Banking (Special Provisions) Bill

I strongly support amendment No. 14, and the arguments put forward by my hon. Friend the Member for Fareham (Mr. Hoban) and the hon. Member for Twickenham (Dr. Cable). As has just been noted, it is very important that we have parliamentary accountability for the strategic objectives that the Government propose to give to the bank, which they now wholly own. However, I need to be persuaded that the Government know what those strategic objectives are. I took part in the exchanges with the Chancellor yesterday, and it seemed to me that he was not capable of answering the question in any but the most general terms. I regret that I was not able to attend this afternoon's Second Reading debate but, as sometimes happens, I was giving evidence before a Select Committee. I did hear the wind-up, however, and I was left none the wiser, even though it was obvious that the Minister was addressing the point that several hon. Members had raised about what objectives the Government are setting the new management of the bank that they have acquired. It seems to me that the bank is potentially in a very powerful position. The question is not how it is controlled day by day—we all accept that there must be a considerable amount of independence in its day-to-day management—but what objectives the Government are expecting it to pursue. We are virtually in the situation that, once again, every citizen could bank with the Bank of England, at least indirectly—something that has not been possible for many years. I said yesterday that if the nationalised bank was going to be competitive and aggressive, the fact that it will be totally secured by the Bank of England means that it would be a very attractive option for any sensible saver with cash in savings deposits. At the moment, it is able to offer very attractive rates of interest, but much will depend on the strategic objectives that the Chancellor and his colleagues set for the people whom they have appointed to manage a bank that is in crisis but of which the Government are the 100 per cent. owners. The owner of a business does not appoint a management team and say, ““Now run it in a commercial way, as seems best to you.”” That would be an almost meaningless instruction. While I was doing other things this afternoon, I gather that the following question was pursued: ““Is the Chancellor meant to be building up the business, so that it can be sold to the private sector, or running it down to prepare for the disposal of its assets?”” There is a great deal of variation between those options. If the idea is to build the bank up and prepare it for sale on the best possible terms, it is in a very powerful position. It probably has a greater ability to access the money markets than any other banking institution in the country, because it has behind it the full security of the Government and the Bank of England. It is able to underwrite its business in every conceivable way, so is it the strategic intention that it should go out into the market—at a time when its competitors are in difficulty—and offer the most attractive terms for mortgages that it can so as to increase its market share? Should it make sure that it finances itself as much as possible by enticing depositors in these nervous times with extremely attractive rates of interest? The bank could be a glorious success. If we were investors from Kuwait or Qatar—if we were a sovereign fund—we would probably encourage the new management to use what amounts to guaranteed funding and head for a 70 per cent. share of this country's mortgage market. Of course, the Chancellor realises that the prospect that the bank could do that is causing considerable concern, so I did not ignore his answers yesterday. He said that the European competition laws offer the best protection, but that was all that he said in that regard, and it is something about which I should like to press the Minister. Will she give the House some idea of how she thinks that the European competition laws will affect the bank's objectives? The current Competition Commissioner, Neelie Kroes, is very powerful and a formidable person, and she is quite rightly trying to strengthen European competition policy, but the policy takes a long time to enforce. My suspicion is that the Government do not have the first idea how far European competition law will bear down on what the bank will do. I suspect that it will require quite a long process, with propositions going to the European Commission to determine the basis on which it will accept that the bank is not guilty of unfair competition. However, I do not think that the Government have thought through the constraints that they would expect the new management to place on itself to avoid the charge that it is competing very unfairly with other banks and savings institutions. That is a very great danger, as those other organisations are going through very difficult times in the current market.