Northern Rock plc Compensation Scheme Order 2008

My Lords, I am also grateful to the Minister for the opportunity to debate this order. I agree very much with what my noble friend Lady Noakes and the noble Lord, Lord Newby, have said, so I will be brief. I would like to make one or two additional points. Although we are grateful for the Opposition to debate the order on compensation, it is a great pity that your Lordships’ House and another place have been denied the opportunity to debate under the affirmative procedure either this main transfer or a further main transfer. I am extremely disturbed that the taxpayer is therefore at risk that, without any scrutiny by your Lordships' House, it would be possible that an equivalently large financial institution could be taken into public ownership under the order. As the noble Lord, Lord Newby, correctly said, Northern Rock would have gone bust without the Government stepping in to nationalise it last autumn. However, as your Lordships know, there was a serious approach by a major financial institution. Although the Minister has told us that no serious proposal was ever received, it is clear to me that if the Government had responded with more positive indications of the kind of financial support they would have been prepared to give to an inquirer at that time, it is extremely likely that that institution would have come forward with a firm proposal. Much has been said about the subject of Granite and I do not want to repeat what many noble Lords have already pointed out. However, it is clear that Granite should have been included in the nationalisation. Note 22 to the consolidated accounts of Northern Rock at 31 December 2006 says: "““Although the Company has no direct or indirect ownership interest in these companies””—" that is, the ““SPEs””— "““they are regarded as legal subsidiaries under UK companies legislation””." If they are regarded as legal subsidiaries of Northern Rock plc, that means that they are clearly legal subsidiaries owned by the shareholder of Northern Rock plc; that is, the Government. I should like briefly to address the question of the Government's adviser, Goldman Sachs. I feel that the public have not been informed enough about the basis on which Goldman Sachs was appointed as adviser to the Government, what its remit was, or indeed whether it was paid a success fee. In other words, was the ultimate decision on the solution for Northern Rock regarded as a success or not? I wonder whether the selection of an independent valuer under this order will be subject to a similar kind of process as the appointment of the Government's investment bank advisers. I should like to comment on the Northern Rock Foundation. Like my noble friend Lady Noakes, I do not understand why it was necessary for the Government to convert the foundation shares. In any event, the Government have committed to continue to pay charitable donations from Northern Rock—or they have required the new Northern Rock management to continue to pay, regardless of whether it makes a profit, £15 million in each of the next three years to the Northern Rock Foundation. I rather wonder why. I do not for a moment wish to suggest that the charitable causes in the north-east and in Cumbria which have been supported by the Northern Rock Foundation are not entirely worthy. Indeed, as the former chairman of Northern Rock pointed out in his chairman’s statement in 2006, Northern Rock was the third most charitable FTSE 100 company. But why should the taxpayer, who already makes his own decision about which charities he supports, be bound by that? I can well understand why the former management needed such a potent poison pill to protect itself against takeover, which I understand was the purpose of the establishment of the Northern Rock Foundation and the obligation on the company to pay 5 per cent of pre-tax profits to the foundation, but I do not think that it is right for the taxpayer to bear this additional obligation and burden—insignificant though it is in comparison with the vast liability and obligation which the taxpayer has taken on—to pay £15 million a year to the Northern Rock Foundation. The valuer must of course provide for the public interest to be entirely repaid before the shareholders receive compensation, but I am satisfied that that will be the case. But I ask the Minister to say a little about the Northern Rock Foundation and why—if the foundation is being preserved, and if Northern Rock under government ownership will continue to fund the privatisation although it does not need a poison pill any more—the foundation shares had to be converted to ordinary shares.