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10 Feb 2009 : Column 1263

Mr. Hoban: My hon. Friend tempts me, but we have accepted elements of the banking bail-out package. We feel that parts of the package could have been made much more effective at an earlier stage. We welcome the Government’s working capital scheme, which was announced by Lord Mandelson, although it was a pale imitation of a policy that we proposed in November. So although elements of the package may cause controversy, there are elements on which the Government have followed our lead. The important thing is that we hold the Government to account on how the schemes are introduced and implemented. We will refer to ways in which we can do so in the debate on the first group of amendments.

It is difficult to speak of a backdrop in the first debate on a topic, but it is important that hon. Members who wish to participate in the debate on the Bill recognise the cost of the initiatives that the Government have taken already, the potential exposure that that brings to the taxpayer, and the need to ensure that taxpayers are fully aware of the liabilities that they are likely to bear. I, too, was surprised that the Minister was so quick to resume his seat. He announced in the House at least one of those packages, if not two, and I should have thought that he would be happy to talk about their merits and why they would be effective.

Mr. William Cash (Stone) (Con): Will my hon. Friend give way?

Mr. Hoban: I am conscious that other hon. Members wish to participate in the debate, but I shall give way to my hon. Friend.

Mr. Cash: A subject that I have been pursuing since at least 7 October is what is a proper measure of the percentage of gross domestic product represented by the debt—it is somewhat along the lines of the remarks made by my hon. Friend the Member for Wellingborough (Mr. Bone). My hon. Friend the Member for Fareham (Mr. Hoban) correctly referred to contingent liabilities as the proper criteria. However, surely the real criteria should be the financial obligations that are entered into. Nobody could seriously doubt that we are speaking of financial obligations, so whatever the measure that may be imposed by virtue of a theoretical definition, the fact is that the figures are up to £2 trillion to £2.5 trillion, as I said in the most recent debate. Does my hon. Friend agree that we need to work that out carefully so that we get a proper measure, not just a theoretical measure, of what is defined?

Mr. Hoban: My hon. Friend makes an important point about trying to quantify the extent of the liabilities that the taxpayer is taking on. Dredging the recesses of my memory, I recall from my accountancy training that there are accounting standards that examine the extent to which a potential liability could crystallise and therefore how one should account for those liabilities. What is more likely to transpire should be provided for, and what is less likely to transpire should not be provided for.

Part of the challenge that we face is that one of the potentially largest elements of the package is the asset protection scheme, which will insure a portfolio of bank assets. Work is going on to try to quantify the extent of the package and what guarantees the Government will
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enter into with the banks, so we are yet to find out the true scope of the commitments that we are likely to enter into on behalf of the taxpayer in trying to resolve some of the issues associated with the banking crisis.

Mr. Brooks Newmark (Braintree) (Con): Building on the point that my hon. Friend the Member for Stone (Mr. Cash) was making—

John Bercow: The thesis!

Mr. Newmark: It was not a thesis, but it was a very good point about contingent liabilities. Equity accounting rules say that if the Government own more than 50 per cent. of a bank or any institution, they should consolidate not just a portion—that is, 70 per cent. of the debt—but 100 per cent. of the debt. Does my hon. Friend agree that if we want transparency, the Government should consolidate 100 per cent. of the debt of anything that they own over 50 per cent.?

Mr. Hoban: My hon. Friend, who has made a great study of the state of Government finances and their on and off-balance sheet liabilities, tempts me down a course which, if he does not mind, I shall not tread at this point. He makes an important point about the extent to which the Government may wish to recognise the liabilities. We are speaking of the liabilities of not just one bank. The Government have nationalised two banks—Northern Rock and Bradford & Bingley—so their liabilities will need to be taken into account as well. In the interests of transparency, we have heard nothing about the condition of Bradford & Bingley since it was nationalised at the end of September. That will be referred to later, in the debate on Lords amendment 83.

I give way to the hon. Member for Thurrock (Andrew Mackinlay).

Andrew Mackinlay (Thurrock) (Lab): I shall make a substantive speech.

Mr. Hoban: I do not wish to get in the way of the hon. Gentleman’s making a substantive speech. It will be good to hear comments from Government Back Benchers, but I am sure that the hon. Gentleman will agree that there are significant sums of taxpayers’ money involved and it is right to have a proper debate about it not only now, but as the scale of the liabilities unfolds over the coming months. Not wishing to deprive other hon. Members of the opportunity to speak, I shall conclude my remarks there.

3.59 pm

Andrew Mackinlay (Thurrock) (Lab): I am pleased to have caught your eye, Mr. Speaker. I am a bit bewildered and concerned that countless Members of Parliament from all political parties will be responding to letters and representations from constituents about the bonuses being paid to people who presided over the banks that have failed. That issue is fully within the footprint of the resolution, which involves Parliament authorising moneys to fulfil the intentions of the Banking Bill, which is designed to bail out and underwrite the banks.

It is inconsistent for us in this Parliament to agree this money resolution when the Prime Minister has failed to ensure that bonuses are not paid to people who have failed both the banks and the wider United Kingdom
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community. In my view, the money resolution should be contingent on an undertaking that the banks will not pay the bonuses or that the Government will enact legislation to ensure that those payments are not made. I find it bewildering that neither the Opposition spokesperson nor the Government Front Bencher has mentioned the big elephant in the room—that is, the bonuses being paid. At the same time, we are expected to vote this afternoon—

Mr. Speaker: The money resolution does not involve a debate about bonuses. Perhaps the hon. Gentleman can raise that issue at some other point in the proceedings.

Andrew Mackinlay: I fully accept what you say, Mr. Speaker.

Mr. Redwood: Does the hon. Gentleman agree with me that the consequence of this money resolution is that the House has to supervise a big bank with a medium-sized country attached—a £2 trillion bank and a £1.5 trillion country? That is why the hon. Gentleman is in difficulties.

Andrew Mackinlay: Maybe. We are being asked to authorise this expenditure by Parliament; it is Parliament’s historic role to make moneys available to the Government. I was inadequately trying to make the point that it would be wrong for me, on behalf of my constituents, to acquiesce, by my silence, in this authorisation of payment just when the Executive branch of the Government, these Ministers, are not ensuring that the rights and interests of our people are protected and promoted to the fullest extent; I am thinking about making sure that the bonuses are not paid to the failed bankers.

I conclude by saying that I am not prepared to let the motion go through without making it clear that it should be a condition of the resolution that the Prime Minister comes to the House to say something about the payments. I am not talking about setting up reviews; reviews that take months are no good—particularly if they are conducted by a man who received bonuses. Working-class people do not receive bonuses, and earlier we debated a Bill about rights to work. It is now time that Parliament exercised its right, and I am tempted to divide the House on the issue. I hope that the Whips are listening in their offices.

4.3 pm

Mr. Colin Breed (South-East Cornwall) (LD): This morning, the Treasury Committee spent about three hours interviewing bank executives. Part of the reason for that was our incredulity at how they had made decisions based on information about very complex financial instruments, which we suggested they did not know enough about before they committed huge sums to buying various assets and lending money in a certain way. We suggested to them that perhaps they should have had better training and education so that they could have understood exactly what they were approving.

Now we find ourselves here this afternoon. The Minister has made a statement lasting two or three minutes and is asking us to approve something, although many of us have not got the foggiest idea what it is to fund.

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Andrew Mackinlay: Bonuses.

Mr. Breed: It could well be bonuses. Some of it will be in actual cash, by way of loans; some of it will be by way of guarantees and indemnities; and some of it will be by way of stand-by facilities. However, we do not know what the estimated total exposure at any one time might be. We do not have much idea of what the underlying security might be. We have not been provided with a cash flow forecast to indicate what the peaks of this exposure might be. We do not appear to have any exit routes for how the money will be paid back, in what time scale it will be paid back, or whether it will ever be paid back. There seem to be no dates by when these facilities will no longer be available, how long they will be made available for, or what review periods will be undertaken to ensure that the cash flow forecast is on track, or not on track. Combining all that with the opaqueness of the Government’s own accounts as regards their off-balance sheet items and suchlike, we have no idea whatever of the total exposure that the Government are suggesting we should agree with taxpayers’ money.

To debate all that we have three quarters of an hour, most of which has now gone. We have to decide what could be an unbelievable amount of exposure. As the right hon. Member for Wokingham (Mr. Redwood) said, it could be £1 trillion; we just do not know. I cannot conceive how we could possibly approve it today without a significant amount of additional information so that we have at least some idea of what is involved. If somebody gets us in front of a Committee in a year or so and says, “When you approved it, did you understand what it was all about?”, we are going to look rather foolish.

Stewart Hosie (Dundee, East) (SNP): I am almost tempted to suggest that it is worse than that. One of the component parts of this money resolution is the Government’s insurance for the banks’ excess bad debt, effectively covering the toxic debt, which is a moveable feast—it is completely open-ended. Is it not worse than the hon. Gentleman describes in the sense that debts, or loans, that are good at the moment can become bad as the recession worsens, making this a completely open-ended commitment to an unmeasurable liability?

Mr. Breed: I thank the hon. Gentleman for that. He is exactly right: it is worse than I was thinking. If we discussed it for another half an hour or hour, we might discover that it is even worse again.

Most money resolutions are relatively straightforward—I think we all accept that—but this is entirely different. We should not just pass it and get on to the Lords amendments, because it is fundamental to the whole question of our bailing out the banking system. Unless we fully understand what the exposures are, this House will not be doing its fundamental task of oversight.

Mr. Graham Brady (Altrincham and Sale, West) (Con): I am following the hon. Gentleman’s remarks with care. Does he agree that there is a marked contrast with the situation in the United States of America, where not so many months ago the Treasury Secretary went on his knees in front of Congress to seek permission for that money?

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Mr. Breed: There is a certain similarity, of course. Althouh I do not want the Minister here, or anybody else necessarily, on their knees, when they come to the Dispatch Box they should at least give us a much fuller understanding of exactly what we are being asked to do.

Mr. Cash: Is the hon. Gentleman aware that the Japanese bankers went on their knees to apologise for the mess they got the Japanese economy into?

Mr. Breed: They may have chopped their heads off as well—I do not know.

Perhaps the Minister will be able to explain exactly what he wants us to approve, what amounts and so on, because at the moment I, for one, am not very happy.

4.8 pm

Mr. John Redwood (Wokingham) (Con): This is the biggest, most important and most dramatic money resolution I have ever seen in the House of Commons. It has taken 1,000 years to amass a debt that the Government put at around £550 billion. Under this money resolution and the associated actions that the Government might take, they might double the debt by making that amount of money available as loans and share capital to banks or put the same amount again at risk through their loan guarantee scheme. As my hon. Friends have indicated, if we consolidate on the general balance sheet, as we should, all the assets and liabilities of the banks that the Government are buying, we do not just double the debt but quadruple or even quintuple it when one takes into account the full size of RBS, Northern Rock and Bradford and Bingley—no others, we trust, but this is very open-ended and implies that there could be others.

The money resolution takes the form of two different assertions. First, we are invited to give the Secretary of State power to put out money provided by Parliament under these headings, and secondly, in urgent cases, to authorise payments to be made out of the Consolidated Fund. The Bill that backs up the money resolution contains even more wide-ranging powers relating to the central bank, enabling quite a lot of money to be generated by the bank through quantitative easing and the manoeuvres of its own balance sheets, so the process is literally open-ended. We have absolutely no idea how much is involved.

I was disappointed because I wanted to intervene on the Economic Secretary. He gave the impression of a Minister who was going to make a serious and sensible statement about this weighty issue, but he sat down as soon as he saw me trying to intervene and before he had mentioned a single figure. Call me old-fashioned, but if I were moving a money resolution in the House of Commons, even one for a modest sum of money, I would mention the sum involved and explain why I thought it would provide good value. We have a money resolution that could involve half a trillion or a trillion pounds. On a consolidated basis, if we take all the liabilities into account, it could be several trillion. We might think that it was worth giving a few numbers, or at least some kind of ceiling to suggest that the Government understand that we are talking about big banks in a relatively small country.

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Mr. Newmark: Does my right hon. Friend share my concern that the Government do not know the answer because they have not had the time to do their own due diligence on the exact amount of risk to which they are exposing the country and taxpayers? That is why we are now on our second bail-out, and my concern is that we may end up having a third two or three months down the road.

Mr. Redwood: I quite agree. I do not know whether the figure of £37 billion is retrospective, or whether the Economic Secretary thinks it was voted for under some other provision. We know, however, that £37 billion of equity capital was put into banks just a few months ago. The money changed hands only comparatively recently because it took quite a long time to get the approvals and do the final detailed negotiation. In the case of RBS, we believe that £20 billion went in one week, and the following week it announced it had lost the lot and a bit more besides. Again, call me old-fashioned, but I do not feel I got a lot of value out of that £20 billion, and I wonder why the Government put it in in the way they did, why they did not ask a few questions about the future results before they chose a price to put in new share capital, or why they put in new share capital at all, instead of using guarantees and short-term cash loans, which would have been quite sufficient.

Sir Peter Viggers (Gosport) (Con): To give a sense of perspective about the size of the amounts involved and the speed with which figures can change, on 13 October the Chancellor of the Exchequer told us that the assessment made on the money going into the banks at that point was a cautious one—the FSA had made it on a cautious basis—so the amounts involved were rather larger than might otherwise have been the case. Three months later, on 19 January, RBS had to write off £28 billion, which is the largest amount ever written off by a company.

Mr. Redwood: That is right, and some of us have urged the Government in the past to show a little more concern for the public money involved, to ask more questions and do a little of what is called due diligence in the private sector before committing such huge sums of money to get a better deal for the taxpayer, if they feel that they need to do such a deal at all.

I urge the Economic Secretary, when considering the money resolution, to ensure that next time—I fear that there will be a next time because the Government are looking at a second package of banking support measures—the Government at the very least try to find out the scope of the problem. They should ask what the next set of figures might be. They should take that into account before valuing any share capital or loan capital they intend to put into the bank, and they should understand that a medium-sized country with an annual turnover and national income of £1.5 trillion will find it difficult to stand behind all the London-based banks with their combined multi-trillion-pound balance sheets.

If the Government are not careful, they will undermine the credibility and the reputation of their own debt and public finance by linking themselves too strongly and closely to some large banks, three of which we know have been badly run and have committed themselves to big risks and to big bonus and other contingent payments for no good reason, which have landed the taxpayer with a very big bill owing to the Government’s policy.

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I know that others wish to speak. It is a pity that we do not have a three-hour debate on the biggest sum of money ever voted on in the history of Parliament, but I do not want to detract from colleagues’ time. I have made my main points: the Government should show more care, they should provide us with some numbers and they should understand that the total sum involved is too big.

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