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The purpose of the amendment, however, is to focus on the fact that this measure is intended to deal with Northern Rock and Northern Rock alone. The Chancellor has said in terms that he has no plans to use the Bill for any other nationalisation and he has explained that it was drafted widely and with enduring application in order to avoid issues of hybridity and thus to facilitate the Bill’s passage under an expedited procedure. The amendment is designed to narrow the
scope of the Bill without creating any risk of hybridity. We believe that one month is long enough for the Government to lay and pass the required orders—or at least the transfer order under clause 3. Having laid that order, and assuming that it is approved, it will endure. It is designed to be enduring and to outlive the primary legislation powers. In any case, the order for compensation provisions is intended to be and can be introduced later.
In tandem with subsequent amendments designed to limit the Bill’s scope to banks only—Northern Rock is not a building society, so an emergency measure targeted on Northern Rock does not need to deal with building societies—the amendment is designed to emphasise the focus on the specific problem of Northern Rock, sending out a signal that whatever the parliamentary manoeuvring necessary to avoid hybridity, this Bill has a narrow, specific focus on nationalising the Northern Rock bank.
As the Chief Secretary will know, there is considerable concern in the City about the potential damage to Britain’s reputation that might result from a standing power to nationalise being on the statute book. Reputations are fragile things: they are easily destroyed, and much more difficult to rebuild. The Chief Secretary can give all the assurances she likes at the Dispatch Box that she has no intention of using the power, but—although she may consider this irrational—I assure her that narrowing the time scale one month to make clear the specific nature of the Government’s intention will send the appropriate signal to those in the City and the international financial community who are concerned about the latest development.
9.30 pm
We made plain our opposition to the principles of the Bill on Second Reading. What we are trying to do now is improve its workability. The Government do not need a year in which to carry out a Northern Rock nationalisation. They should not have a standing power without proper scrutiny for other nationalisations. I therefore hope that, in an attempt to make what is by definition a rather poorly scrutinised piece of legislation a little narrower and more focused, the Chief Secretary will either accept the amendment or give us an assurance that a similar period—perhaps two months, or three months—would be acceptable to the Government, and that they will introduce an amendment to that effect in the other place.
Dr. Cable: I did not subscribe to the amendment originally, as its objective was not clear. I suspected initially that it might be a wrecking amendment, which I would not have supported. Having heard the arguments, however, I feel that some perfectly sensible points have been made. For practical reasons, the Government are not able to limit the scope of the Bill, but at least they can limit the time scale for its implementation to an appropriate period. I understand that Royal Assent will have been sought and hopefully given by the end of the week, and that there is then a relatively short period in which statutory instruments can be implemented. There is no particular reason for the power to continue beyond that point, and it seems rather indulgent to let it go on for a year.
The hon. Member for Runnymede and Weybridge (Mr. Hammond) is right: we shall have to return with
more extensive and far-reaching legislation covering the conditions in which Governments should intervene. Such issues should be properly considered, and not under emergency legislation of this kind.
I did not, however, agree with everything the hon. Gentleman said. I have not yet heard all the arguments, but I am not entirely persuaded in regard to the concern about building societies. I think there is a genuine issue—I am not sure why banks should have a lender of last resort and building societies should not—but it is an issue to be dealt with separately when we reach the intervention powers. I also think we should be a little sceptical about the rather precious sensitivities of the City. After all, the problems in the financial markets were caused by a breakdown of trust between financial institutions themselves, rather than by a fear of nationalisation. That apart, I think the hon. Gentleman made a sensible, practical case for limiting the Government’s action to a one-off emergency intervention.
Yvette Cooper: The Bill was deliberately designed to impose constraints. Clause 2(2) specifies some high-level tests in relation to the purposes of the power:
“maintaining the stability of the UK financial system in circumstances where... there would be a serious threat to its stability if the order were not made”,
“protecting the public interest in circumstances where financial assistance has been provided by the Treasury... for the purpose of maintaining the stability of the UK financial system.”
As a later part of the clause makes clear, that does not apply to circumstances in which the Bank of England is simply providing financial assistance or playing its ordinary lender of last resort role. We have also made it clear that Northern Rock is the only institution that currently meets those high-level tests, and that we need to be able to deal with the specific problems that it has created. As Members have recognised, however, the Bill is drawn more widely. Therefore, it could in theory be used for other organisations in similar unusual circumstances to those of Northern Rock, but, as I have said, we have set the test high and put in place a sunset clause of one year. We intend to introduce a full Bill—which would, of course, go through the normal procedures—following on from the detailed consultation that we have conducted. It would look more widely at what further reforms are needed to the way in which problems in the financial system, particularly to do with banking, are dealt with. Those reforms would be made in a considered fashion, and in the normal way through this House, after full consultation and debate in this House. However, we need in the interim to be able to deal with the position of Northern Rock.
Under the Bill, there are other powers that can be used in the interim in the sunset period, until the full measures are put in place.
Mr. Hands: I am not sure that the right hon. Lady gives us a lot of confidence when she says that the Bill could be used for other organisations in similar circumstances. That is potentially market-sensitive information. Will she outline to the Committee why, if she does not believe that one month is appropriate, she believes that one year is?
Yvette Cooper:
It is hardly market sensitive: we have said this repeatedly, and I am merely describing what
the scope of the Bill is and how it could apply. Under clause 6, as well as clause 3, it could be applied to circumstances that some people called for back in the autumn. People called for powers to be in place that would have enabled Northern Rock to be transferred directly to another bank or institution prepared to take it on. In fact, that opportunity was not available for Northern Rock at that time, but people did call for that power. That is contained in this Bill, again as a temporary measure for one year.
Jim Cousins: Will my right hon. Friend deal with the point of the hon. Member for Twickenham (Dr. Cable)? To turn his point against the argument he was making, there is some value in the provisions in clause 11; for the first time, a lender of last resort facility will be created for building societies, and a building society that gets into difficulties will not be imprisoned and made captive by the restrictive terms of the existing building societies legislation. I accept that that is only a temporary situation until matters can be looked at in more detail, but does she not think that it is an attractive feature?
Yvette Cooper: My hon. Friend is right that clause 11 allows for the Bank of England to be able to provide greater assistance to building societies, should they need it given the circumstances of the current global credit crunch. The Bill provides for interim arrangements in advance of the full debate on banking reforms that we need to introduce.
Mr. Philip Hammond: For the sake of clarity, the hon. Member for Newcastle upon Tyne, Central (Jim Cousins) said he recognised that that was only a temporary provision ahead of new arrangements coming in, but the sunset clause applies to clauses 3 and 6, and our concern about clause 11 is that it introduces wide and far-reaching new powers but is not subject to the sunset clause. Will the right hon. Lady confirm that?
Yvette Cooper: I think that that is right as things stand, but we would expect this issue to be dealt with more widely as part of the banking reform provisions that we are consulting on. The current measures are about having interim arrangements in place in circumstances of unprecedented turbulence in world financial markets and a global credit crunch as a result of—or triggered by—events in the US sub-prime market, as a result of which banks are not lending to each other in the normal way. These are highly unusual circumstances, and they lie behind the introduction of the Bill. We have repeatedly made it clear that Northern Rock is the only institution that currently meets these high tests, and we are introducing this Bill at this time so that we can deal with the problems that Northern Rock has created.
The amendment would greatly shorten the period for completing the orders transferring the securities or business of an authorised UK deposit-taker. On that basis, we think that the tests and safeguards being introduced are significant, and having a sunset clause in place for a year should provide the House and the wider community with the reassurance that they need.
Mr. Hammond: The Chief Secretary has just made the extraordinary assertion that reducing the period to a month would place the Government under an unreasonable constraint in terms of laying these orders. We were led to believe that this was a matter of great emergency that had to be dealt with today and that legislation had to be completed by the end of the week. If I have misunderstood, perhaps she will correct me. I was expecting that the order, a draft of which we have seen, would be laid within a matter of days, at the most, of the Bill completing its parliamentary passage. If that is wrong, hon. Members ought to be made aware of the fact. She has not made any case for providing for a period of longer than one month. She has certainly not made a case for providing for a year. Had she made a convincing case for providing for a three-month or two-month period, Conservative Members would have been prepared to listen to that and to any assurances that she wanted to offer us about introducing such proposals at a later stage.
Yvette Cooper: Simply to clarify, may I say that we expect to introduce the order—we have done so in draft—dealing with Northern Rock? The hon. Gentleman will recognise the unusual circumstances that we face in dealing with Northern Rock. Further work will obviously need to be done after we have put in place the main transfer to ensure that any subsequent issues that might require powers to be provided under clauses 3 or 6 are dealt with to ensure that the business of Northern Rock is taken properly into temporary public ownership on the appropriate basis.
Mr. Hammond: I am grateful to the Chief Secretary, but I think she will find—I am sure that she will receive a note telling her this in a minute—that once the initial order is made, the Government will be safe. They will be able to make subsequent orders without complying with the various conditions—that is how the legislation is drafted. She is now telling us that she does not need more than a month to get the order made. Once the first order is made, the Government will be safely home. I have not heard a convincing argument about why we should not agree this amendment, which would provide the Bill with much greater clarity and focus. Therefore, I must ask my right hon. and hon. Friends to vote in favour of the amendment, and I seek to press it to a Division.
Question put, That the amendment be made:—
The Committee divided: Ayes 222, Noes 302.
AYES
Afriyie, Adam
Ainsworth, Mr. Peter
Alexander, Danny
Amess, Mr. David
Ancram, rh Mr. Michael
Arbuthnot, rh Mr. James
Atkinson, Mr. Peter
Bacon, Mr. Richard
Baker, Norman
Baldry, Tony
Barker, Gregory
Baron, Mr. John
Barrett, John
Bellingham, Mr. Henry
Bercow, John
Beresford, Sir Paul
Bone, Mr. Peter
Boswell, Mr. Tim
Bottomley, Peter
Brady, Mr. Graham
Brazier, Mr. Julian
Breed, Mr. Colin
Brokenshire, James
Brooke, Annette
Browne, Mr. Jeremy
Browning, Angela
Burns, Mr. Simon
Burrowes, Mr. David
Burt, Alistair
Burt, Lorely
Butterfill, Sir John
Cable, Dr. Vincent
Campbell, Mr. Gregory
Campbell, rh Sir Menzies
Carmichael, Mr. Alistair
Carswell, Mr. Douglas
Cash, Mr. William
Chope, Mr. Christopher
Clappison, Mr. James
Clark, Greg
Clarke, rh Mr. Kenneth
Clifton-Brown, Mr. Geoffrey
Cox, Mr. Geoffrey
Curry, rh Mr. David
Davey, Mr. Edward
Davies, Mr. Dai
Davies, David T.C. (Monmouth)
Davies, Philip
Davis, rh David (Haltemprice and Howden)
Djanogly, Mr. Jonathan
Dodds, Mr. Nigel
Dorrell, rh Mr. Stephen
Duncan, Alan
Duncan Smith, rh Mr. Iain
Dunne, Mr. Philip
Ellwood, Mr. Tobias
Evennett, Mr. David
Fabricant, Michael
Fallon, Mr. Michael
Farron, Tim
Field, Mr. Mark
Foster, Mr. Don
Francois, Mr. Mark
Fraser, Mr. Christopher
Gale, Mr. Roger
Garnier, Mr. Edward
Gauke, Mr. David
George, Andrew
Gibb, Mr. Nick
Gidley, Sandra
Gillan, Mrs. Cheryl
Goldsworthy, Julia
Goodman, Mr. Paul
Goodwill, Mr. Robert
Gray, Mr. James
Grayling, Chris
Green, Damian
Greening, Justine
Greenway, Mr. John
Grieve, Mr. Dominic
Gummer, rh Mr. John
Hague, rh Mr. William
Hammond, Mr. Philip
Hammond, Stephen
Hancock, Mr. Mike
Hands, Mr. Greg
Harper, Mr. Mark
Harris, Dr. Evan
Heald, Mr. Oliver
Heath, Mr. David
Heathcoat-Amory, rh Mr. David
Hemming, John
Hendry, Charles
Herbert, Nick
Hoban, Mr. Mark
Hollobone, Mr. Philip
Holloway, Mr. Adam
Horam, Mr. John
Horwood, Martin
Hosie, Stewart
Howarth, David
Howarth, Mr. Gerald
Hughes, Simon
Hunter, Mark
Hurd, Mr. Nick
Jack, rh Mr. Michael
Jackson, Mr. Stewart
Jenkin, Mr. Bernard
Jones, Mr. David
Kawczynski, Daniel
Keetch, Mr. Paul
Key, Robert
Kirkbride, Miss Julie
Knight, rh Mr. Greg
Kramer, Susan
Laing, Mrs. Eleanor
Lait, Mrs. Jacqui
Lamb, Norman
Lancaster, Mr. Mark
Laws, Mr. David
Leech, Mr. John
Leigh, Mr. Edward
Letwin, rh Mr. Oliver
Lewis, Dr. Julian
Liddell-Grainger, Mr. Ian
Lidington, Mr. David
Lilley, rh Mr. Peter
Loughton, Tim
Mackay, rh Mr. Andrew
MacNeil, Mr. Angus
Main, Anne
Malins, Mr. Humfrey
Maples, Mr. John
May, rh Mrs. Theresa
McCrea, Dr. William
McIntosh, Miss Anne
McLoughlin, rh Mr. Patrick
Mercer, Patrick
Miller, Mrs. Maria
Milton, Anne
Mitchell, Mr. Andrew
Moore, Mr. Michael
Moss, Mr. Malcolm
Mulholland, Greg
Mundell, David
Murrison, Dr. Andrew
Neill, Robert
Newmark, Mr. Brooks
O'Brien, Mr. Stephen
Öpik, Lembit
Osborne, Mr. George
Ottaway, Richard
Paice, Mr. James
Paterson, Mr. Owen
Penning, Mike
Penrose, John
Pickles, Mr. Eric
Price, Adam
Prisk, Mr. Mark
Pritchard, Mark
Pugh, Dr. John
Randall, Mr. John
Redwood, rh Mr. John
Reid, Mr. Alan
Rennie, Willie
Rifkind, rh Sir Malcolm
Robathan, Mr. Andrew
Robertson, Angus
Robertson, Hugh
Robertson, Mr. Laurence
Robinson, rh Mr. Peter
Rowen, Paul
Ruffley, Mr. David
Russell, Bob
Sanders, Mr. Adrian
Scott, Mr. Lee
Selous, Andrew
Shepherd, Mr. Richard
Simmonds, Mark
Simpson, David
Simpson, Mr. Keith
Smith, Sir Robert
Soames, Mr. Nicholas
Spicer, Sir Michael
Spink, Bob
Spring, Mr. Richard
Steen, Mr. Anthony
Streeter, Mr. Gary
Stunell, Andrew
Swayne, Mr. Desmond
Swinson, Jo
Swire, Mr. Hugo
Syms, Mr. Robert
Tapsell, Sir Peter
Teather, Sarah
Thurso, John
Tredinnick, David
Turner, Mr. Andrew
Vaizey, Mr. Edward
Vara, Mr. Shailesh
Villiers, Mrs. Theresa
Walker, Mr. Charles
Wallace, Mr. Ben
Waterson, Mr. Nigel
Watkinson, Angela
Webb, Steve
Whittingdale, Mr. John
Widdecombe, rh Miss Ann
Wiggin, Bill
Willetts, Mr. David
Williams, Hywel
Williams, Mark
Williams, Mr. Roger
Williams, Stephen
Willis, Mr. Phil
Willott, Jenny
Winterton, Ann
Winterton, Sir Nicholas
Wishart, Pete
Yeo, Mr. Tim
Young, rh Sir George
Younger-Ross, Richard
Tellers for the Ayes:
James Duddridge and
Jeremy Wright
NOES
Abbott, Ms Diane
Ainger, Nick
Ainsworth, rh Mr. Bob
Alexander, rh Mr. Douglas
Anderson, Mr. David
Anderson, Janet
Atkins, Charlotte
Austin, Mr. Ian
Austin, John
Baird, Vera
Balls, rh Ed
Banks, Gordon
Barlow, Ms Celia
Barron, rh Mr. Kevin
Battle, rh John
Beckett, rh Margaret
Begg, Miss Anne
Bell, Sir Stuart
Benn, rh Hilary
Benton, Mr. Joe
Betts, Mr. Clive
Blackman, Liz
Blackman-Woods, Dr. Roberta
Blears, rh Hazel
Blizzard, Mr. Bob
Blunkett, rh Mr. David
Borrow, Mr. David S.
Bradshaw, Mr. Ben
Brennan, Kevin
Brown, Lyn
Brown, rh Mr. Nicholas
Brown, Mr. Russell
Browne, rh Des
Bryant, Chris
Burden, Richard
Burgon, Colin
Burnham, rh Andy
Byrne, Mr. Liam
Caborn, rh Mr. Richard
Cairns, David
Campbell, Mr. Alan
Campbell, Mr. Ronnie
Caton, Mr. Martin
Cawsey, Mr. Ian
Challen, Colin
Chapman, Ben
Chaytor, Mr. David
Clapham, Mr. Michael
Clark, Ms Katy
Clark, Paul
Clarke, rh Mr. Charles
Clarke, rh Mr. Tom
Clelland, Mr. David
Clwyd, rh Ann
Coaker, Mr. Vernon
Coffey, Ann
Cohen, Harry
Connarty, Michael
Cooper, Rosie
Cooper, rh Yvette
Corbyn, Jeremy
Cousins, Jim
Crausby, Mr. David
Cruddas, Jon
Cryer, Mrs. Ann
Cummings, John
Cunningham, Mr. Jim
Curtis-Thomas, Mrs. Claire
Darling, rh Mr. Alistair
David, Mr. Wayne
Davidson, Mr. Ian
Davies, Mr. Quentin
Dean, Mrs. Janet
Denham, rh Mr. John
Dhanda, Mr. Parmjit
Dobbin, Jim
Dobson, rh Frank
Donohoe, Mr. Brian H.
Doran, Mr. Frank
Dowd, Jim
Drew, Mr. David
Dunwoody, Mrs. Gwyneth
Durkan, Mark
Eagle, Angela
Eagle, Maria
Ellman, Mrs. Louise
Etherington, Bill
Field, rh Mr. Frank
Fisher, Mark
Flello, Mr. Robert
Flint, rh Caroline
Flynn, Paul
Follett, Barbara
Foster, Mr. Michael (Worcester)
Foster, Michael Jabez (Hastings and Rye)
Francis, Dr. Hywel
Gapes, Mike
George, rh Mr. Bruce
Gibson, Dr. Ian
Gilroy, Linda
Goodman, Helen
Griffith, Nia
Griffiths, Nigel
Grogan, Mr. John
Gwynne, Andrew
Hain, rh Mr. Peter
Hall, Mr. Mike
Hall, Patrick
Hamilton, Mr. David
Hamilton, Mr. Fabian
Harman, rh Ms Harriet
Harris, Mr. Tom
Havard, Mr. Dai
Healey, John
Henderson, Mr. Doug
Hepburn, Mr. Stephen
Heppell, Mr. John
Hesford, Stephen
Heyes, David
Hill, rh Keith
Hillier, Meg
Hodgson, Mrs. Sharon
Hoon, rh Mr. Geoffrey
Hope, Phil
Hopkins, Kelvin
Howarth, rh Mr. George
Howells, Dr. Kim
Hoyle, Mr. Lindsay
Hughes, rh Beverley
Humble, Mrs. Joan
Hutton, rh Mr. John
Iddon, Dr. Brian
Illsley, Mr. Eric
Ingram, rh Mr. Adam
Irranca-Davies, Huw
James, Mrs. Siân C.
Jenkins, Mr. Brian
Johnson, rh Alan
Jones, Helen
Jones, Mr. Kevan
Jones, Lynne
Jones, Mr. Martyn
Jowell, rh Tessa
Kaufman, rh Sir Gerald
Keeble, Ms Sally
Keeley, Barbara
Keen, Alan
Keen, Ann
Kelly, rh Ruth
Kemp, Mr. Fraser
Kennedy, rh Jane
Khan, Mr. Sadiq
Kidney, Mr. David
Kilfoyle, Mr. Peter
Knight, Jim
Kumar, Dr. Ashok
Ladyman, Dr. Stephen
Lammy, Mr. David
Laxton, Mr. Bob
Lazarowicz, Mark
Lepper, David
Levitt, Tom
Lewis, Mr. Ivan
Linton, Martin
Lloyd, Tony
Love, Mr. Andrew
Lucas, Ian
Mackinlay, Andrew
MacShane, rh Mr. Denis
Mactaggart, Fiona
Mahmood, Mr. Khalid
Malik, Mr. Shahid
Mallaber, Judy
Mann, John
Marris, Rob
Marsden, Mr. Gordon
Marshall, Mr. David
Marshall-Andrews, Mr. Robert
Martlew, Mr. Eric
McAvoy, rh Mr. Thomas
McCabe, Steve
McCafferty, Chris
McCarthy, Kerry
McCarthy-Fry, Sarah
McCartney, rh Mr. Ian
McDonagh, Siobhain
McDonnell, John
McFadden, Mr. Pat
McFall, rh John
McGovern, Mr. Jim
McGrady, Mr. Eddie
McGuire, Mrs. Anne
McIsaac, Shona
McKechin, Ann
McKenna, Rosemary
McNulty, rh Mr. Tony
Meacher, rh Mr. Michael
Meale, Mr. Alan
Michael, rh Alun
Miliband, rh David
Miliband, rh Edward
Miller, Andrew
Mitchell, Mr. Austin
Moffat, Anne
Moffatt, Laura
Mole, Chris
Moon, Mrs. Madeleine
Moran, Margaret
Morden, Jessica
Morgan, Julie
Mudie, Mr. George
Mullin, Mr. Chris
Munn, Meg
Murphy, Mr. Denis
Murphy, Mr. Jim
Murphy, rh Mr. Paul
Naysmith, Dr. Doug
Norris, Dan
O'Brien, Mr. Mike
O'Hara, Mr. Edward
Olner, Mr. Bill
Osborne, Sandra
Owen, Albert
Palmer, Dr. Nick
Pearson, Ian
Plaskitt, Mr. James
Pound, Stephen
Prentice, Bridget
Prentice, Mr. Gordon
Primarolo, rh Dawn
Prosser, Gwyn
Purchase, Mr. Ken
Purnell, rh James
Rammell, Bill
Raynsford, rh Mr. Nick
Reed, Mr. Andy
Reed, Mr. Jamie
Reid, rh John
Riordan, Mrs. Linda
Robertson, John
Robinson, Mr. Geoffrey
Rooney, Mr. Terry
Roy, Mr. Frank
Ruane, Chris
Ruddock, Joan
Russell, Christine
Ryan, rh Joan
Salter, Martin
Seabeck, Alison
Sharma, Mr. Virendra
Shaw, Jonathan
Sheerman, Mr. Barry
Sheridan, Jim
Simon, Mr. Siôn
Skinner, Mr. Dennis
Slaughter, Mr. Andy
Smith, rh Mr. Andrew
Smith, Ms Angela C. (Sheffield, Hillsborough)
Smith, Angela E. (Basildon)
Smith, Geraldine
Smith, rh Jacqui
Smith, John
Snelgrove, Anne
Soulsby, Sir Peter
Southworth, Helen
Spellar, rh Mr. John
Starkey, Dr. Phyllis
Stewart, Ian
Stoate, Dr. Howard
Strang, rh Dr. Gavin
Stringer, Graham
Stuart, Ms Gisela
Sutcliffe, Mr. Gerry
Taylor, Ms Dari
Taylor, David
Thomas, Mr. Gareth
Timms, rh Mr. Stephen
Tipping, Paddy
Todd, Mr. Mark
Trickett, Jon
Truswell, Mr. Paul
Turner, Dr. Desmond
Turner, Mr. Neil
Twigg, Derek
Vis, Dr. Rudi
Walley, Joan
Waltho, Lynda
Watson, Mr. Tom
Watts, Mr. Dave
Whitehead, Dr. Alan
Wicks, Malcolm
Williams, rh Mr. Alan
Williams, Mrs. Betty
Wills, Mr. Michael
Wilson, Phil
Winnick, Mr. David
Winterton, rh Ms Rosie
Woodward, rh Mr. Shaun
Woolas, Mr. Phil
Wright, David
Wright, Mr. Iain
Wyatt, Derek
Tellers for the Noes:
Ms Diana R. Johnson and
Tony Cunningham
Question accordingly negatived.
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