Banking (Special Provisions) Bill

My Lords, I, too, am conscious of the need not to repeat speeches that have already been made. I want to add a little to the background and the early stages of that background, to demonstrate why the proposals will not work and to ask some questions. I do this from a background of being an FSA-approved person. I have chaired two financial services companies recently and I currently chair one quoted investment trust. I am primarily a marketing man who specialises in financial services. Is this background the least bit relevant to the Bill? I think that it is. I know the FSA in some detail and, more important, like my noble friend who has just spoken, I know whether or not a brand is dead. This brand, Northern Rock, is dead and cannot possibly be revived. Looking quickly at the antecedents and the parts that have not been covered, I believe that it was in the autumn of 2005 that the Government’s leading financial experts realised that the failure of a high street bank would create a serious problem in the UK. I understand that meetings were held between the Treasury, the FSA and the Bank of England and that the Minister involved was Ed Balls MP. By the autumn of 2006, a minute had been sent to the then Chancellor, now Prime Minister, Gordon Brown, which suggested that urgent action was required in order to anticipate such a problem. The tragedy was that that urgent action was never forthcoming. Once again there was no decision taking, just dithering. Then, of course, as we know, along came Northern Rock to compound the whole problem. It is alleged that the FSA was concerned and was seeking stress-testing and so on, but when the real question came on 27 June 2007 and Northern Rock announced to the Stock Exchange that it had a problem, the FSA’s reaction seems solely to have been one of not acting at all. In fact, it did the exact opposite by relaxing the controls, allowing the bank to free up certain assets and to make a big payout to shareholders. This then became a joint problem with the Bank of England, the FSA and the Treasury. As we have heard, a lifeline was offered by Lloyds Bank and rejected. The election was looming and the heartland of Labour’s north-east was in peril. There was no leadership and no decision was taken until last Sunday. The result, as we know, was Labour’s old traditional policy of state control. Allegedly this is temporary, but it cannot be temporary. Let us consider the case history of Abbey National and the turnaround achieved by Mr Arnold. That was a reasonably good brand but it took him three years to turn it round, so how on earth can this dead brand of Northern Rock be turned round in any shorter time? It cannot be done. Branson has a highly respected brand but he reckoned that this was not worth the risk in the end. Incidentally, why was he given an extra month to work out his proposals? Shades of insider dealing there, I would venture to suggest. But Branson walks away, as has already been said, with £5 million in cash, millions of pounds worth of free publicity and perhaps a beneficial pay-off in the future. Both Branson and Arnold know that it is impossible to pay back with that organisation the £110 billion of bank guarantees, the £100 million in fees that has been spent, the expenses, the redundancies, the pension contributions and so on. If they cannot do it, how will Sandler succeed? Mr Sandler’s track record has not been a huge success over time. Colleagues may remember the Sandler suite of stakeholder products. They are all dead ducks in the market—no one buys them, no one markets them, no one wants them. That is not financial success in retail financial services. They are totally dead ducks. That is not terribly encouraging. Why did they fail? They failed because both he and the Treasury thought that cheapest equalled value. It does not in financial services. Even on the financial control front, Sandler’s track record does not appear to be that good. In 2006, I am told, he was chairman of Kyte Securities, which was fined £250,000 for financial control and accounting failures. That is not a good antecedent. He has a team of independent directors, we are told, but they are all close friends of either the Prime Minister or the Chancellor of the Exchequer. Hardly a recipe for independence. How can it be business as usual? Let me repeat a question to the Minister. Even today on the website there is the highest return on a cash ISA, the highest return on a deposit account and, as far as I know, as of yesterday, Northern Rock was still offering 125 per cent mortgages—all backed by Her Majesty’s Government. Is this fair competition? Why are the Government unable to be more open and honest and tell the people the real truth? The business has to be downsized—there is no other prospect. Fifty per cent of the book has to be sold off and, sadly, yes, probably 50 per cent of the staff have to be made redundant. The retail savings side should be saved. At least National Savings & Investments is highly efficient these days; the whole of the retail side could be moved across there and individual depositor’s positions safeguarded. I conclude by asking my questions. Who will monitor the fairness? I have no faith in the Competition Commission; I have no faith in the FSA any more; and I certainly have no faith in the Government. I have some faith in Europe, but Europe acts after the event and that is too late. How will Parliament be informed? I think that we have a right to know how Parliament will be regularly informed. Are the terms and conditions of the new company to be determined by the remuneration committee of that board or are they to be determined by the Government? I ask the question again: is there any bonus for Mr Sandler? Is he working full time or part time? As I understand it, he is a non-dom. This question has been asked before, but it has to be asked again: why is Northern Rock to be exempt from the Freedom of Information Act? Finally, why is Clause 11 even in the Bill at all? Of all the Ministers, this Minister knows full well that the building society movement is totally different in its mortgage lending, in its capital structures and in the way in which it is controlled. It is totally different from the banking sector; it is not a problem and should not be in the Bill. I hope very much that that clause will be deleted. So there you have it. It is a sad day for a company that a year ago was 67th in the FTSE 100 on the basis of market capitalisation and now, frankly, is nothing. This is Prime Minister Gordon Brown’s biggest gamble. He will lose it. More important, British taxpayers will lose their money as well. It sends totally the wrong message to foreign investors who have so far chosen this country for its liberalism and openness in financial affairs. Boom has led to bust and prudence has gone to new Labour’s casino.