Banking (Special Provisions) Bill

My Lords, the Title of this Bill is Banking (Special Provisions), and special it certainly is. The words ““Northern Rock”” are not in the Bill and yet that is what it is about. Why are we here? In his contribution the noble Lord, Lord Stewartby, mentioned the business of borrowing short and lending long, which has been the model of the building society movement for more than 150 years. What is different in this case is borrowing short in bulk and lending long. Reference has been made to the word ““sub-prime””. I am not certain I understand what it means. It could be one of two things: either lending takes place on rather doubtful property; or lending is given to people without the resources to repay. But as well as borrowing short in bulk and lending long, and these two different ways of being sub-prime, there is general incompetence. We have heard that Lloyds TSB was some months ago contemplating coming in, that Virgin was prepared to buy and that the group that the noble Lord, Lord Marland, was part of was also prepared to come in. The due diligence of these people suggests that there is a feeling about that there is still some value. I am not clear whether there is value or not at the moment. Is there any value for the small shareholder who received shares 10 years ago when the demutualisation took place? Is there any value for the Johnny-come-latelys who have bought shares in the past few months—the hedge-fund folk? Is there any value for the Northern Rock Foundation? This is what I really want to speak about. The amazing thing about the Northern Rock demutualisation was that it was done on the basis that when the building society decided to become a bank, the intergenerational equity that had been built up over 150 years would be shared between its members who would become shareholders and the greater community of the north-east of England. Five per cent of the profits were given to the Northern Rock Foundation, contingent on a 15 per cent stake in foundation shares to be relevant on a winding-up. To listen to this debate so far, one would think it was all about a bank which is in trouble, but to many people in the north-east of England Northern Rock will mean the work that has been done by the foundation. Of the £192 million which went from Northern Rock to the foundation, £175 million have been spent so far in that community. What is to become of these shares? Nationalisation is not a winding-up. The foundation shares are held by the Northern Rock Foundation. The accounts say: "““These shares carry no rights to dividends but rank pari passu with the ordinary shares in respect of other distributions and in the event of a winding up””." But nationalisation is not a winding-up so do these shares stay as a contingent 15 per cent on the balance sheet so that on a further privatisation of Northern Rock the 5 per cent of the profits and 15 per cent on a winding-up are handed on to the successors? It is very much a special case. This is a general Bill about handling any bank or building society and the words ““Northern Rock”” do not appear, so all this will be left to the order. Will the order tell us about these very special shares and their standing? The Government have said that they are determined that the foundation should receive £15 million in years one, two and three. I suppose that will see shareholders OK for the moment, although it is half what they have been receiving in the past few years. But what is the long-term position? As I said, it is a very special case. The foundation was not given 15 per cent of the shares; it was given a contingent 15 per cent. Had it been given 15 per cent of the shares, it would have been wise, in my view, to have diversified. But it did not have that luxury and therefore it is in this very strange position of being a contingent shareholder without any prospect of a winding-up. I would be particularly grateful if the Minister could find out what the score is going to be and whether this is going to be important as far as the order is concerned. The Minister mentioned some draft orders. I was not clear whether these have already been produced and are available for us to look at or whether he was suggesting that they are going to be available on Monday. It would be useful to know. But it seems important to consider under this Bill the particular position now for the north-east of England of this important institution which has done so much tremendous work in the past 10 years in that area.