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Northern Rock

3.24 pm

Lord Higgins asked Her Majesty’s Government:



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Lord Davies of Oldham: My Lords, the Government took Northern Rock plc into temporary public ownership by acquiring the company’s shares and taking on its assets and liabilities. The Government did not acquire Granite and have not taken on its assets or liabilities.

Lord Higgins: My Lords, I thank the Minister for that substantive reply, but after the Government have forced through Parliament the biggest takeover ever anywhere of a failed private company, we still do not have much of the information which we ought to have. Will the Minister clarify two points arising from his Answer? First, he rightly says that the Government have taken over Northern Rock by taking over its shares, which of course own its assets and liabilities, but the Granite trust was consolidated on the group accounts of Northern Rock. How then has the Granite trust not been nationalised?

Secondly, before nationalisation, the Government said that the Granite trust was effectively controlled by Northern Rock. Is it still controlled by Northern Rock and, if so, has it not been nationalised?

Lord Davies of Oldham: No, my Lords. The Granite companies are separate and therefore have not been nationalised. Let me make it clear to the House that the relationship between Northern Rock and Granite is paralleled in a number of building societies with similar securitisation companies related to them. The concept of securitisation is that the companies are separate from the main company. They raise their money through bond holders and it is to the bond holders that they are responsible. Granite is responsible for that, which is why the Government cannot be and is not responsible for Granite and its assets. The Government are responsible for Northern Rock.

Lest it be thought that the Government are less than clear on these matters, which may be a reflection of competence at the Dispatch Box in my case, all these issues are clearly in the public domain on the Northern Rock website. Anyone with a keen interest in the relationship of Granite to Northern Rock has full access to the position, where they will see that the two groups of companies are separate.

Lord Barnett: My Lords, I appreciate that my noble friend is trying hard to explain exactly what has happened. But I remain, I must confess, confused. The fact is that yesterday he told us that,

But the Chancellor, in his technical note to Vincent Cable, said—the noble Lord, Lord Higgins, has repeated it—that Granite is effectively controlled by Northern Rock. It goes on to say that Granite is consolidated in Northern Rock’s group balance sheet. Perhaps I am a bit out of touch with accountancy matters, but if a group balance sheet has the assets and liabilities consolidated, how is it not part of the group we have taken over? If my noble friend does not feel able to answer a technical question, I would be happy if he would let me have a technical note explaining it in full.



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Lord Davies of Oldham: My Lords, I would be happy to furnish that to my noble friend, but that might not meet the full needs and requirements of the House. The Government have taken over Northern Rock because it is separate from Granite. The fact is that Granite appears in the group accounts, but we have not taken over the group. We have taken over Northern Rock plc. Northern Rock controls Granite because Granite cannot get resources from any source other than Northern Rock. It is not getting resources at present because Northern Rock has not sold any mortgages to Granite since September 2007. These mortgages are the basis of the resources that Granite controls. Therefore, when the Government take over Northern Rock plc they have a position where Northern Rock plc is the only controller of Granite, but that does not mean that Northern Rock is responsible for the liabilities of Granite. The bond holders are responsible for that.

Baroness Noakes: My Lords, at the end of 2006, there were £550 million of liabilities in Northern Rock’s Whinstone SPVs, which were intimately bound up in guaranteeing the Granite arrangements. Are those Whinstone liabilities included in the nationalised balance sheet or not? How can they be kept separate from Granite?

Lord Davies of Oldham: My Lords, I welcome the noble Baroness’s return, as does the whole House. She will have detected that in her absence, various odd names have popped up in our debates. We had Dolerite last week, and I was able to dispense with it. The company she identifies has never appeared on the radar of any note that I have ever seen in relation to this issue. I assume that, like Dolerite, the noble Baroness is talking about a redundant vehicle.

Lord Newby: My Lords, will the Minister answer just one simple question? Who is the real owner of Granite?

Lord Davies of Oldham: My Lords, Northern Rock controls Granite because Granite cannot and does not function beyond the sale of Northern Rock mortgages to Granite. I repeat, Granite has not been receiving additional resources from Northern Rock since September 2007. But because of its structure, the liabilities of Granite, which are the issue of the Government’s guarantee and the taxpayer exposure, are in fact the bondholders, not Northern Rock. That is why the taxpayer is not exposed to any issue with regard to Granite.

Lord Desai: My Lords, does my noble friend recall that I said at Second Reading that the Government had not bought Granite because its liabilities should not be the responsibility of Northern Rock? That explanation should have been sufficient not only for my noble friend, but for noble Lords opposite. I do not understand why they go on asking about it.

Lord Davies of Oldham: My Lords, I imagine that my noble friend has a siren voice rather than the voice of the prophet in these terms, and therefore does not carry quite the authority we need, and clearly I do not either.



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Let me reassure the House on this score. There is nothing exceptional about the Granite group of companies. Other hugely respected building societies have securitisation vehicles on exactly the same legal basis as Granite. The Government have nothing at all to hide on this issue. Let me also make the obvious point that it is only a month until Northern Rock produces its accounts and only a month until the relationship between the Treasury and Northern Rock with regard to its future is made public in the strategic plan. Given that, why on earth would the Government be involved in any exercise other than one of complete openness on what I admit is a difficult issue?

Statute Law (Repeals) Bill [HL]

3.34 pm

The Parliamentary Under-Secretary of State, Ministry of Justice (Lord Hunt of Kings Heath): My Lords, I beg to introduce a Bill to promote the reform of the statute law by the repeal, in accordance with recommendations of the Law Commission and the Scottish Law Commission, of certain enactments which, except in so far as their effect is preserved, are no longer of practical utility, and to make other provision in connection with the repeal of those enactments. I beg to move that this Bill be now read a first time.

Moved accordingly, and, on Question, Bill read a first time, and ordered to be printed.

House of Lords (Members’ Taxation Status) Bill [HL]

Lord Oakeshott of Seagrove Bay: My Lords, I beg to introduce a Bill to make provision about the taxation status of Members of the House of Lords. I beg to move that this Bill be now read a first time.

Moved accordingly, and, on Question, Bill read a first time, and ordered to be printed.

Charities Act 2006 (Charitable Companies Audit and Group Accounts Provisions) Order 2008

Lord Davies of Oldham My Lords, I beg to move the Motion standing in my name on the Order Paper.

Moved, That the draft order laid before the House on 29 January be approved. 9th Report from the Joint Committee on Statutory Instruments. Considered in Grand Committee on 26 February. —(Lord Davies of Oldham.)

On Question, Motion agreed to.

Criminal Justice and Immigration Bill

3.35 pm

The Parliamentary Under-Secretary of State, Ministry of Justice (Lord Hunt of Kings Heath): My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill. With the leave of the House, perhaps I may make a few remarks before we move into Committee.



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The first priority of the Government is to ensure public safety and it is with this overriding duty in mind that we have been considering how best to move forward with the Bill. The Government hope that the Bill will receive Royal Assent by 8 May and perhaps I may explain to the House why it is necessary to have such a deadline. The House will be aware that the Bill now includes provisions in Clauses 189 and 190 to restore the statutory provision on inducing prison officers to take industrial action. We have included such a provision in the Bill following the decision of the Prison Officers’ Association, representing prison officers, to withdraw, with effect from 8 May this year, from the existing voluntary joint industrial relations procedural agreement with the Prison Service. I stress that the provisions in Clauses 189 and 190 are a reserve power. In the event of a new voluntary agreement being reached between the POA and the Prison Service, the Bill provides for the statutory prohibition on industrial action to be suspended.

We are taking this action to ensure that protections are in place to avoid disruption to the prison estate of the kind we witnessed on 29 August last year. While our preferred solution has been and remains for a negotiated non-strike agreement with the POA, I regret that recent events mean that it is unlikely that any such agreement will be reached in the foreseeable future. The POA special delegates conference on 19 February passed by an overwhelming majority a motion mandating that any further agreement must not constitute a no-strike agreement, nor should it prevent the campaign to fight to regain full trade union rights. It is the Government’s continued hope that the ongoing Ed Sweeney talks will enable more positive engagement between the POA and the Prison Service. However, given the position adopted by the POA at the special delegates conference, it is clear that we cannot responsibly allow for a gap between the termination of the existing voluntary agreement and the statutory bar on industrial action taking effect.

The loss of a scheduled Committee day on 20 February to the Banking (Special Provisions) Bill has not helped us to maintain the progress necessary to ensure that Royal Assent is secured by 8 May. In these circumstances, my right honourable friend the Minister of State for Justice, Mr David Hanson, and I have in the past few days been discussing through the usual channels with our Front Bench opposites and their counterparts in the other place how we can speed up passage of the Bill. Noble Lords will be already aware that we have withdrawn Parts 4 and 5 from the Bill, but we have now concluded that it is necessary to withdraw further provisions from the Bill so that we can achieve Royal Assent in good time.

Accordingly, I wish to inform the House that we will be withdrawing the provisions relating to criminal appeals in Clauses 42 and 43 and to the prostitution provisions in Clauses 123 to 125. In addition to withdrawing those provisions, we will be bringing forward amendments, either in Committee or on Report, to address matters which have been raised on other parts of the Bill. I am grateful to noble Lords from all sides of the House for their assistance. I hope that we

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can make the necessary progress so that the Prison Service can continue to operate without fear of disruption from 8 May.

Moved, That the House do now again resolve itself into Committee.—(Lord Hunt of Kings Heath.)

The Earl of Onslow: My Lords, normally when Governments get themselves into a pickle people say to them, “Yah, boo, sucks. You’ve made a mess of it”. I think that when Governments get themselves into a pickle and then get themselves out of it, one ought to congratulate them and say, “Well done for taking a sensible course”. So perhaps I may say, “Well done the Government for taking a sensible course”.

I am slightly disappointed because preferably my noble friend Lady Stern, who is not in her place, or myself would have liked to be involved in these discussions for the simple reason that we have been deeply involved with the Joint Select Committee on Human Rights, which has had, I hope, a serious influence on the Bill. It would have been quite helpful had we been kept in the loop. However, well done the Government for not going on digging. Let this be an example to Conservative Governments in the future.

Lord Kingsland: My Lords, I shall make no observations about my noble friend’s intervention. We quite understand the reasons why the Government wish to get their Bill by 8 May. We are extremely pleased that they have decided to drop Clause 42 which, as the Minister well knows, we regard as deeply pernicious. We also think the Government are wise to drop Clauses 123 to 125, which concern certain aspects of prostitution. However, we would be dismayed if next year, which will almost inevitably be a year of yet another Criminal Justice Bill, we should find these provisions reappearing in exactly the same form. We would like to think that the Government’s change of heart on these matters is not just a tactical manoeuvre but a genuine reconsideration of the merits of what they have done.

As to all the other matters, we will wait and see what amendments emerge from the Government. It is impossible to commit ourselves one way or other. As the Bill makes its way through the Committee stage, no doubt we shall find the Government’s new position gradually revealed. We are particularly interested in violent offender orders, which we think, in their present draft, are deeply defective. We will be looking to the Government for some fundamental changes if they are going to have anything other than an extremely rocky ride. I am grateful to the Minister for his statement.

Lord Thomas of Gresford: My Lords, I am not as generous in this matter as the noble Earl, Lord Onslow, and noble Lords probably do not expect me to be. This is just how not to legislate. The Bill started off in the House of Commons with about 139 clauses and on to that skeleton were piled topic after topic. When it came to Report, a further 200 clauses and amendments were introduced by the Government that the other place had no time whatever to debate so the ship steamed to this House leaking in every way. The Government are now throwing over the ballast; they threw away Parts 4 and 5 at the very beginning, and

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now they are throwing away more parts of the Bill and we will have further amendments in due course. This is an object lesson in how not to overload a Bill and how not to try to push through any idea that has come into the head of the Home Office or the Ministry of Justice in the way in which the Government have tried to do.

Lord Lloyd of Berwick: My Lords, I, too, want to say how glad I am that the Government have dropped, in particular, Clauses 42 and 43. I echo what the noble Lord, Lord Kingsland, said. I hope that they will not come back next year, but in case they do, I intend to keep the speech I would have made this afternoon.

Lord Wedderburn of Charlton: My Lords, I preface my question with my congratulations to the Government on pressing this matter forward and in the hope that the talks with Ed Sweeney will provide a voluntary answer to the question of industrial action. Having said that, I ask my noble friend—he need not answer now—to consider the legal problems involved in the new formula in Clause 189(2); namely, the illegality of taking or continuing to take industrial action. I give my full support to the Government in pressing the Bill to the statute book. I was going to speak on that clause, but shall not now do so when it passes through the House.

Baroness Miller of Chilthorne Domer: My Lords, the Minister will know, because his noble friend Lord West was at the meeting, that there was concern all around the House about the clauses on prostitution. I am sure that that feeling will be echoed on all sides of the House. I hope that the Government will use the intervening time to come forward with a proper Bill based on complete research. The Government were part of the way through: they have completed a strategy; Ministers have visited Sweden; they have not visited New Zealand to see an example of different practice. I hope that when they bring back a Bill it will be in a more complete form.

I also make a plea to the Government that they think again about the extreme porn clauses. They would benefit enormously from pre-legislative scrutiny, which would enable us to discuss them in a far more considered and necessarily sensitive atmosphere before they were brought on to the Floor of the House.

3.45 pm

Lord Henley: My Lords, I am slightly confused. The Minister has told us that Clauses 42 and 43 will be dropped, which I presume means that the amendments which the noble and learned Lord, Lord Lloyd, and others have tabled will not be debated. We do not have even a manuscript amendment from the Government at this stage. Will we debate the amendments of the noble and learned Lord, Lord Lloyd? Perhaps the noble and learned Lord will not move them. The situation creates confusion, because we want to know how far the Minister thinks we will go today. I ask not only as one active on the Bill, but as a former Business manager. It is an important question. Will we get on to Part 7, where we will move on to completely different subjects from those in

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Part 2, to the end of which we will come fairly soon? We will then have Parts 3, 4 and 5, some of which the Government introduced in the Commons and then removed in this House, which is another sign of the Government’s confusion. I do not know how many other parts of the Bill the Government will remove. I on the Front Bench and, I have no doubt, many colleagues on the Back Benches are deeply confused as to how far we are supposed to go today, what we are supposed to do today, and where we are.

Lord Stoddart of Swindon: My Lords, if the Government are concerned to get the Bill through by 8 May, other clauses could be removed as well. Like other noble Lords, I have had a lot of correspondence about Clause 126, which was inserted in the Bill after it had been published and halfway through its passage through the House of Commons. In addition, an amendment to the clause has been tabled which is bound to take quite a lot of time. Will the Minister consider withdrawing that clause as well, which would be helpful to him?

Lord Hunt of Kings Heath: My Lords, I thank noble Lords for their generous remarks on my announcement. As on Lords reform, the noble Earl, Lord Onslow, and I once again find ourselves in agreement. I say to him and the noble Baroness, Lady Stern, who is not in her place, that one would of course wish to make sure that all noble Lords who have taken part in the Bill are kept informed. This has been a fast moving feast, but I shall do my best to take note of what the noble Earl said.

Other matters will of course come to be discussed. Discussions are taking place in the usual channels, on which I shall be able to report in due course. I am not prepared to respond to what is not so much a shopping list as a list of things that noble Lords do not like. It would not be appropriate to respond to the specific issues that were raised by a number of noble Lords today.

The noble Lord, Lord Thomas of Gresford, who is ever complimentary about the legislative—

Lord Stoddart of Swindon: My Lords, the Minister has asked the House to agree, virtually without any discussion, to his shopping list of matters to be withdrawn. Why on earth will he not take into account the suggestions of noble Lords from other parts of the House and from the Back Benches? Do we not have any say these days?

Lord Hunt of Kings Heath: My Lords, of course. The noble Lord has never been backward in making his views known. I did not say that I would not take account of comments made by noble Lords this afternoon. What is not appropriate is to try to negotiate across the Floor of the House on the other suggestions that have been made. However, discussions will continue.


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