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Mr. Osborne: The one point of agreement between the Conservatives and the Liberal Democrats on the substantive point is that, whatever the Government wanted to do, they should have done it earlier instead of dithering for four or five months. However, I am glad that we have Liberal Democrat support for some of the amendments, which we tabled with Liberal Democrat agreement. I therefore hope that there will be opportunities to vote on, for example, ensuring the publics right to know and fair competition. If there is no opportunity to vote tonight, there will be plenty of opportunities in the House of Lords, where circumstances mean that we may carry the day through working with the Liberal Democrats, and that we will come back on Thursday evening, perhaps late at night, to discuss those matters.
We do not know what we are buying or how much we are paying for it. We also do not know for how long we are buying it. The Prime Minister and the Chancellor keep telling us that there will be a temporary period of public ownership. They still cannot bear to utter the word nationalisation. It has become the policy that dare not speak its name. How long could temporary be? The Chancellor and the Prime Minister refused to say. The Chief Secretary, whom it was enjoyable to watch on Newsnight last night, also refused to answer the question. However, Ron Sandler is not so coy. He said yesterday, Were clearly talking about some years. Why did we hear that from Ron Sandler but not from the Chancellor of the Exchequer today or yesterday?
We know that, in private, the Chancellor tells journalists that temporary could be at least three years. That is reported as being said by authoritative sources in Government. Why does not he say that in Parliament and to the public instead of simply briefing the press?
The sorry history of nationalisation is littered with examples of companies that were taken into what was supposed to be temporary public ownership and stayed there for years. I repeat that we do not know what we are buying, how much we are paying for it and for how long we are going to own it. We do not know what the Government plan to do with that high street bank. The formal business plan will not be presented until 17 March. When it is, I understand from the Chancellor that it will be presented to the European Commission instead of the House of Commons. Are we in Westminster not entitled to know the plans for the bank that we are being asked to buy?
The hon. Gentleman has implicitly criticised Mr. Sandlers comments about the length of time it could take for the bank to remain in public ownership. Does he believe that a brief period of public ownershipdays, weeks or monthswould be in the taxpayers interests?
Mr. Osborne: I am not in favour of nationalisation, full stop. What I am pointing out is that it will take a long time; indeed, Mr. Sandler said yesterday that it would take several years. That is not something that has been heard from the Chancellors lipsat least not in publicbut it is something that Mr. Sandler says. The hon. Gentleman was fairly acute in pointing out the dangers of nationalisation, telling the House that
the policy of nationalisation would lead to a slow lingering death for the jobs of the Northern Rock workers, its assets and Britains reputation as a major financial services centre, with my right hon. Friend the Chancellor cast in the role of undertaker.[ Official Report, 19 November 2007; Vol. 467, c. 968.]
The next point that I want to address is exactly what the Chancellor hopes to do to prevent the bank from unfairly competing in the market. He said yesterday that he wanted business as usual. However, he said at the beginning of his speechthis was when north-east Members suddenly woke up and paid attentionthat there would be elements of the business plan that prevented the bank from competing on a commercial basis in a straightforward way and which prevented business as usual. We are talking about a Government-owned bank. It can borrow more cheaply than any of its competitors and can offer better savings rates and cheaper mortgages than any other bank.
If the bank is operating on a strictly commercial basis, which the Chancellor said yesterday [ Interruption. ] I know that the hon. Member for Blyth Valley wants Northern Rock to use the fact that it is backed by the Government to undermine every other bank and building society in the country, but the rest of us are concerned about the other jobs in the financial services industry. The Chancellor said that he wanted the bank to operate on a commercial basis. However, anyone who visits its website today will find that it is offering the most generous savings rate in its class and a 0.5 per cent. bonus for existing savers, and it is still offering those 125 per cent. mortgages that people cannot get in most other places. There are no plans for that to change. Ron Sandler said yesterday:
We will continue to operate on normal commercial principles, both as a deposit-taker and a mortgage provider. On a day-to-day basis, nothing will change.
But to allow Northern Rock to compete vigorously as a nationalised company in a fiercely competitive mortgage and savings market is completely unacceptable. It will cost jobs in other banks and building societies, and do more damage to Britains reputation as a home for financial services.
Dr. Gavin Strang (Edinburgh, East) (Lab): Is there not a slight contradiction between that point and the hon. Gentlemans earlier statement, when he described what a poor state Northern Rock was in, citing the fact that many of the loans were no longer viable? I put it to him that either we want the firm to be successful and profitable, before going into the private sector, or we are going to cripple it, along the lines that he suggests, giving it no chance to achieve that. Surely the idea that a successful Northern Rock will undermine the rest of the financial sector is a bit overdone.
Mr. Osborne: The right hon. Gentleman should pay attention to what Mr. Sandler and the Chancellor are saying in briefings to the press, which is that they are going to shrink the bank to half its size and lay off many thousands of the work force. That is what we read in the newspapers, but not what we hear from the Chancellor at the Dispatch Box, when he is standing in front of his colleagues from north-east constituencies.
If the Chancellor were absolutely straight with us, he would tell us what he knows the business plan for the bank will be. If the plan is a managed run-off of the bank, let him tell us. He said yesterday that it would be business as usual. But business as usual for a Government-backed bank that can borrow more cheaply than any of its competitors means that other companies in Britains financial services markets will be undermined and jobs will be lost in Edinburgh and every other part of the country.
Mr. Cash: Has my hon. Friend noticed the consequential and supplementary provisions, which, under a Treasury order, would effectively give a power to disapply any statutory provision or rule of law, quite apart from the fact that the provisions also provide for indemnities to everybody for everything?
Mr. Osborne: My hon. Friend is persistent in making the point that clause 2 introduces general powers for the Government. We may actually reach clause 2 in the Committee stage, so I look forward to his contribution on that point.
Rob Marris (Wolverhampton, South-West) (Lab): I know what the hon. Gentleman says about unfair competition and the possibility of destabilising other financial institutions in this country. Following the logic of what he has said, would he be in favour of privatising the Royal Mail?
Mr. Osborne: Royal Mail operates under a regulatory regime specifically designed to consider its impact on private competitors. We have tabled an amendment, and I know that the hon. Gentleman is assiduous in looking at amendments and taking part in the debate
We have tabled an amendment, with the support of the Liberal Democrats, that would allow the Office of Fair Trading to have a supervisory role, in order to ensure that we were not simply relying on the assurances of the Chancellor of the Exchequeror, indeed, EU state aid rulesto protect other financial services and institutions from unfair competition from Northern Rock.
Following on from the question put by my hon. Friend the Member for Wolverhampton, South-West (Rob Marris), will the hon. Gentleman tell the House whether he would privatise National Savings and Investments or premium bonds? They are clearly investment vehicles that are in direct competition with other banks and savings institutions.
Mr. Osborne: First, they operate under a proper, statutory regulatory regime. That will not be the case with Northern Rock in these special circumstances. The hon. Gentleman can vote for our amendment tonight. Secondly, with the best will in the world, National Savings is not offering the extraordinary rates that are to be found on the Northern Rock website at the moment, which are better in their class than the savings rates of any other major institution in Britain.
Mr. Greenway: My hon. Friend knows from my interventions yesterday and today that I very much share his concerns. Has he also taken on board the fact that the likely offering of Northern Rock to depositors could have such wide implications that it could undermine the gilt market? That is undoubtedly the view in the City of London.
Mr. Osborne: That is a possibility, and it has been raised with me by various people in the City. It is another reason why I am against the nationalisation of Northern Rock. I shall be voting against the proposals later this evening, and I am sure that my hon. Friend will join me.
I should also sayas we might not get the chance to discuss these matters in Committeethat we shall be tabling a couple of other amendments. Labour Members might not be aware that article 18 of the draft order exempts Northern Rock from the Freedom of Information Act 2000, on the bizarre ground that it should not be treated as a publicly owned company. Royal Mail is not exempt. National Savings is not exempt, and neither is the Tote. Why should Northern Rock escape public scrutiny? We shall seek to amend the Bill so that members of the public can find out more about what they own.
We shall also table amendments to prevent our Prime Minister from interfering in the day-to-day management of Northern Rock. Only he could keep a straight face, after announcing yesterday morning that Northern Rock would be entirely at arms length from the Government, when, yesterday afternoon, he appointed his former chief of staff to the board. We shall seek amendments to keep the Ministers out.
We will also try to reduce the extraordinary scope of this legislation, so that it will be exactly for the purpose for which we are told it is intended. If it is simply intended to bring about the nationalisation of Northern Rock and to get around the hybrid Bill procedures, the Government could easily reduce the length of time for which the legislation is to be active from one year to one month. We shall table an amendment to that effect. It is interesting that the British Bankers Association, which the Chancellor quoted in his speech, has said this afternoon that it is very concerned about the year-long period for which the provisions will be active. It believes that that will be repuationally detrimental to UK financial services.
We can only assume that the Government are taking on these sweeping powers to nationalise banks because they think that there is at least a possibility that they might have to exercise them. In that case, they should bring forward proper legislation at the proper time, which we can debate in the House.
Mr. Deputy Speaker, the correct way forward, I believe, is to follow the plan that the Chancellor is going to ask us all to vote on later this year for future bank rescues, which would minimise the already substantial exposure of the taxpayer: it would not double it, but ensure that the taxpayer comes at the top, not the bottom, of the list. We would also avoid the nationalisation word, which the Chancellor is so keen to avoid as well. That is the way to minimise the taxpayers exposure. Instead, we are being asked to vote for something that the Chancellor did everything he possibly could to avoid for five months. The Chancellor did so because he knows that nationalisation will double the taxpayers exposure; he knows that the public will bear all the risk; he knows that nationalisation means years of lingering uncertainty and no clear exit; he knows that nationalisation could do real damage to Britains reputation as a home for financial services; and he knows that it will destroy the Governments reputation for economic competence as well as the Chancellors own credibility. All those things are right, which is why we are going to vote against nationalisation tonight.
As the House will know, the Treasury Committee has undertaken a five-month inquiry into financial stability and transparency, which began with the taking of evidence from the Governor of the Bank of England on 20 Septemberwithin days of the announcement of the support operation for Northern Rock. Our report of late January covered the events leading to that support operation and the subsequent run, guarantees and proposed reforms, which the Committee believe will prevent a recurrence of these problems. I do not propose to talk about those aspects of our report today; instead, I want to concentrate on the proposals for public ownership and how they relate to the analysis in the final chapter of our report on Northern Rock since September last year.
The Bill allows a bank or building society to be taken into public ownership when there is a threat to financial stability or when state support has been provided. I realise that there are concerns that Northern Rock might set a precedent for other institutions, but it was clear during our inquiry that Northern Rocks excessive dependence on wholesale markets made it an extreme outlier among banks. Indeed, we were told by the European Central Bank in Frankfurt that no European bank had comparable exposure. I understand why the
Bill is drafted so that it relates to deposit-takers in general and why there is no provision on the face of the Bill for a particular interestthereby making it a public, not a hybrid Bill. I will confine my remarks to the case of Northern Rock.
On 11 October, my right hon. Friend the Chancellor of the Exchequer told the House that any proposals on the future of Northern Rock would have to be considered in the context of how far they, first, protected taxpayers; secondly, promoted financial stability; and, thirdly, protected consumers. He subsequently confirmed in an answer to my question that he viewed those three criteria as being of equal importance. My own assessment of the proposals for Northern Rock arising from this Bill relates to those three criteria.
On the firstthe protection of taxpayersI believe that the decision to nationalise Northern Rock is the right one. The taxpayer has been paying the piper since September and it is now rightly time for the taxpayer to call the tune. The Virgin offer seems to have been based on an optimistic view of the value that Virgin Money would bring to the table. I well remember the BBC reporting that Richard Branson was going to put in £200 million of his own money. When I spoke to people in the City, I discovered that Virgin Money was being sold to Northern Rock, and when I asked someone very close to Northern Rock what they thought the value of Virgin Money was, they said that it was not £100 million, but only £50 million. Hey prestoRichard Bransons personal contribution of £200 million from the sale of Virgin Money to Northern Rock! The £10 million to £11 million that was requested for the branding of the Virgin Money name did not strike me as a good investment.
Any private takeover would have posed the threat of taxpayers continuing to bear all the risk, with the bulk of any profits going to a private owner. The scandal that that might have created in due course, particularly if the profits were realised in a tax haven, could have been far more damaging than any difficulties associated with nationalisation.
On the second criterion of financial stability, the Treasury Committee concluded that the Chancellors decision to make public support available to Northern Rock was the right one. For a time at least, there was political consensus on that decision. I have heard no convincing argument as to how, having embarked on providing taxpayer support, the Government could extricate themselves from their commitment without jeopardising financial stability. Under existing insolvency law, administration would mean deposits being frozen, and the expensive guarantees offered by the Government would be invoked. In modern circumstances, the difficulties of individuals with no access to their bank accounts, even for a short while, would undermine confidence in the whole banking system and jeopardise financial stability, and there would be multiple runs on banks. At least until there is a new legislative framework for handling failing banks, administration is not a realistic option.
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