Banking (Special Provisions) Bill

My Lords, by this stage in the evening, most of the points that one wants to make have already been made, but perhaps I can make one point that has not been made, apart from by my noble friend Lord Lawson, which is to say how much sympathy I have for the Minister, the noble Lord, Lord Davies, for having to deal with the Bill. He truly is between a rock and a hard place. Rather like the noble Lord, Lord Bilimoria, I feel that we have Hobson's choice. The Government having rejected the initial Lloyds-TSB bid and the Chancellor having gone on the ““Today”” programme and announced that the depositors’ money would be guaranteed by the Government, from then on it was inevitable that the Government would have to take control from the shareholders in some form. What I do not understand is the timing. I do not understand why it is necessary to deal with all this legislation in two days. I should be very grateful if the Minister could explain that. What is the urgency? Why, as my noble friend said, if we have such complex matters to discuss, can we not have time to do so? Why is it necessary to have all this done by next Tuesday? I do not understand it. What has been going on for the past five months? I know that investment bankers are expensive but I read that £100 million of our money is being spent on advice. We are spending £100 million on advice not just for Northern Rock and the Government but apparently we are paying for the advice for Mr Branson and the other bidders, which is outrageous. Speaking as an investment banker, we normally operate on the basis that if the deal is not done, one does not receive one’s fee. No deal has been done here, so why is all that money being paid out and what was the impact of that advice? We have had five months of dithering and delay. I should like to ask the Minister a number of questions. I hope that he will deal with them in the wind-up or that we can obtain some answers before tomorrow, because I would not wish to have to repeat them or to make difficulties in Committee. We are entitled to answers to these simple questions. The Bill, which does not mention Northern Rock by name, has wide-ranging powers, as the noble Lord, Lord Goodhart, has indicated, and we are told that its purpose is simply to enable the Government to acquire Northern Rock without getting into hybridity difficulties. Normally if we are buying something we want to know the price, so how much are we going to pay for the Northern Rock shares? What is going to be the Government’s position on the compensation for shareholders? If we do not know the price, it is a strange process to start on. I understand that, but what are we getting for our money? We have been given no indication of the nature of the assets. We have had concern about the special purpose vehicle in Granite and we have no idea what the liabilities are. In answers to Questions and throughout the course of the past five or six months the Minister has repeatedly told us that the loan book is sound and good. How does he know that? Have his advisers done due diligence? Does he have that information? Could we have it as we have paid all this money for this advice? I wonder about the quality of the loan book. I was brought up on the principle of high risk, high reward. If someone is paying high interest it is probably higher risk; and here we are dealing with a bank that was paying the highest interest to depositors and charging among the lowest interest rates to borrowers and had the highest debt to equity mortgages. It is an open question as to whether the loan book is as sound as is suggested. Why do we not have a business plan? What have the advisers been doing for the past five months? I read in the papers that Goldman Sachs advised the Government five months ago that they would have to nationalise the bank. Is that correct? Did they receive that advice? If that advice was being given, why has no one done the work? I understand that the European Union has to have information and a business plan by 17 March, which is soon. If the Government will be in a position to produce the business plan in three weeks, why can we not have the business plan now? Why have the Chancellor, the Minister and every one else refused to answer the questions that have been repeatedly asked: what is the bank, under government ownership—under state control— going to do? Is it going to be business as usual, as the new chairman says, is it going to be run down, or is it something in between? How is that going to work? Surely it will have to be in the business plan, and surely before the business plan is written we need to know the answer. Why are we not receiving an answer? Given the need for information, what is the purpose of uniquely making this public enterprise, as it will be, exempt from the provisions of the Freedom of Information Act? It does not apply to the Post Office or to National Savings & Investments or to any other organisation. What are the Government trying to hide by placing the provision in the Bill? There was no mention in the other place about what went on in the summer with Lloyds-TSB, as I said when the Minister kindly gave way to me. We are entitled to know as £100 million of our money is on the line because the Government made a mistake. Is it true that Lloyds-TSB was prepared to take over Northern Rock and that it asked for a facility of £30 billion over two years to be provided by the Bank of England at commercial rates of interest? It is true that that facility was intended as a backstop facility in case Lloyds were unable to provide its own liquidity? Is it true that the response from the Bank of England and the Treasury was that they were not prepared to provide that facility because the loan book was not considered sufficient security and that they demanded gilts as security? If it is true, why have the Government been telling the country that the loan book is a sound basis on which our money could be provided? I understand that the initial response from the Government was that the loan book would not be sufficient security and then they changed their position. They argued that Lloyds-TSB would have to pay a penalty rate of interest. All of that information has been reported in the press and bandied around the City and we have heard nothing from the Government about the facts. We are entitled to know what the facts are. If Lloyds-TSB was prepared to pay a commercial rate of interest, why were the Government suggesting that there would have to be a penalty rate? Is it because they felt that it would be seen to be giving an unfair advantage to one bank over the others? Compared to what is proposed now, that is derisory. While that was going on, if the Bank of England, the Government and the Treasury were taking that position, what was happening in the EU? The European Central Bank opened the window and was providing liquidity to any bank that wanted any amount of money because it saw the necessity to do so in the crisis. I have to ask the Minister: did the Chancellor drop the ball in the summer? Why did the Government not take the opportunity; or was it that the Prime Minister was planning an election and did not want anything to interfere with his plans in that respect? Why was it allowed to fall away? The effect of allowing the deal to fall away, as the Treasury knew full well, was inevitably that there would be a run on the bank and there would be the problems that we have had; that Northern Rock’s good brand was trashed and the opportunities to move forward were limited. Here we are today. I am not going to repeat the points that have been made about the tripartite structure. When the noble Lord, Lord Bilimoria, says that the Bank of England was given independence, I would say not at all. As we have seen, the Bank of England was not given independence; it was given the right to set the interest rate. Even now, the Government are seeking to change the criteria, as inflation comes back into our system. I agree with the noble Lord that the tripartite structure has failed abysmally. It is clear that no one was in charge and that the Chancellor either refused to take a grip or was not allowed to take a grip by a Prime Minister who was putting his party political interests ahead of the taxpayer’s interests. The Bill contains extraordinary powers, which apply to any financial deposit-taking institution. The Government are asking us to give those powers to the same people who dropped the catch in the summer and have given us five months of dithering and delay and great uncertainty. I certainly will not be voting for it.