Banking (Special Provisions) Bill

My Lords, it is always a great pleasure to follow the noble Lord, Lord Marlesford, in this House, as I once followed him on the staff of the Economist magazine, though I regret that, from his remarks this evening, he does not share that magazine's wise view that nationalisation is the right course for Northern Rock. I do not exactly welcome the Bill, because of the sad circumstances that have made it necessary, but I do strongly support it. That of course is the exact opposite of the position of the Conservative Party, which opposes it but has thoroughly enjoyed wallowing—like hippopotami—in the resulting mud, hoping that some of it will stick on the Government. The political arguments will go on, no doubt, as no doubt will the orgy of wise hindsight which has informed so many of the contributions from the Benches opposite in the course of today's debate. If I may, I should like to stand back for a moment and try to look at this whole episode from the point of view of an economist looking at how you handle financial crises and what you try to do. The rules about the handling of financial crises are pretty well agreed by every financial economist, as I hope the noble Lord, Lord Eatwell, who is to follow me, will agree. The first is that the authorities should inject into the system sufficient funds to prevent the contagion spreading—no Credit Anstalt here. Secondly, at the earliest feasible moment, the management of the organisation responsible for the disaster should be sacked, and preferably disgraced, pour decourager les autres. Thirdly, the shareholders should lose certainly most and probably all of their investment. According to those established criteria, has the handling of the Northern Rock debacle been a success or a failure? It is too early to be sure, but not too early to be reasonably reassured. So far as limiting the crisis is concerned, the Chancellor swiftly guaranteed all deposits. The Bank injected sufficient liquidity to ride the initial run on the bank and restore stability. Despite widespread rumours and fears, no other institution has followed Northern Rock down the pan. So far at least, the real economy has remained largely insulated from this crisis in the financial economy, though of course it remains to be seen if that continues. We are not in the 1930s, thank god. Secondly, the management—they are out. Ron Sandler, good luck to him, is in. Now of course, some people will complain, and I sympathise a bit, that the management left with pockets still stuffed with Northern Rock gold, and it would be a great thing if some of them chose to put some of that back into the communities that they have let down. Still, I knew Matt Ridley, the former chairman, slightly in the days when he was sticking to his last as a great scientific journalist—energetic, confident and, in the old sense of the word, gay. Then I saw the pictures in the newspaper of Matt Ridley at the height of the crisis, prematurely old, creased with worry, devastated. I have not asked him but I dare say that Mr Ridley would give back every penny he made out of Northern Rock for his whole tenure never to have happened. Or take Sir Derek Wanless, previously likely to be remembered by history for his authoritative report on the National Health Service, now to be remembered down the generations for having been chair of Northern Rock's risk committee. They and others have paid—rightly—a high price for their recklessness. It is only sad that their staff will have to pay a price, too. Thirdly, the shareholders. Everyone will have some sympathy with the small shareholders who have lost out; they are victims of a situation that they could not have reasonably been expected to predict. But let me draw a homely analogy. There have been all too frequent occasions when I have ventured into a betting shop and placed my bet on a carefully chosen horse, only for the beast to fall with the race at its mercy. I am sure that everybody in your Lordships' House would sympathise with me in that sad situation, but I do not think that any of you would expect the bookmaker to give me my money back. If Northern Rock had stellar luck and made stellar profits from the stellar risks it was taking, no one would say that the shareholders should not collect, any more than they would resent my collecting from my bookie on the occasions, alas only too rare, when it is my horse that wins because someone else's horse has fallen. It is not, however, the small shareholders who are making most of the noise at the moment. It has been the big institutional shareholders, many of whom bought their shares after the crisis in the hope of scavenging a profit from the corpse. For hypocrisy—for sheer, egregious hypocrisy—it would be hard to beat the hedge fund managers, some of whom have even been heard to murmur that they will take legal action for compensation. Compensation for what? For the infringement of their human rights. Where is this human right to make an unearned profit out of taxpayers? I hear some in this House complain that the Bill’s scope is not drawn wide enough. If I consulted my heart and not my head, I would wish that it was wide enough to nationalise fiends like that without compensation and dispatch them to perform voluntary service in deprived Newcastle, whose corpse they look to feed off, until they learn sense and morality. That will not happen but I trust the courts will sweep aside any challenges to the compensation payable under the Bill. Ironies pepper the current debate. Over the last few days I have enjoyed watching the City, and, indeed, some in this House this afternoon, who have long preached the complete inefficiency of nationalised concerns. Now it seems they have got their knickers in a twist lest the newly nationalised Northern Rock proves to be an effective competitor. I have enjoyed—and give credit to—the Liberal Democrats for latching on to nationalisation as the right solution before the Government committed to it. And most of all, as a seasoned political observer, I have enjoyed witnessing the Conservative Party practising every sort of diversionary tactic to hide the fact that there is no alternative—no sensible alternative at any rate—from where we are to what the Government are doing. Let them have their fun. I remind them only that when it comes to the next general election the British public will have a choice to make about who they want in charge of the economy in difficult and dangerous times, in charge of their jobs, in charge of their mortgages, in charge of their savings. Is it to be men, or boys? I am confident that they, like the Government in this case, will make the right choice.