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My hon. Friend is right. Along with other hon. Members who represent north-eastern constituents, he rightly expresses concern about the bank and its employees. I very much hope that in the next few weeks, Ron Sandler and his team will continue to have the discussions that they started today with management and employees to see what can be done in restructuring the business to ensure that it has a future. It will be difficult because the market conditions are difficult, but what we have done gives the bank the opportunity to do that and at the same time ensures
that we safeguard the interests of the taxpayer. To put it into administrationto run it down, which has appeared over the past half hour or so to be the developing policy among the Conservatives, would not be the right thing to do for anyone.
Mr. Andrew Mackay (Bracknell) (Con): Following the Chancellors response to my right hon. Friend the Member for Chingford and Woodford Green (Mr. Duncan Smith), and following the Chancellors edict that it will business as usual at Northern Rock, how can he justify that Northern Rocks special position in giving a better deal to depositors is within European Union rules? Is it or is it not?
Mr. Darling: As I said in reply to the hon. Member for Ryedale (Mr. Greenway), it would be a profound mistake to remove the guarantees that we have put in place. Those guarantees ensure the stability of the bank. They also protect individual savers. Removing them is not the right thing to do. I fully understand the concern that the bank should be allowed to continue to trade, but that it should not do so unfairly. The whole point of state aid rules is to ensure that that does not happen. That is certainly our intention, as much as, I am sure, it will be the intention of the Commission.
Mr. Ken Purchase (Wolverhampton, North-East) (Lab/Co-op): First, may I say to the Chancellor that he has been wise to take his time before arriving at this momentous decision? That is absolutely right. People will see it as a common-sense response to a difficult position. However, does he recall, in the days before demutualisation, that the bank was a sound building society, operating a good business model with significant reserves that were squandered on a pay-out at demutualisation? Does he accept that rather than rushing into another decision, which the Conservatives would like, to return it immediately to the market, further consideration should be given to the companys mutualisation so that we return to the sanity of the days when building societies gave proper mortgages to people who required them for good purposes?
Mr. Darling: I am not sure that I can make a promise on the last point, but my hon. Friend is right that it was correct to give the management and shareholders time to come up with options and alternatives. We gave them that time. We had two bids. Unfortunately, when matched against the option of a temporary period of public ownershipI made the point many times that that had to remain on the tableit was not possible to proceed with those bids. He is right that it is important to get the correct decision.
Greg Clark (Tunbridge Wells) (Con): The Chancellor is right to say that the Northern Rock Foundation is a crucial charitable institution in the north-east, but before he paints too rosy a picture of its prospects, can he confirm that the £15 million funding is less than half the £31 million that it received in 2006? Can he say what will happen to the foundations 15 per cent. stake in the bank, and whether any purchasers of Northern Rocks assets will acquire an obligation to pay funds into it as the bank has done?
Mr. Darling: I do not think anyone would maintain that the foundations prospects have been affected by the difficulties in Northern Rock, which funded all its activities. On any view, the amount that Northern Rock was able to pay into it was going to decrease. We all recognise that it supports a great many activities in the north-east; I wanted to ensure that it had a considerable income, and although the £15 million is less than it was receiving, it is a substantial annual contribution. I did what I could to deal with that particular problem. As for the hon. Gentlemans other question about the foundation, the legislation will make the necessary provision.
Mr. David Clelland (Tyne Bridge) (Lab): This morning I received an e-mail from a constituent who is a shareholder in Northern Rock. He said that he was a Labour supporter who would never vote Labour again because of what the Government had done. I have not yet had a chance to reply to my constituent, but should he vote for the Liberal Democrats, who would have nationalised the bank five months ago without seeking any of the private sector solutions that the shareholders required? Should he vote for the Conservatives, who would have let the bank sink with all the consequences for shareholders and employees alike? Or should he, on reflection, continue to support the Labour Government, who offer the best solution for the bank and the long-term future of the north-easts economy?
Mr. Darling: Probably, the correct answer is the last one. Naturally we are all concerned about all those who experience a fall in the value of shares they have bought, but there is no getting away from the basic problem: these were shares in a bank whose business model was entirely dependent on the ability to raise large sums of money. Last summer, when the problem began in the international financial markets, the company had no fallback position, and it would have gone bust at that time if we had not intervened. That, I am afraid, is the stark reality, as I know my hon. Friend recognises. Today we are trying to ensure that we do the right thing by the taxpayers, while also helping the company to restructure and refocus its activities.
Mr. Philip Dunne (Ludlow) (Con): In his hat trick of humiliating statements, the Chancellor has told us that he is accepting the proposal in order to protect taxpayers. If that is the case, what independent assessment has the Treasury undertaken of the quality of the loan book? A year ago Northern Rock was writing mortgage business at two and a half times its market share, at a time of unprecedented house price inflation. It is highly likely that a large proportion of those mortgages will turn sour. Is the Chancellor relying entirely on the FSAs assurances that the bank is solvent, or has he bothered to do a bit of independent checking himself?
The FSA is responsible for regulating Northern Rock. Ron Sandler and his new management team will want to make their assessment relating to the revised business plan on the basis of what they know
about the bank, and they will make it their business to find out all that they need to know about it.
Mr. Dennis Skinner (Bolsover) (Lab): It was imperative for the Chancellor to intervene last year. He made the right decision, because in that very week Alliance and Leicester shares fell by a third, which signalled to anyone with any sense or political acumen that something had to be done. Now he has made the right decision again.
The Tories were not always where they are today. In 1971 Ted Heath did not run away from taking over Rolls-Royce, and it was saved. In 1975 Harold Wilson decided to save Burmah Oil, and as a result it too was saved. That is unlike the Notting Hill finance group, who run away at every single opportunity.
Mr. Robert Goodwill (Scarborough and Whitby) (Con): The European Commission has indicated that while the emergency loans made at commercial rates do not fall under state aid rules, the guaranteeing of deposits does, and it has given the Government six months for emergency restructuring. That six months runs out in March. For how long does the Chancellor think that the EC will condone this continuing situation before it bows to pressure from other banks and financial institutions to implement those rules?
Mr. Darling: We do have to submit a restructuring plan by March; that has been the case since last year. The hon. Gentleman touches on another important point by emphasising the problems that are faced. There have been similar difficulties in Europein Germany, the German Government and other authorities have had to take action to support their banksbecause of issues that all stem from the same source: the problems that started in America last year and have spread throughout the world.
Rob Marris (Wolverhampton, South-West) (Lab): The Government have an enviable record in the last 11 years for economic stability and confidence in the economy. They took a decision last September on Northern Rock to preserve stability in the economy. What assessment has my right hon. Friend made of the stability of the UK economy? Is he aware, for example, of there having been a run on any other major bank or financial institution in the United Kingdom since last September?
Mr. Darling: My hon. Friend makes the point that this country has a very strong and stable economy. We have had more than 10 years of growth and we have very low unemployment and historically low interest and mortgage rates, which is in complete contrast to what we had in the early 1990s when the then Government lurched from one problem to another because they could not keep inflation down, they could not get interest rates down and they had unemployment of almost 3 million. No wonder they got into the difficulties that they faced then.
The Leader of the House of Commons (Ms Harriet Harman): With permission, I should like to make a short business statement following on from the announcement that my right hon. Friend the Chancellor of the Exchequer has just made.
Tuesday 19 FebruaryConsideration of a Business of the House motion, followed by all stages of the Banking (Special Provisions) Bill, followed by motion to approve a local government restructuring order relating to Shropshire.
Wednesday 20 FebruaryContinuation of consideration in Committee of the European Union (Amendment) Bill [5th allotted day]. Any selected amendments to clause 2 relating to foreign, security and defence policy.
Thursday 21 FebruaryMotion to approve the draft Prevention of Terrorism Act 2005 (Continuance in force of sections 1 to 9) Order 2008, followed by motion to approve the draft Social Security Benefits Up-rating Order 2008 and the draft Guaranteed Minimum Pensions Increase Order 2008, followed by, if necessary, consideration of any Lords Amendments that may be received.
As the Leader of the House announced, there will be a business motion tomorrow to programme the Banking (Special Provisions) Bill. We have already said that we will not hold up the Bill, but given that it has 24 pages, 17 clauses and two schedules, we need to ensure that it receives proper and full consideration. Will she guarantee that business will go beyond the 10 pm moment of interruption tomorrow, to ensure that debate on the Bill is not cut short unnecessarilyparticularly as while this elected House has one day to debate the Bill, I understand that the unelected other place will have two days of debate on it? Given that the Committee stage of the Bill will come immediately after Second Reading, what will be the timetable for the tabling of amendments?
Despite the length of the Bill, a lot of detail will still be dealt with by order under the negative procedure. Members need to be able to see that order before they debate the Bill, so will the Leader of the House ensure that the draft order or orders are available to Members in the Vote Office tomorrow morning? Given the importance of the legislation to so many people, and to the reputation of London as a financial centre, can we have a commitment that the order will be subject to a full debate on the Floor of this House, rather than that taking place in Committee with a limited number of Members being able to take part? When will that debate on the orders take place? Will she consider
changing the business for this Friday, so that we can debate the orders then? Failing that, will she commit to holding that debate on the Floor of the House next week?
Following the change to tomorrows business, when will the sixth allotted day of debate on the European Union (Amendment) Bill take place? Will the Leader of the House guarantee that the House will still have the same amount of timethe same number of days debate on the Floor of the Houseon that Bill as had previously been set aside?
Over the past months, the Government have dithered and delayed on Northern Rock, but the House needs proper time to consider the Banking (Special Provisions) Bill. Will the Leader of the House guarantee that the House will be given that time to consider it, and the orders pertaining to it, in full?
Ms Harman: Draft orders will be laid in the usual way by the Chancellor of the Exchequer before the House rises today. I shall give the House next weeks business in the usual way in the business statement on Thursday, but I can say that there will be no less debate on the European Union (Amendment) Bill than was originally anticipated. As the right hon. Lady will understand, it will be moved back by a day, but we do not expect to curtail the debate that we had scheduled on that important Bill.
As far as consideration in this House and the other House is concerned, the right hon. Lady will know that the procedures of the other House are a matter for it. I know that she will understand that, the decision having been made by the Government on Northern Rock, it is important that we act expeditiously in order that we can have certainty and business as usual, at no loss of confidence to customers and staff. The decision having been made, it is important that this House turn its attention to scrutinising the Bill on the matter and to making its decision as quickly as possible.
Simon Hughes (North Southwark and Bermondsey) (LD): We welcome the statement by the Leader of the House and the intention that this important Bill should receive Royal Assent by the end of this working week. That seems absolutely the right objective. It is a substantial Bill and potentially deals with any bank, and building societies as well.
In addition to the questions asked by the right hon. Member for Maidenhead (Mrs. May), may I ask the Leader of the House for a couple of other assurances relating to the handling of the Bill in this House? There is usually a difficulty with amendments if we go straight from Second Reading into Committee on the Floor of the House. Can she assure me that there will be an opportunity for Members of the House to take advice on amendments from Clerks from now until then, so that they can be cleared as being in order, and that there will be short interruptions between Second Reading and Committee stage, between Committee stage and Report and between Report and Third Reading, so that people can be fully aware of exactly what the state of the Bill is and what has happened?
Will the Leader of the House be clear that if colleagues around the House, particularly but not only from the north-east, are willing, able and concerned to debate the matter way beyond 10 oclock, we absolutely should
not impose any artificial restrictions? We should be willing and able, as we have regularly been in the past on far less important legislation, to go through the night if that is required, and to have until 11.30 on Wednesday morning to deal with the Bill at its first time before us.
On Thursdays business, I welcome the fact that the Leader of the House expects the Bill to come back to us, if there are any Lords amendments, on Thursday. Because we have two other important pieces of business, on terrorism matters and social security uprating, which by tradition and by arrangement are fixed in their time, may I suggest that, with the consent of both Opposition parties, she might agree that we take the Bill first on Thursday, if it is ready and if there are amendments from the Lords? I am aware that a second day of debate may be provided for there, but it is important that if there are amendments, we have the time to examine them and deal with them properly. The Leader of the House knows that we support the Bill and will not obstruct it at all, but it has to be properly debated. It is hugely important not just for Northern Rock but for the whole banking and building society industry.
My last point is on the knock-on effects of the Bill. I completely understand that the topical debate on Thursday will be lost, as that is a reasonable conclusion. However, because the timetable for the European Union (Amendment) Bill has been knocked back one day, will the Leader of the House give Opposition parties a half-way assessment of the timetabling of the second half of the Bill in Committee, to see whether we can reach a more satisfactory agreement about the timing for the restand most controversial bitsof that Bill? That might mean fewer complaints that the Government are steamrollering that Bill through the House.
Ms Harman: I have announced that we will have a Business of the House motion, which will be debatable and which will be tabled before the House rises so that hon. Members have a chance to consider it. There will be a debate on that motion tomorrow.
I thank the hon. Gentleman for his support for the Bill and I agree that it has to be properly debated, but it also has to be brought in expeditiously to achieve the desired effect. As for the question of when on Thursday we should consider any Lords amendments, we have scheduled that as the last business, because if it were the first business we might not know whether the Lords have concluded their consideration and agreed any amendments. It is therefore important for us to deal with the other issues first and then come to the question of any Lords amendments later.
On the issue of tabling of amendments, I do not accept the argument for a gap after Second Reading. My right hon. Friend the Chancellor placed a draft Bill in the Table Office this morning, so that hon. Members could consider its terms. I am sure that they will be able to obtain the advice of the ever helpful Clerks on what amendments will be in order. Hon. Members will be able to table amendments tomorrow.
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