Northern Rock plc Transfer Order 2009

I support my colleague on the Front Bench, my noble friend Lady Noakes, who has done the House a great service by tabling this order and moving it so ably and in such forensic detail. However, the events to which the order refers have already occurred on 1 January for the reasons that the noble Lord, Lord Newby, referred to. The Government should have learnt their lesson about acting in haste and avoiding consultation on this issue. The telephone numbers dealt with in this banking rescue package behove a greater level of parliamentary scrutiny. I associate myself with the concerns of my noble friend Lady Noakes about the treatment of creditors and the concerns of members of the pension scheme—both current and future beneficiaries. There will be quite a bit of anxiety about where this fund will end up. There will also be a great deal of concern among shareholders who are currently undergoing the independent assessment for compensation. I am torn between two distinct emotions when I see this order before us this evening. The first is real excitement and enthusiasm. The prospect of a phoenix of a great north-eastern institution rising from the ashes of the great recession enthuses me greatly. One of the reasons why I believe we can have a degree of confidence in the new venture is that it has some outstanding leaders. There is a lot of talk, often ill informed, about bankers being the villains of the piece and about there being no such thing as a good banker. I want to inform the House that there is. One of them, Gary Hoffman, happens to be running both parts of Northern Rock—the plc and the asset management. He, his senior management team and the entire 4,500 strong workforce have done an outstanding job over the past 12 months in incredibly difficult circumstances to turn the bank around, to identify the true level of risk and to start rebuilding a tarnished reputation. During that time we have seen some of the original loan repaid to the Government at a faster rate than was anticipated. We have seen depositors returning to Northern Rock, with deposits doubling. We have also seen the very welcome prospect of Northern Rock re-entering the mortgage market at a time when that was greatly needed, doubling the amount made available for lending. At the other end of the spectrum, I am reminded of my deep sense of anger and injustice at the way Northern Rock was handled in the period between August 2007 and September 2007. Indeed, it continued through the period while the Government dithered over whether to nationalise the bank, which led right up to February. Between Friday 14 September and Monday 17 September 2007, we saw the first run on the deposits of a UK bank for 140 years. Centre stage, we now know, were three elements which conspired to create a perfect storm and signal the onset of the recession for the UK economy. These failures were highlighted in the Treasury Select Committee report in another place which found that the directors of the Northern Rock, especially senior management, were the principal authors of the difficulties that the company faced. It went on to say that the failure of Northern Rock, while being a failure of the board was also a failure of the regulator. In the case of Northern Rock, the FSA appears to have systematically failed in its duty as regulator. However, it was not just the FSA that failed; according the Select Committee, the entire tripartite arrangements seemed to have failed between the FSA, the Bank of England and the Treasury for the financial supervision of the City, which had been put in place with considerable hubris by Gordon Brown as his first act in government. The Select Committee said that, ""for a run on a bank to have occurred in the United Kingdom is unacceptable, and represents a significant failure of the Tripartite system"." Then there was the publicising—the leak, by accident or design, of 13 September that Northern Rock had been granted emergency financial support, which led directly to the queues of investors around Northern Rock branches on the morning of 14 September. Those pictures were sent around the world in a matter of seconds and did immense damage to the reputation of UK financial services and of north-east England, with which Northern Rock is so closely associated. Just to be clear, it was this Government who set the regulatory environment; it was the regulatory environment, along with management, which failed; and the disclosure of sensitive market operations between the Bank of England which destroyed depositor confidence and shareholder value. We now know that there were potential buyers for Northern Rock in July and August 2007, but mixed signals, founded on a fear of competition rules set out by the Government, discouraged people from taking part and pursuing those interests further. We also know that emergency funds from the Government were considered, but it was felt that this too may fall foul of EU rules concerning state aid. Mervyn King, governor of the Bank of England, told the Treasury Select Committee investigation that: ""I had still hoped and indeed pressed strongly for the ability to conduct a covert operation, but in the end strong legal advice amongst the tripartite authorities was that this could not be done"." That was September 2007; but one year later, in September 2008, of course they discovered that it could be done, and when HBOS got into difficulties, an emergency acquisition by Lloyds TSB was allowed. Bradford & Bingley had its retail operations sold to Grupo Santander, and the remaining part of the business was nationalised. The Government took a controlling stake in Royal Bank of Scotland and it was only a year later that they revealed by the Bank of England had made loans of £61.5 billion to these institutions. They had delayed that information from coming out for a year; if only they had done that with Northern Rock, there would have been a very different picture. The pain that was felt by the 2,000 employees who lost their jobs, the concern and anxiety felt by the depositors, and the loss of value for so many individual shareholders will be indelibly placed on the record of this Government. Given this track record, the Minister will understand why there is scepticism bordering on cynicism on this side of the House that again we see a new approach presented for Northern Rock in this setting. It is a new way that has not been tried before. Of course, we do not know whether it will or will not work, but neither do the Government—yet it is Northern Rock that is again the institution being experimented on in this respect. The Government, the Chancellor of the Exchequer who announced the tripartite regime, and now the Prime Minister are centre stage. Now, the same bodies—the Treasury, the regulator and the Bank of England—who failed in 2007 are the ones to come forward to tell us that we can trust them—it will be all right and they will get it right this time. The people of the north-east will wait and see.