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It being after half-past Ten o’clock, The First Deputy Chairman of Ways and Means proceeded to put the Question necessary to dispose of proceedings in Committee , pursuant to Order [this day].
Clauses 6 to 17 ordered to stand part of the Bill.
Not amended in the Committee, considered.
Mr. Patrick McLoughlin (West Derbyshire) (Con):
On a point of order, Madam Deputy Speaker. We have just heard the formal words of the Government Whip.
Would it be possible for the Modernisation Committee to consider the matter? The Committee of the whole House has not gone through the Bill—the guillotine has come down and the House has been prevented from debating it. The Committee has not gone through the whole Bill, so should not the matter go to the Modernisation Committee so that we get a more accurate record of what has actually happened?
Madam Deputy Speaker (Sylvia Heal): I thank the hon. Gentleman for his point of order. It is not a matter for the Chair, but it will be brought to the notice of the Chairman of the Modernisation Committee.
I ask hon. Members who are not staying for Third Reading to leave the Chamber as quickly and quietly as possible.
10.34 pm
Yvette Cooper: I beg to move, That the Bill be now read the Third time.
I thank hon. Members for the speedy consideration of the Bill, which was introduced under unusual circumstances.
Last summer, triggered by events in the US sub-prime mortgage market, a global credit crunch began. Banks stopped lending to each other in the normal way and Northern Rock, owing to its business model, could not get the money that it needed to keep going. The action that we took last autumn was widely supported at the time. The Government stepped in and effectively saved Northern Rock. As a result of the decisions that the Chancellor took at that time, not only is Northern Rock still operating, but its customers’ deposits are secure and we have prevented the problems affecting it from spreading elsewhere in the banking system. That has been one of our main concerns from the beginning—to safeguard the stability of the banking system.
Mr. Colin Breed (South-East Cornwall) (LD): Will the Chief Secretary confirm that throughout the period since Northern Rock fell into problems there have been no branch closures, that it has been receiving deposits and repayments on its mortgages, and that it has operated perfectly satisfactorily every day, including today? Can she explain why there has been such a rush to introduce the Bill when Northern Rock has been operating perfectly satisfactorily over those months?
Yvette Cooper: If the hon. Gentleman had been here earlier, he would know that we have discussed the reasons for bringing the Bill through rapidly. We took action in the autumn to ensure that Northern Rock could continue. As well as the Bank of England loans, we provided Government guarantees. Those have proved necessary in order for Northern Rock to continue and to support financial stability at the time.
We took the decision on Sunday after detailed consideration of the two bids—two serious bids, I should point out—which we could have gone with. We took the decision, however, that temporary public ownership was in the interests of the taxpayer. We took the decision and announced it very soon after on Sunday, and shares of Northern Rock were suspended on Monday morning. Those shares are still suspended. They have not yet been transferred to the public sector and the Treasury solicitor.
It is important for Northern Rock that it should have some certainty about its future operations, and that it should know who its shareholders are and who is in charge. It is important for Ron Sandler to be able to get on with his work in an environment of stability and security. Therefore, it is not in the interests of Northern Rock, the wider stability of the banking system or the House to extend unnecessarily our consideration of the Bill, when we can get it in place rapidly, in order to be able to effect the order and provide certainty for Northern Rock for the future.
Mr. Philip Hammond: The Chief Secretary has said that it is important for Northern Rock and its employees and shareholders to have certainty. Does she accept the recurrent theme of our debates today: in order for them to have that certainty, they need to know whether the Government’s strategic objective is to grow the business or shrink it? That is the key issue.
Yvette Cooper: We have made clear our objectives throughout the process: to ensure the financial stability of the banking system. We have also been keen to secure the interests of depositors and, in particular, to ensure that the taxpayers’ interests are protected. That is why we have taken the decision, and we have made detailed assessments of all the options for that purpose. We have said that we will shortly publish a framework document, which will deal with the arrangements that need to operate between Northern Rock and the Treasury and the Government. Ron Sandler will publish a business plan in due course which will need to be agreed with the Government and compliant with EU state aid rules.
It is important also that we should operate within a framework that is fair, and in which there is no inappropriate unfair competition. It is right that that should happen, but it is equally right that the new board of Northern Rock should have a chance to go through the books, assess the business in detail and draw up its proposals on how the interests that the Government have set out can best be secured. Those will then need to be approved and considered by the Government, and obviously they will be published at that time.
Mr. Hugo Swire (East Devon) (Con): Have the Government made any calculation of what would happen if the business plan were to shrink the business, and of how many job losses that would lead to in the north-east?
Yvette Cooper: Ron Sandler is assessing what the options and future course of the business should be. Hon. Members want us to answer all their detailed questions about what the business plan should be, yet they also want Ministers not to take those decisions. They want this to be an arm’s length operation—which is what we think it ought to be—that is properly run on a commercial basis and in which the decisions are taken by the board and by the people with the expertise to do so, but they want us simultaneously to prescribe to the board the exact details of its business plan. We are clear that Ron Sandler and his team should have time properly to draw up a business plan. It will need to be agreed with the Government and to be compliant with EU state aid rules. That is a sensible way for us to go forward.
Mr. William Cash (Stone) (Con): The Minister has just said that it will be necessary to comply with a range of provisions, including European legislation with respect to competition policy. Will she explain why clause 12 specifically states that an order may
“disapply...any specified statutory provision or rule of law”?
In that context, is she saying that we will disapply any Westminster-based legislation, but that we will not be able to disapply any European-based legislation?
Yvette Cooper: The hon. Gentleman must be quite mortified that we are saying that the clear safeguards that will be in place to ensure that we do not have unfair competition lie with the European Commission. I realise how difficult that is for him. I also realise that he had been hoping to have a debate on Europe today, and he has obviously come in specially for that. It must have been quite frustrating for him to have to discuss the details of a bank instead. As a result, he is now desperately trying to find some way of getting in a question on Europe—
Mr. Cash: Will the Minister answer my question?
Madam Deputy Speaker (Sylvia Heal): Order.
Rob Marris: Will the Minister give way?
Yvette Cooper: I will give way to my hon. Friend.
Rob Marris: Northern Rock got into difficulty because it had a rubbish business model. Sticking with clause 12, subsection (3)(d) will enable powers to deal with
“exempting directors of any relevant deposit-taker, or of any group undertaking of any relevant deposit-taker, from liability in connection with acts or omissions in relation to the deposit-taker or undertaking”.
Will my right hon. Friend assure me that those powers will not be invoked to let the directors of Northern Rock who got it into difficulty off the hook should there be any legal liability for the incompetence of those directors?
Yvette Cooper: I have now had questions from both my hon. Friend and the hon. Member for Stone (Mr. Cash) about that. Let us be clear that the purpose of clause 12 is to ensure that the Treasury has the power to make consequential and supplementary provisions, given the complexities of the financial system and of the way in which the banking system works. We need to be able to ensure, if particular consequences follow through later when more detailed considerations are looked into, that they can be dealt with. It is clearly not the intention that people who should rightly take responsibility for their decisions should be exempt from doing so. Nor is it the intention to disapply any appropriate laws—be they European or UK laws—that should apply in these circumstances. This is simply about ensuring that we have the consequential powers that we need to implement the intention of the Bill, which is exactly what we have been discussing throughout the debate today.
As hon. Members will know, the global credit crunch is continuing. That means that banks are still not lending to each other in the normal way, and that is
why the Government guarantees are still in place. Given that they are in place, it is right that we should expect an appropriate return for them, and that is why we have done the detailed assessment and chosen temporary public sector ownership as the appropriate way forward.
Interestingly, one thing that has come out of today’s debate is the fact that hon. Members who at the time of the intervention in the autumn supported both the introduction of Government guarantees and the intervention to prevent Northern Rock from going under are now arguing that those guarantees should be removed and that the bank should be put into administration. Throughout the different stages of today’s debate, a number of Conservative Members have said that they cannot accept the very principle of a bank continuing to have Government support, yet operating in the marketplace, despite the particular, unusual and difficult conditions that apply and despite the fact that the Financial Services Authority has emphasised the good loan book and the solvency of the bank.
Mr. Bone: Does the Minister have a plan B if the current arm’s length business plan—though she does not know what it is—is rejected by the European Union? Is there a plan B if the EU will not allow us to proceed?
Yvette Cooper: Detailed discussions with the European Commissioner will need to take place and they are likely to consider, for example, the conditions that need to be in place for the business plan to proceed. That would be the usual approach of the Commission in these circumstances. Clearly, that sort of discussion will need to happen and it will consider the detail of the business plan and the particular conditions with which it needs to comply.
Yvette Cooper: Conservative Members need to understand that they are effectively arguing for Northern Rock to go under—either very rapidly because of the withdrawal of Government guarantees or because it was put into administration. On the Government side, we have made very clear the consequences of putting Northern Rock into administration at this stage. It would mean that creditors would have claims on collateral and they would be exercised. In practice, it would mean a significant risk both to the Bank of England’s contributions and loans and to the taxpayer as a result of the guarantees that are being put in place. Given the current market conditions, it is important that we do not promote a fire sale of assets or effectively a sell-off at the bottom of the market. That is not in the interests of the taxpayer. It is important to promote the interests of taxpayers rather than the ideological approach of Conservative Members.
Keith Vaz (Leicester, East) (Lab):
My right hon. Friend is absolutely right and I would like to remind her of what happened to BCCI 17 years ago when the then Conservative Government refused to support its
creditors and depositors. It has been in liquidation for 17 years, but all the money has been found all of a sudden.
Yvette Cooper: My right hon. Friend, who has greater expertise in this area than me—details of the BCCI case are beyond my memory—makes an important point.
Mr. Gerald Howarth (Aldershot) (Con) rose—
John McDonnell (Hayes and Harlington) (Lab) rose—
Yvette Cooper: I give way to my hon. Friend.
John McDonnell: I want to follow on from a point raised by my hon. Friend the Member for Wolverhampton, South-West (Rob Marris) about the liabilities and responsibilities for Northern Rock’s actions. If I recall correctly, when my right hon. Friend the Chief Secretary summed up on Second Reading, she said that the Granite exercise was excluded from the legislation. I understand that the Granite exercise was an offshoring of securitisation that offered 50 per cent. of the funding for Northern Rock—as far as I can see, it was used as a tax-avoidance measure—yet it is to be excluded from the scope of the Bill. If there are responsibilities and liabilities, surely those who participated in that exercise for their own advantage should be brought into the scope of the legislation. Should not responsibility and liability fall on them as well?
Yvette Cooper: Perhaps I should clarify that there are two different points. Granite is part of the funding mechanism for Northern Rock and it is on the bank’s balance sheet; however, it is a separate trust and has never been covered by the Government guarantees. It is not being taken into public ownership and it is not, in fact, owned by Northern Rock, so it is not part of the taxpayer’s exposure and has never been so. On the matter of how clause 12 relates to the directors, it does not apply to old or former directors; it is about the potential to make provision for directors who are in place while Northern Rock is temporarily in the public sector. It is an enabling provision— [Interruption.]
Yvette Cooper: We had this discussion earlier, on Second Reading. This is a Third Reading debate. [Interruption.]
Yvette Cooper: I am conscious of the time, and of the fact that other Members wish to speak in the debate. I will give way to Members, but they may need to be patient.
Mr. Philip Hammond: The Chief Secretary just said something about the ownership of Granite. Will she make clear to us who owns the shares in the Granite incorporated vehicles? Are they owned by Northern Rock, or by a third party?
Yvette Cooper: I understand that Granite was set up on a trust basis. I shall be happy to give the hon. Gentleman further details, because I think they are in the public domain. Granite is not owned by Northern Rock; nor will it pass into the hands of the public sector.
Mr. Philip Hammond: I am sorry to press the Chief Secretary on this point, but it is important. The Granite entities are consolidated on the Northern Rock balance sheet. When Members look at the totality of Northern Rock’s assets and liabilities, they see Northern Rock plus Granite. Is the Chief Secretary now telling the House that the public sector will acquire ownership of Northern Rock, but not of the Granite entities?
Yvette Cooper: That is what I said earlier.
John McDonnell: Can it be made clear for the record that although Granite is a creature of Northern Rock, was established by Northern Rock and was undertaken as an exercise for profit and tax avoidance, liabilities resulting from the overall exercise of Northern Rock will fall on the taxpayer, while those who participated in Granite to make profits will have no liabilities whatever? Is that statement accurate?
Yvette Cooper: Granite is and has always been a separate legal entity. What we are taking into temporary public ownership is Northern Rock, the bank, not Granite. I clarified that on Second Reading.
Mr. Hands: May I return the Chief Secretary to something else that she said earlier? She said that she opposed a fire sale—as, I think, does everyone—but that her reason for opposing it was that that would take place at the bottom of the market. Will she tell us why she is so sure that this is the bottom of the market?
Yvette Cooper: Opposition Members may say that they are not in favour of a fire sale of the assets, but that would be exactly the consequence of putting Northern Rock into administration. Creditors would have claims on collateral that would be triggered by insolvency; assets would need to be sold, and the bank would be rapidly wound down. That would not be in the interest of taxpayers. Members in all parts of the House should recognise that the purpose of the Bill is to protect the interests of taxpayers. I think that that is responsible, and it is something that the Government consider important.
Madam Deputy Speaker: Order. I remind all Members that this is a Third Reading debate, and we are discussing the content of the Bill.
Yvette Cooper: Members in all parts of the House should recognise the importance of protecting the taxpayers’ interests. That is why we have made detailed assessments of the different options throughout this process. We must continue to safeguard financial stability, but we must also secure the interests of the taxpayer.
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