Northern Rock plc Transfer Order 2009

If the noble Lord is going to apostrophise the British Government as getting regulation wrong at that time, what about the collapse of banks in Germany? What about the threat to banks in France or the American crisis, where one of the largest banks in the world collapsed in the United States? Is he somehow suggesting that this is a little local difficulty produced by mismanagement by the British Government?—of course not. The noble Lord certainly ought to be aware of that. I know he is, with his usual acumen. The noble Baroness is certainly aware. I know that she was not able to participate in our debate on the Bill at that time, which was a great misfortune and we sorely missed her on that occasion. I am not so sure that she should strive to make up for her inability to participate at that time by engaging us in debate today, but she has the option to do that. But the noble Lord will recognise, I am quite sure, that emergency action was taken at that time. The noble Lord, Lord Newby, indicated how hard we had to work on legislation over a very short period of time to deal with this, because the crisis was upon us. Is it contended on the other side that somehow the Government ought not to have acted in this way? These are somewhat misplaced criticisms of the Government’s strategy, which I will develop in a moment in response to questions about how the Government intend to set out the future for Northern Rock. One has to face the fact that Northern Rock was nationalised at a period of very great crisis. It will not do for the noble Lord to abstract from our position that the problems of Northern Rock at that time were not part of a much wider issue. The Government acted with dispatch and, I should add, with success. We are now moving to the stage whereby restructuring is necessary to maximise the company’s capacity for new lending and protect taxpayers. We said at the time that we certainly wanted to protect depositors—lenders to the bank—and those with mortgages. We needed to protect the ordinary citizen and restore a degree of confidence in the wider financial system. However, we said all along that the other great objective was to protect the taxpayers’ investment in Northern Rock. This is the next stage in which we seek to do that. I appreciate that these are significant sums and that therefore they should be the concern of Parliament. However, the Government are acting entirely properly. It is part of a wider government policy to encourage and support a well functioning mortgage market, whereby lenders lend responsibly and borrowers have access to a wide range of mortgages that they can afford to repay. The sooner that we are able to restore that confidence in mortgages and their supply, the greater the pace of economic recovery will be. That will also benefit our citizens, because we should not underestimate the stresses and strains of people’s inability to obtain mortgages at the level that they would like. The restructuring of the bank successfully took place on 1 January 2010 and, as a result, two companies are carrying out the business formerly carried out by Northern Rock: Northern Rock plc, a new savings and mortgage bank, and Northern Rock (Asset Management) plc, the existing company, renamed, that holds and services the majority of the existing residential mortgage book, as well as the government loan. Everyone knows that our long-term objective is to restore these companies to the private sector when they are a position to command a price which safeguards taxpayers’ interests. Both entities will continue to be wholly owned by the Government and will operate at arms’ length from them on commercial principles. I am grateful to the noble Lord, Lord Bates, for indicating that he takes a keen interest in the management of Northern Rock, for whom he has considerable regard. UK Financial Investments has taken on the management of the Government’s shareholdings in the two companies. As regards the restructuring, I understand the criticisms of the noble Baroness, who is right to test the Government on this order, but I hope that I am able to refute them. Her speech would have been rather better if she had recognised that the decisions are good news for Newcastle, the north-east region and the wider UK banking sector. They are important for Northern Rock and its staff, because the Government’s actions to stabilise Northern Rock over the past two years have protected the savings and deposits of hundreds of thousands of British families. From 1 January, Northern Rock will offer savings and mortgage products, increase competition in the sector and provide consumers with more choice. I should have thought that there would be universal rejoicing in the House at that development, but noble Lords opposite have concentrated overwhelmingly on the down side. With the restructuring process now complete, the bank and its team can move forward towards playing a full role in supporting the recovery of the economy. We should all note that the recovery successfully began in the last quarter of last year. The Government have made it clear that they want to see a well functioning mortgage market, where lenders lend responsibly and borrowers have access to a wide range of affordable mortgages. The successful launch of the new Northern Rock is a significant step towards meeting those aims. As we have stated, our objects are quite clear: we want to see Northern Rock flourish, to support financial stability, to protect depositors’ money and, in due course, to protect the interests of taxpayers and to repay them. In the White Paper, Reforming Financial Markets, the Government announced that the conditions for the eventual sale of Northern Rock would be that it must promote competition for retail services, secure the best possible return to taxpayers and ensure that Northern Rock continues to lend to home owners. In his Written Ministerial Statement on 8 December, my right honourable friend the Chancellor said that the Government will provide full details of the financial support provided by them to support the restructuring in January. One charge from the noble Baroness was: why was that not spelt out in detail in the order? Something like 40 or 50 pages would have been needed for the order to spell out all the details which the noble Baroness suggested should be in it. The Government have made clear what the order involves but I do not think that it is appropriate criticism to suggest that a parliamentary order would have been of that dimension. The Government have made it clear that they have provided Northern Rock with exactly £1.4 billion of capital support in order that the company can meet its Financial Services Authority regulatory capital requirements. The Government have also provided a commitment to the FSA that up to £1.6 billion of additional capital support would be provided to Northern Rock (Asset Management) should the need arise in order for Northern Rock (Asset Management) plc to continue to meet its regulatory capital requirements. Those amounts are within the £3 billion of capital support announced by the Government in August 2008. The Government have been perfectly open and clear about those matters. The outstanding government loan owned by Northern Rock (Asset Management), as at 31 December 2009 stood at approximately £14.3 billion. This loan increased on 4 January 2010 by £8.5 billion, taking the outstanding loan balance to £22.8 billion. It is suggested that all that could have been provided in advance. I make two comments about those figures. First, it will be recognised that there is market sensitivity about government commitments and resources of this kind until the order is through and action has been taken.