have ensured that the directors would turn their minds regularly—probably on a weekly basis in board meetings—to whether they should continue to support administration, rather than going down the liquidation route. They would have been focused on whether the business should continue as a going concern.

My hon. Friend the Member for Fareham has said that we should not allow the debate to be taken over by the range of different interest groups that will, no doubt, be very vocal in coming months. You will be aware, Mr. Martlew, that I am very much of that view. Those with the deepest pockets, in particular, might even go to court to try to protect their position as shareholders, especially. I believe that all shareholders should be treated alike. My hon. Friend rightly expressed concern that, given the international treaties to which we have signed up, there is a risk that certain international shareholders—obviously, we do not know the entire extent of the shareholding of Northern Rock—may be able to argue a different deal. The issue is whether a deal acceptable to international shareholders should apply to all shareholders. That would have substantial financial implications, as the right hon. Member for Norwich, South pointed out.

I am concerned that we are effectively giving a go-ahead today. I appreciate that we need to move on the issue, but we are giving the go-ahead in the form of an order containing a range of assumptions whose implications we are not fully aware of. It would be useful for the Minister to give us more of an idea of precisely what assumptions the valuer will put in place, given what other hon. Members have said.

Mr. Beith: Although I am grateful for the opportunity to mention the situation as it affects some of my constituents, I shall start by referring to the intervention made earlier by the hon. Member for Cities of London and Westminster, who introduced what I thought was an inappropriately partisan note into the proceedings by suggesting that any turn of phrase used here is somehow of great importance in fighting elections in the regions. It is relevant to point out that, although there are many small shareholders in my constituency, there are even more taxpayers, many of whom pay quite a lot of tax on relatively small incomes. The impact on them of the Government expenditure generated by the measures will be significant.

Mr. Field: The right hon. Gentleman might not like my taking a partisan view, but the Northern Rock issue is far closer to the hearts of shareholders than to those of taxpayers at large. That is why politicians of all parties may be tempted to make common ground with shareholders for the purpose of electioneering in the north-east and perhaps elsewhere.

Mr. Beith: Not in my part of the world, where Northern Rock is a matter of concern to absolutely everybody. It is striking how dramatically and vividly it has impinged on the lives not just of shareholders, depositors and mortgage holders but of people throughout the region, for reasons that I shall mention in a moment.

There are many small shareholders in my constituency, and some of them are surprisingly stoical. Many of them got their shares at de-mutualisation because they were members, happily so, of Northern Rock as depositors, borrowers or, in many cases, both. I am surprised how many of them have said to me, “Well, Mr. Beith, we got them for nothing, so we can’t really complain.” That is an impressively philosophical view of it, but a lot of people who got shares free after de-mutualisation bought more shares, because they saw the company’s apparent success and were confident. It was a northern business, headquartered in the north, that had given a great deal to the north, both directly through sponsorship and indirectly through the Northern Rock Foundation.

There was a remarkable sense of ownership right across the region. Indeed, I think that that has made it difficult for shareholders and others there to accept the amount of responsibility that must be assigned to the directors of the company, who were primarily responsible for the appalling situation in which the company found itself. Several of them were recognised and respected figures in the economic and community life of the north-east, yet they somehow failed in their duty to shareholders and the region by allowing the pursuit of a model that must have been realised by anyone who saw it at the time to be highly dangerous, with a great capacity for disaster. I have said elsewhere that if one drives around a blind bend at 80 mph and crashes into a broken-down bus, it is no use saying that the police should have prevented it and that the broken-down bus should not have been there. That is essentially what happened. There was no adequate risk assessment, so the primary responsibility for what has happened to shareholders lies with the directors of the company.

Inevitably, the small shareholders still ask, “What about the Financial Services Authority, and why isn’t that relevant to the calculations that the valuer must make?” They have seen the widely publicised Treasury Select Committee report about the FSA’s failure, and indeed that of the Bank of England and the Government themselves, to deal with the dangers posed by that extraordinarily high-risk business model. It was dangerous to the banking system of the country. Here, the small shareholders’ interests happen to be coterminous with those of taxpayers as a whole. The collapse of the whole banking system was against the taxpayers’ interests, therefore the Government took action to give loans and guarantees to Northern Rock. However, the fact that the company got into that situation was against the shareholders’ interests. The failure of the FSA, although it was not acting on behalf of the shareholders—it was supposed to be acting on behalf of taxpayers as a whole—also had a direct effect on the small shareholders. That is why small shareholders say that that ought to be one of the factors that the valuer could take into account. I hope that the Minister will give her view of why that should not be so.

Perhaps the small shareholders and their organisations will move on from this point and say that they ought to seek redress through the courts for the failures and the liability arising thereby. As a former Equitable Life policyholder, I have to say that the Equitable Life experience was not encouraging in this respect. However, those shareholders may feel that it is necessary and appropriate to take action. Small shareholders observe failure by the directors, which is the primary failure, and failure by those who were responsible for regulating the system—not particularly in their interests, but in the interests of the community as a whole. The same failure that hit the community as a whole and is now costing the taxpayer so much money also directly affected the shareholders.

Small shareholders are looking for answers from Ministers as to why the order is cast in this particular form, which is why I pose that question again now.

Mr. Atkinson: There is not much to add, but I want to reinforce a point. I am not here to represent any form of shareholder.

The difference between Northern Rock and a normal company in trouble is that there are tens of thousands of small shareholders for whom we feel particularly sorry. Many of those shareholders are in the north of England, in the constituencies of my hon. Friends and other Members. Northern Rock was formed from two well-established building societies in the region, and people placed their trust in it. When it was demutualised and people got some shares, many rightly thought that if they wanted a blue-chip, safe home for money, the Northern Rock was the place to go. These are sophisticated investors.

Today, we are asking the Government to give those people the answer to the question that they are asking. All that I and my hon. Friends came here for was to discover a bit more about what is behind the order and to hear answers to questions that have been asked time and again about why these assumptions are being given to the valuer. I am not optimistic about our getting a great deal more clarity from the Minister.

I have been in the house long enough to know that Treasury Ministers sometimes have to be deliberately obscure. I appreciate that there are battalions of lawyers standing in the background, sharpening their pencils and ready to go, but as my hon. Friend the Member for Fareham said, there many questions to be asked, including about the different classification of shareholders, on top of those about the valuer’s assumptions. The relationship between any future value of small shareholders’ shares and the assets in Granite, for example, is an issue that they do not understand. Such issues are totally obscure to them.

In the letters that I write in reply to those who have written to me about this Committee, I will have difficulty explaining what is motivating the Government and what is behind some elements of the order. Unless the Minister is going to be frank now—I suspect that she is not—we will perhaps have to wait, at least until the order goes to the other place, to get an answer to some of these rather complex questions.

Mr. Henderson: Following on from what the hon. Gentleman said, I want to reinforce a point. I have received a lot of letters and e-mails on this matter. The Committee will understand that the head office of Northern Rock is in my constituency. There is a pretty good spread of shareholders throughout the whole of the north-east, and beyond it in the rest of the country.

Shareholders have asked me various questions. If the shares were valued last January, the share price would be about £12, but if they were valued in June it would be around £10 or £11. If the shares had been valued the night before it broke publicly that there was a problem in the bank, what would the value have been then? Different people tell me different things about the value at that point.

Shareholders have also asked me whether the valuer will value the shares according to an average over the last six months, which has sometimes been done under nationalisation compensation arrangements—although not usually in this circumstances such as this—or whether the valuer will say, “I have to work out the theoretical drop in price of the shares from the night before the public announcement in September to the day of the announcement. I have to make a judgment as to what happened next.” The judgment can be made—the facts are there—until the point at which the shares are suspended, and then there is a problem.

The question is how the share price would have reacted that next morning—back in September—had the Government announcement not been made. Had the announcement been made that the Government were not backing this, and that there was a real problem—if it had hit the bus, as in the tale told by the right hon. Member for Berwick-upon-Tweed (Mr. Beith)—what would have been the value of the shares?

The Government rescued the bank, and I think that all Government Members welcomed that. My constituents, the trade unionists and Northern Rock itself very much welcomed that. They did not support premature nationalisation because they were not sure of the consequences and they were worried about that, but they did support intervention by the Government. Those people are now asking what criteria are used to value the shares—to value the business—between that day in September and 22 February, when I think nationalisation took place. There are no easy answers to that question. Estimates will inevitably be made of the net asset value. I do not think that there is an answer to that question, either. I know that, as a Labour member of the Committee, I am not meant to declare that I have friends in the City, but I do have some friends there and I have asked them for their estimate on the question of assets against liabilities. One receives interesting theoretical responses.

The valuer does not have an easy task. I do not see how the valuer can easily reach a determination, because the only way in which one knows whether there is a positive or a negative net asset value is if one attempts to terminate the business, and is either selling it or it is in liquidation. I do not have an answer to the question and I do see how the Minister can, either. Perhaps she has, but it is a very difficult issue for the valuer to determine. I suspect that we will still be discussing the issue after the valuer has had a stab at it and perhaps, as the order allows, a further stab and, as the order also allows, after an appeal on the second stab. We may want to consider that further in different forums in the House, and we will clearly be under scrutiny by the shareholders with, as the hon. Member for Hexham (Mr. Atkinson) said, the sharpened pencils of the solicitors and counsel behind them.

Angela Eagle: I will attempt, inasmuch as it is possible to do so, to deal with the questions that have been raised thus far in our debate. A number of hon. Members spoke about the assumptions that the order specifies must be made when determining the amount of any compensation that would be payable. As I said at the start, any compensation must be based on a realistic assessment of the shares’ value without public support. That is simply because taxpayers should not be expected to pay compensation for value that would not have existed without their support. It is clear that without public support, Northern Rock would not have been able to continue as a going concern and would, at best, have been placed into administration. I believe that the assumptions in the order, which are essentially those, are fair.

The hon. Member for Fareham asked a series of questions. First, he asked about the consequence of assuming that Northern Rock would be wound up and why that was not assumed. The assumptions set out in the order are appropriate for this case—the complex case of Northern Rock, in which there is a range of assets and liabilities. The Banking (Special Provisions) Act 2008 is a general Act, as is the Insolvency Act 1986, so the assumptions must cover all insolvency issues that may arise in all cases. The two assumptions that we want the valuer to take into account are those in the order, which seem perfectly reasonable and fair to me.

Mr. Hoban: Is the Minister therefore saying that it is inappropriate for Northern Rock to be valued as if it were going to be wound up—a fire sale?

Angela Eagle: It is for the valuer to value Northern Rock shares with the assumptions that I have set out more than once in the debate—not that it is particularly going to be wound up.

The hon. Gentleman and other Opposition Members talked about the seeming oddness of how one reconciles the argument that Northern Rock cannot continue as a going concern and will be in administration, with the argument that it is in public hands, is solvent and has a good mortgage book. First, the point about Northern Rock being in administration is that there are assumptions about what would have happened had the public financial support been withdrawn and not been available in the future. Secondly, the assumption concerning withdrawal and non-availability of financial assistance is about Northern Rock’s cash flow. Owing to its business model, it would not have had sufficient cash flow to pay its debts as they fell due in the absence of continued public support. Those debts would have included repaying its depositors as well as the Bank of England’s lending.

The important distinction that has not been appreciated in today’s debate is between cash-flow insolvency or the inability to pay debts as they fall due—the bank’s business model’s problem with what happened in the credit markets—and balance-sheet insolvency, whereby liabilities exceed assets. The bank had a problem with cash-flow insolvency, but that does not exist now because it has been taken into temporary public ownership. That is the distinction about which hon. Members have been confused, and that is how it is possible to say that the valuer must make their decision assuming that all public support is withdrawn. For the reason that I mentioned earlier, it is not appropriate that shareholders should be compensated and that part of the value ascribed to their shares should come from the fact that the taxpayer has supported the bank. That would not be in the best interest of taxpayers.

Clearly, therefore, if the Bank of England’s support had been withdrawn, Northern Rock would at least be in administration due to cash-flow insolvency, which is why the order is very careful to specify that point. That is the starting point from which the valuer, if both Houses approve the order, will begin to do their work.

Mr. Hoban: The Minister referred to the Enterprise Act 2002, but does she appreciate that there is a distinction between administration and being wound up? The distinction is important in influencing the valuation. Why was winding up not the assumption, as opposed to administration?

Angela Eagle: Looking at the bank’s situation, the decision was made that it would at least be in administration. That is the assumption in the order before us. Only so much future-gazing can be done, and I assert that the assumptions in today’s compensation order are fair, given the situation that the bank was in.

Mr. Field: I appreciate that this is a somewhat tortuous process, but the reality is that there have been only two certainties about the share price that are relevant to the debate: first, the moment when the shares were suspended last autumn; secondly, assuming the thing goes bust, the value is therefore nil. The concern of many shareholders—it is right that we at least express such concerns in Committee—is that the Government are going through this tortuous process in order to minimise the amount of money that they pay out. The underlying assumption of many groups deeply concerned about the situation is that the process is designed to result in as low a valuation as possible. That is why we are trying to clarify as precisely as possible the broad base of assumptions that the valuer will use when creating a valuation.

Angela Eagle: That is why the assumptions that we require the valuer to make are in the order for us to debate. Given the situation that the bank was in, the assumptions are fair. I hope that the Committee accepts that it would be unfair to attempt to value shares by taking into account taxpayers’ support. I assume that all Members support the view set out in the Banking (Special Provisions) Act 2008, which is that in this instance, the value ascribed to the bank by the fact of public and Bank of England support must be withdrawn in order to produce a fair valuation. The aim of this compensation order, and of the assumptions in the primary legislation that has brought us to this Committee, is not to minimise the value of the shares, but to get an accurate and fair valuation for shareholders under the circumstances that would have pertained had taxpayers’ support not been given. I am sorry if that is a tortuous explanation, but I am trying to put it as firmly as I can. I believe that our approach represents a fair way in which to deal with such difficult circumstances.

The hon. Member for Fareham asked when Northern Rock will publish its accounts. They will be published later this month. He also asked who will pay for the costs of the valuation process. The Treasury will pay those costs.

Mr. Hoban: The taxpayer.

Angela Eagle: The taxpayer and the Treasury will pay the cost of the valuation process—“you” and everybody in this room.

The hon. Gentleman also asked about the basis on which the Treasury could challenge any assessment that the valuer comes to. He rightly pointed out that under the order, shareholders and Her Majesty’s Treasury, both being potentially affected by an assessment, will have the same opportunity to seek a reassessment or referral to the Financial Services and Markets Tribunal if they believe that an assessment or reassessment that they have asked for is wrong.

Mr. Hoban: Will the Minister address my question about investors resident overseas taking advantage of bilateral agreements that work on a different basis when calculating compensation for shares expropriated by the Government?

Angela Eagle: The hon. Gentleman is right to point out the existence of bilateral investment treaties, but the process set out in the order for the assessment of any compensation payable to shareholders by an independent valuer will apply equally to all, irrespective of their location or nationality. I hope that that is a reasonable enough answer for him.

The hon. Member for Taunton made some telling points about the position of the Conservative party. As usual, I agree with him. It is very hard to discern the approach of Conservative Front Benchers. It is probably shifting by the minute and will probably change as we walk out of the Committee.

Mr. Hoban: I was explicit in my view about reducing the cost to the taxpayer of this whole debacle. If the Minister refers to Hansard for the debate on the Banking (Special Provisions) Bill, she will see that my hon. Friend the Member for Tatton (Mr. Osborne) concurs with the basis of the valuation offered and agrees with the Chancellor that the value that people are likely to receive will, sadly, be very small.

Angela Eagle: I am glad that the hon. Gentleman has finally come clean. It had to be dragged out of him by a new tripartite authority. Through the goading of the hon. Member for Taunton, my right hon. Friend the Member for Norwich, South and myself, we have finally got the hon. Member for Fareham to put on the record the view of Conservative Front Benchers on this issue. I hope that every shareholder, large or small, will read the debate and note that point.

The hon. Member for Taunton talked about the bank as a “gone” concern. I suppose that that is similar to my phrase and to the one that appears in the statutory instrument—that it is not “a going concern”. The valuer will have to do his or her job on the basis that, had Bank of England support been withdrawn, the bank would be in administration and would not be a going concern. I concur with the hon. Gentleman that the right balance should be achieved between the interests of tax payers and shareholders. The valuer will be under no illusions about what the Government wish him or her to base their decision on once the order has passed through the House.

The hon. Member for Cities of London and Westminster asked what actions may be taken after the tribunal. He may be right that there will be those who are dissatisfied with the process. We can only guess what might happen, but it is important to set out that the Government are determined to make this process as fair and open as possible to ensure that shareholders get the fair and appropriate value for shares that have been extinguished by the temporary nationalisation of Northern Rock. The answer to his question is that there is no further process in the order for the review of an assessment. If it is upheld by the tribunal, any further challenge would need to be made by going to the High Court. A court can quash a tribunal’s decision only if it considers that the tribunal has misdirected itself in law.

A question was asked about the basis for a challenge of an assessment notice and how long the shareholders would have to go through that process. Clearly, that is a matter for the valuer to determine in relation to the reassessment of any decision. The Financial Services and Markets Tribunal has its own rules of procedure for referrals to it. It is important that the valuer let shareholders who are affected know what those processes and time limits are. I am sure that they will be available in a reasonable way, so that the process can be followed appropriately.

We have had an important debate about an important order that affects 200,000 shareholders both large and small in the aftermath of the temporary nationalisation of Northern Rock. Now that we have had the chance to consider these important issues, I hope that the Committee will support the order.

Question put and agreed to.

Resolved,

Committee rose at six minutes to Six o’clock.