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Dr. Cable: The ideal outcome would be the sale of the bank, as a going concern, to a private operator who could maintain the employment in the north-east and the brand, and repay the Government in full. It is clear from this morning’s bids, however, that that is a fantasy and will not happen, which leaves us with two very unpalatable options.
The first option is liquidation of the bank—putting it into administration—which I think we all agree would be a disaster. It would devastate the north-east, the shareholders would get nothing, and the Government would lose a great deal of money. Should not the Government therefore consider the other option, which is temporarily assuming full control of the bank? That would eliminate the conflict of interest, it would provide a breathing space enabling— [Interruption.] It would provide a breathing space— [Interruption.]
Mr. Speaker: Order. I must now stop the hon. Gentleman.
Mr. Darling: I note that over the weekend the hon. Gentleman changed his position on Northern Rock several times. On Saturday he was calling for full-scale nationalisation, by yesterday he was calling for reluctant nationalisation; and today it was reluctant nationalisation for a very short period. This afternoon, having denounced the City, he went on to press for a quick sale to the very people whom he had denounced.
I understand full well that the board and the shareholders have a particular interest with regard to Northern Rock—I made that clear in my statement—but we, the Government, have an interest in protecting not just financial stability but the taxpayer’s money that is being lent. The reason that we insist on our interests being upheld is that we would have to agree with any proposal for the future of Northern Rock. If we do not like a proposal, we can say no to it. We can veto it because, through the Bank of England, we are by far the major creditor.
I believe, however, that simply plumping for one solution today—and presumably, by extension, not bothering even to consider any of the expressions of interest that have been received—would be extremely short-sighted and foolish. Would it not be better to use the time that we have to establish whether those expressions of interest can be translated into a firm proposal that would both help the company and, crucially, protect the public interest? I think that that would be far the better course, and it is the one that I propose to pursue.
Mr. Ronnie Campbell (Blyth Valley) (Lab): At least 6,000 people work at Northern Rock, many of them in my constituency. I agree with my hon. Friend the Member for Newcastle upon Tyne, North (Mr. Henderson) that employment is a big issue among my colleagues and Members of Parliament in the north-east. I join my hon. Friend in asking the Chancellor please to ensure that those jobs are secure. We know that the money is important and paying back the taxpayer is important, but 6,000 jobs are a lot of jobs and we cannot afford to lose them.
Mr. Darling:
My hon. Friend is absolutely right. The jobs are very important, which is why I think that the Liberal Democrats’ attitude is so short-sighted and
wrong. I think that we owe it to people in the north-east, as well as to the general public, to do all that we can to try to reach a point from which this business can be taken forward. It will be difficult—many hurdles will have to be overcome, and a great deal of hard work will be involved—but I think that the Government have a responsibility to ensure that we can manage the process, and that it would be wrong to close the door on any possibility of something in the future.
Mr. Peter Lilley (Hitchin and Harpenden) (Con): Will the Chancellor spell out in more detail why, despite the unprecedented sums involved, he is unable to be more transparent with the House in regard to the amount, the conditions, the terms and the repayment process? He now says that that is not possible because of the central bank’s commercial confidentiality, but we were told earlier that the potential deal being considered by the Treasury and the bank was aborted precisely because it was thought that such details would have to be made public.
Mr. Darling: The right hon. Gentleman raises two points. Let me deal with the second one first, as there has been some comment about a proposal that a major bank made to the Government, the Bank and the FSA at the end of August. There was no firm proposal on the table, but, as the FSA chairman has said, an exploratory inquiry was made as to whether the Bank would be prepared to lend the institution in question about £30 billion at commercial rates. It was explained that there were three problems with that. First, neither the Bank nor the Government normally provides commercial lending in this way to a going concern, which is what that financial institution was. The second problem was that if we were to entertain such an option we would have had to ask other banks whether they would be willing to enter into a similar arrangement, perhaps involving less Government money. As the right hon. Gentleman will recognise, the Government cannot just, in effect, lend £30 billion to a bank without there being some sort of due process to allow others to see whether they could do something more competitively. I would have been open to severe criticism if I had done that. The third problem was that, on any view, this would have been state aid.
As it happened, having made the preliminary inquiry the institution never pursued the matter. The proposal was made on a Saturday and the institution withdrew its interest in Northern Rock on Monday. Therefore, it was never the case that there was a proposal on the table that was there to be considered and accepted or rejected. There was a preliminary inquiry, and I have explained what the difficulties were. However, as I have also said to the House, and to the Treasury Committee, I have always taken the view that had it been possible for Northern Rock to have been acquired prior to all these difficulties, that would have been the best solution. I must also say to the right hon. Gentleman—I apologise to the House for taking up so much time in dealing with this, but it is important—that we should remember that that approach was made before anybody in the outside world knew there was a problem with Northern Rock. For us to have then started a competition as to which bank might take it over might have drawn attention to the very problems we are concerned about.
Let me now deal with the other part of the right hon. Gentleman’s question. I will be able to tell the House about the terms of repayment once it is clear what course of action is best for Northern Rock and the public interest, as I have set out. It is not possible to do that until we have a proposal that is properly assessed and worked out. On the right hon. Gentleman’s point about the general Bank of England question, I explained the position in my statement.
Jim Cousins (Newcastle upon Tyne, Central) (Lab): The whole House will have noted that the Liberal Democrats have as much regard for the 5,500 employees of Northern Rock in the north-east—and the 6,500 nationally—as they had for the job of their former leader. [Interruption.] Two or three faces in public, 10 in private—that is the policy of the Liberal Democrats.
Does my right hon. Friend accept that the policy of nationalisation would lead to a slow lingering death for the jobs of the Northern Rock workers, its assets and Britain’s reputation as a major financial services centre, with my right hon. Friend the Chancellor cast in the role of undertaker—and that only by finding a successor business to grow on those jobs, assets and reputations can we offer any real prospect of the taxpayers getting their money back?
Mr. Speaker: Order. I remind Members that they must ask brief supplementary questions.
Mr. Darling: I agree with my hon. Friend. It is regrettable and surprising that the Liberal Democrats never seemed to support our earlier proposals to keep Northern Rock open. It would also, however, be a mistake to shut off all other options and simply go for one at this stage; that does not seem to me to make any sense at all.
Mr. Michael Fallon (Sevenoaks) (Con): Is it the Chancellor’s position now that there is no agreed schedule of repayments for the £23 billion? Is it not also clear from his statement to the stock exchange that he now envisages state aid continuing well beyond the original February deadline?
Mr. Darling: In relation to that last point, as I said to the Treasury Committee, of which the hon. Gentleman is a member, we wanted to make it clear to the company that we needed to get proposals and we needed to bring that to a head, which is why we said that we would review the matter at the end of February. We have never said that everything would stop at the end of February and could not possibly continue. Surely the best thing to do to secure the best possible repayment of the loan made by the Bank of England is to assess the proposals being worked up and then decide on the appropriate rate and timing of repayment. To box ourselves in now and exclude options without having properly considered them would be the wrong thing to do.
John McFall (West Dunbartonshire) (Lab/Co-op):
I refer the Chancellor to his statement on principles this morning. Paragraphs 2 and 3 talk about protecting taxpayers’ interests, promoting financial stability and ensuring that the consumer is safeguarded. For the sake of the Treasury Committee’s inquiry, will he tell us in what order he places those objectives? May I remind
him about Friday’s statement from Northern Rock, which was put out late in the evening and did nothing to bring credibility or focus to this issue. Will he impress upon Bryan Sanderson, its chairman, that there is no case for a payout for its chief executive, Adam Applegarth? Suspicious minds would consider that he is staying on until February so that it is reported in the spring 2009 annual reports, when this will have been swept under the carpet. Credibility is important in negotiations over the next few months. Will the Chancellor ensure that that credibility is injected into this company?
Mr. Darling: I am sure that Bryan Sanderson will have heard what my right hon. Friend has had to say. It is important, especially given the position that Northern Rock is in at the moment, that whatever it does, it must ask itself whether that is the right thing to do. In answer to his question about the three principles that I set out—to protect taxpayers, to promote financial stability and to protect depositors—they are all equally important. For the avoidance of doubt, both inside this House and out, ensuring that we safeguard the taxpayer’s interest is very important, but the other principles are important too.
Stewart Hosie (Dundee, East) (SNP): The Chancellor said in a previous answer that the facility would be reviewed at the end of February. Today’s Treasury press release was headed:
“Principles for assessing Northern Rock proposals”.
“The principles clearly state that interested parties should not assume at this stage that the current Bank of England loan facilities will be available beyond either any sale or the expiry of the facilities in February.”
Yet in his statement the Chancellor said that it would be wrong to dismiss any option, and the third point of what he called his approach was to maintain wider financial stability. Those comments may seem slightly inconsistent, so to help provide transparency, which he was discussing with the G20 Finance Ministers at the weekend, will he tell us how long he expects to, or would be prepared to, have the guarantee and the facility in place?
Mr. Darling: May I suggest that the hon. Gentleman read the statement on principles that I have published today? It says that bidders should not just assume that the facilities will be available in perpetuity, and then goes on to say that we
“are willing to discuss any proposals made”.
That is entirely consistent with what I said in my statement, and with what I said to the hon. Member for Sevenoaks (Mr. Fallon). To get ourselves into a situation whereby right from the start we impose conditions on ourselves that mean that we may not get the best deal available would be a mistake. Most people in this House want to see a solution that, ideally, would help Northern Rock move on in the future and also ensure that we can safeguard both the wider public interest and the specific taxpayers’ interest. If the hon. Member for Dundee, East (Stewart Hosie) were to examine paragraph 3 of the statement on principles, he would see that that is precisely what the Government set out.
Sir Stuart Bell (Middlesbrough) (Lab): The Chancellor of the Exchequer has just repeated what he said earlier, in his statement—that he is trying to balance financial stability, the taxpayer’s interest and the depositor’s interest. May I assure him that if he follows the line taken by the hon. Member for Tatton (Mr. Osborne) and secures only individual investors rather than institutional lenders, the financial markets would see havoc overnight? May I echo the thoughts of my hon. Friends who represent Newcastle seats—that 6,100 jobs are at stake and that this is a major regional company? What we are seeing in this House is Northern Rock being used as a political football, not a surrogate attack on our financial stability.
Mr. Darling: It would be regrettable if the future of Northern Rock became a political football, and I know that my hon. Friend—who of course represents a seat in the north-east—is very mindful of the effect on the economy of the north-east. I agree that the three principles set out this morning are important. As for the guarantee, perhaps I did not deal with the point raised by the hon. Member for Tatton (Mr. Osborne). Having given the guarantee, I am now invited by him to unpick it—but that would be the wrong thing to do.
Peter Viggers (Gosport) (Con): Surely if a way ahead is to be found, it will be on the basis of known facts. For the Government to plead confidentiality, and for an injunction to be sought to prevent the publication of facts relating to the matter, must be counter-productive. Can the Chancellor specifically confirm or deny that there is a proposal for a five-year subordinated loan stock to roll up the interest on the loan?
Mr. Darling: The hon. Gentleman refers to an injunction that was sought by the company, in which the Government played no part.
Mr. David Clelland (Tyne Bridge) (Lab): Is it not now clear that if either of the Opposition parties had been in power, Northern Rock would already have sunk without trace and 6,000 jobs would have gone down the drain? Is my right hon. Friend aware that whatever the outcome of this, the people of the north-east are at least assured that the Government are doing whatever they can to ensure the future of that business and the thousands of jobs involved?
Mr. Darling: My hon. Friend is right. He has raised that point every time we have discussed the issue on the Floor of the House, and he is right. We owe it to people to do everything we can to help the situation. It is unfortunate that some of those who supported what we were doing at the start now appear to be changing their tune.
Mr. Brian Binley (Northampton, South) (Con): The Chancellor charges the shadow Chancellor with irresponsibility, but many taxpayers believe that the Chancellor may have acted irresponsibly by putting their money at risk. They will not be reassured by the vague assurances that he has given today, unless he is more specific. For that reason, can he tell us the precise value of the free collateral that Northern Rock holds, and how many of its assets are already pledged to other creditors?
Mr. Darling: I do not think that I said that the shadow Chancellor was irresponsible: that is the hon. Gentleman’s word, not mine. There are two issues in relation to the point that he makes. It was, and continues to be, right to give Northern Rock both the initial lender of last resort support and subsequent support. The hon. Gentleman almost implies that we should not have done that— [Interruption]—but that would have meant that Northern Rock would have been in substantial difficulties— [Interruption.] Well, that is the implication of what the hon. Gentleman said. As for the loans made by the Bank of England, they are secured in the way that I described in my statement.
Mr. Geoffrey Robinson (Coventry, North-West) (Lab): Is my right hon. Friend aware that Labour Members fully endorse his triple objectives? I wish to remind him, as many of my colleagues from the north-east have done, of the employment considerations. We also fully support him in taking time to find a solution that meets those objectives, but time is also pressing, in that further large loans may come to maturity in January and February and could make the Government’s exposure even greater. Therefore, I urge him to make it clear to those with whom he is negotiating that ultimately—if they are very unreasonable and cannot come to terms with the Government on those reasonable objectives—there is an alternative available.
Mr. Darling: I am grateful to my hon. Friend, and I think that I have set out the right approach, although he is right that the situation cannot be allowed to drag on. We need to try to bring the matter to a conclusion as quickly as we reasonably can, consistent with an opportunity to assess the proposals that we have.
Sir George Young (North-West Hampshire) (Con): What are the implications for the Government’s borrowing requirement of the unexpected multi-billion pound liability for Northern Rock?
Mr. Darling: The position with regard to the Government’s borrowing was set out at the time of the pre-Budget report. The Bank of England’s lending is being done by the Bank, but clearly the Government stand behind the bank.
Dr. Roberta Blackman-Woods (City of Durham) (Lab): I wonder whether my right hon. Friend is aware that my constituents are very grateful to the Government for the way in which they acted to support Northern Rock depositors and to secure a future for the bank, but that confidence in the bank, and the well-being of my constituents, is not helped by the comments of Opposition Members? Can he tell us whether the public interest criterion will extend to trying to secure a future for the Northern Rock Foundation as well as for the bank itself?
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