Banking (Special Provisions) Bill

I must make progress if I am to deal with all the points that have been made. No one expects Northern Rock to operate the aggressive strategy that it operated before the summer, which was clearly unsustainable. Its market share has already dropped. However, the right hon. Member for Charnwood and the hon. Member for Stratford-on-Avon were concerned about the very principle of Government guarantees, or of allowing a Government-supported business to operate in the market at all. The logical conclusion of their argument is that there should be no Government guarantees, and the logical consequence of having no Government guarantees, given the current state of the market, in which banks are not lending to each other in normal circumstances, the global credit crunch, and the history of difficulties at Northern Rock, would be for the bank to go under. That is why we do not support that course of action, and that is why Opposition Members are in fact calling for the bank to go under. They are calling for it to be wound down, with all the problems that that would create for the wider stability of the financial system. It is clear that unfair competition is not in the interests of the consumer or of other banks, but nor is it in the interests of consumers throughout the country and of other banks for Northern Rock to go under, and for us to risk wider instability in the banking system. Taxpayer exposure was mentioned by a number of Members, including the hon. Member for Twickenham (Dr. Cable). He raised some important issues and I welcome his support for the Bill, but I should make it clear that our action has not been at a cost to the taxpayer. The Bank of England has lent money to Northern Rock which is secured against its assets, and we expect that money to be repaid in full and with interest. We have provided further guarantees that have not been called: the taxpayer has not paid any money. The guarantee arrangements have not been changed as a result of the Bill, and transferring ownership of Northern Rock's shares does not mean taking on legal responsibility for the full liabilities. The Government are simply becoming the shareholder. Granite remains a separate legal entity. It is not owned by Northern Rock, it is not being taken into public ownership, and it has not been guaranteed by the Government. The exposure for the taxpayer remains unchanged. The hon. Member for Tatton (Mr. Osborne) has said that he and his party oppose the Bill because they have set out an alternative. The rest of us are struggling to understand quite what that alternative is, not least because it seems to change from day to day. Indeed, the director general of the CBI has said that"““the Conservatives have been banging on about Northern Rock and what a disaster it is, but they haven't told us what they would have done.””" Exactly so. The Conservatives have said that they want administration by the Bank of England. They variously claim that it would keep Northern Rock running, and that it would run it down. They call it administration, but they say that it is not a sell-off or a fire sale of the assets. They say that it would mean taking over shareholders' rights, but that it would not be nationalisation. They are all over the place. The Conservatives say that they want a special form of administration. Let me tell the hon. Member for Stratford-on-Avon that administration would trigger a series of claims from creditors with claims on the collateral of the bank. Putting Northern Rock into administration and triggering insolvency would make it impossible to reconstruct the bank. It would mean selling off assets at the bottom of the market—and we all know the present condition of the market—leaving the Bank of England and the taxpayer with potentially hefty bills. It would be a really bad deal for the taxpayer. Today Opposition Members offered us a new idea. They said that they wanted to adopt our proposals for longer-term reforms in the banking system. I welcome their support, but what they have produced is a set of principles for consultation. Where is the detailed set of powers that the hon. Member for Tatton wishes to use to perform this magic? How would he introduce the necessary safeguards? What provisions would the Conservatives introduce to ensure that property rights were dealt with properly? They have mentioned none of the serious measures that would be necessary to bring about Bank of England administration in the way that they propose. In the absence of such powers, what are they really calling for? They are calling for the Bank of England to take over the decision-making and ownership rights of shareholders, and that sounds a lot like nationalisation to me. What the Opposition are saying is incoherent nonsense. They oppose public ownership, and then propose a policy that requires it; they say that they want to protect the taxpayer, then propose a policy that would rip the taxpayer off. It is shameless opportunism, shameless stupidity, or both. They should drop their opportunism and back the Bill. It being Eight o'clock, Madam Deputy Speaker put the Question already proposed from the Chair, pursuant to Order [this day]. The House divided: Ayes 367, Noes 164.