Banking (Special Provisions) Bill

Well, my Lords, we have to give them a little help somewhere. We all thought that that was the end of nationalisation and that we would never see it again, but here it is. I wonder what the benefits of nationalising Northern Rock will be. Will it bring stability? Presumably that is its purpose, but of course it will not do so. The Government are putting £110 billion of taxpayers’ money at risk. To the normal person, this is a telephone-number figure that compares with expenditure of £104 billion on public sector health and £34 billion on defence. It is a huge sum. Two and a half thousand people will be sacked, 144,000 shareholders will lose their money, 800,000 people will find that their houses are now mortgaged to the Government, and some may find that their houses will eventually be repossessed by the Government. They will find that charming. That is not a nice, contenting or relaxed state of affairs. If the Government wished to keep the bank functioning, why did they not take action earlier? After all, the shares were £12.14 a year ago; they are now 99p. There is not much left to shore up, so why did they not just let the bank go? This is in the nature of things sometimes. Some businesses do run into trouble and have to go out of business, and people are deeply hurt. One does not wish it, but it is not the Government’s business to shore up ailing businesses, even banks. I thought that we had learnt that. History shows that this does not work. Look at Upper Clyde Shipbuilders; that did not work. Look at British Leyland; that did not work. Look at British Steel; that did not work. I doubt whether this will. This is totally different from Rolls-Royce being taken into the public sector in 1971, because if that had been allowed to go bankrupt, defence equipment would have had no spare parts and aeroplane engines would not have been available. That was why that was done, but Northern Rock is an ordinary bank. As we have heard, the Prime Minister says that he will take the bank into temporary public ownership and return it to the private sector soon, but this is not like taking an exhausted footballer out of a match, giving him a rest and then letting him return to the fray later on. I suggest that it will be ages before Northern Rock is ever returned to the private sector. If it is, it will be a very different beast. As has been said so often today, Mr Sandler, the new executive chairman, said that the company would compete vigorously in the market. Those are stout words that sound very impressive, but how do you compete vigorously? Offering half a per cent or 1 per cent more on its deposits might well draw funds to it, but is it fair, in an open market, for a government-backed bank to try to outdo its rivals? What happens if that succeeds? Northern Rock will do well, but what about its rivals? They might then run into trouble. If Northern Rock does not engage in that sort of competition, how will it ever get out of its muddle? Of course it is necessary for the best minds to be applied to this problem, but there is something bizarre about paying someone £90,000 per month to run it. Will the Minister say who is paying those salaries? Is it Northern Rock, or is it the Government? Of course, without the Government’s backing, the company could not have afforded it and probably would have gone bust. I question whether that is fair or equitable trading. By nationalising the bank, the Government will be putting themselves deeper and deeper into the mire of business, banking and debtors, and that is not what government is for. Your Lordships may remember that in 1976 the Labour Government of the day introduced the Aircraft and Shipbuilding Industries Bill, by which the Government intended to nationalise some of the aircraft and shipbuilding businesses. I had the privilege of acting on behalf of the Opposition. As such, I was asked to the Farnborough Air Show. That was a very agreeable experience and great fun. At lunch, I happened to sit next to the chairman of de Havilland Canada, which had just been denationalised. I shall never forget what he said: ““Ministers can say what they like about nationalisation: that they intend to let the business run on its own, at arm’s length, and they will not interfere””. We have heard all that this afternoon, too. ““They may mean it, but it will be the civil servants who will badger the thing to death””. The Act of Parliament will say what has to be done, and the civil servants will consider it their duty to ensure that the Act is working in the way in which it is drawn—indeed, that it would be a dereliction of their duty if they failed to do so—so they will badger the organisation with questions, strictures and rules, to say nothing of targets. Governments do not simply put £110 billion at risk without endless strictures. So the Government are bringing in a Bill to nationalise Northern Rock, but that is not what it will do, although that may be the Government’s intention. Clause 2(8) gives the power to nationalise any bank or building society within 12 months of the Act being passed. That is a colossal power. Barclays, Lloyds-TSB, Nationwide—any bank or building society—can be taken over at the Government’s behest. No doubt this has been inserted to prevent it being a hybrid Bill. However, the Aircraft and Shipbuilding Bill was a hybrid Bill because it proposed to nationalise some, but not all, parts of the industry. It was just like this Bill. There may be an advantage to some companies in being nationalised, and other companies that are not nationalised might like to be. The point is that the law that is being proposed is not the same for all who are competing in the same marketplace. That is why this should be a hybrid Bill.