Jim Cousins (Newcastle upon Tyne Central, Labour)

What the liabilities will be of the proposed (a) good and (b) bad banks to be formed from Northern Rock and Bradford & Bingley.

Alistair Darling (Chancellor of the Exchequer, HM Treasury; Edinburgh South West, Labour)

Northern Rock's total liabilities were published in its half-year results. The split between the two banks will be set out once the business plan is finalised. Bradford & Bingley's liabilities are published in its annual report.

Jim Cousins (Newcastle upon Tyne Central, Labour)

I thank the Chancellor for that answer, but he will know that many thousands of home owners are likely to be left behind with the £50 billion to £60 billion in the old Northern Rock mortgage book. They are not well off, and they are not rubbish, as Opposition Members are so keen to say. What sort of future, and what sort of mortgage deal, will they have?

Alistair Darling (Chancellor of the Exchequer, HM Treasury; Edinburgh South West, Labour)

My hon. Friend raises an important point. The proposal is to split Northern Rock so that there is a new bank that will accept deposits and lend money for new mortgages. The majority of mortgages will remain in the Northern Rock asset management part of the branch. People who have mortgages with Northern Rock will be written to by the institution before this division happens. I am very anxious to ensure that people are treated in a similar way, no matter whether their mortgage is held by the Northern Rock bank or by the Northern Rock mortgage asset-holding company, and I have had discussions with the chief executive of Northern Rock so that we can ensure that that happens.

I should like to say two other things, if I may. One is that what is now happening demonstrates the wisdom of our intervening in the first place to save Northern Rock, to nationalise it and now to see it through to recovery. My second point is that, although some jobs were unfortunately lost, there are more than 3,500 people employed in Northern Rock. That is good-quality employment in a region that needs that employment.

Vincent Cable (Twickenham, Liberal Democrat)

Can the Chancellor explain what process is being put in place to ensure that Northern Rock's good assets, of which there are undoubtedly many, are not sold off cheaply to the private sector while its bad, toxic debts—including those that resulted from 125 per cent. mortgages—are left with the taxpayer?

Alistair Darling (Chancellor of the Exchequer, HM Treasury; Edinburgh South West, Labour)

Again, it might be helpful if I make the point that the mortgages that will be held by the Northern Rock mortgage asset company are not all what we might characterise as bad assets. There will be some—there is no doubt about that, given what happened at Northern Rock, especially towards the end—from which the company will not get its money back. However, the majority of the assets in that company are performing—that is, the people who have them are meeting their loans. In other words, they are perfectly good loans. The reason that we have divided Northern Rock up is that, otherwise, we would have had to put even more capital into it. What I am proposing means that we can sell off the Northern Rock bank—in the not-too-distant future, I hope, when it is right to do so—and get it back into the private sector. The other assets will need to be managed over a longer period of time. As conditions improve, however, I hope that many of those loans will come good again and we will be able to get our money back.

Vincent Cable (Twickenham, Liberal Democrat)

But what is the hurry? As I understand it, the European Commission has set no timeline for this process—unlike with the Royal Bank of Scotland. Our experience of other countries, such as Sweden, is that this problem could take 10 years to sort out, so why are the Government putting forward this proposal now? They run the risk of getting very bad value for money for the taxpayer in a premature sale.

Alistair Darling (Chancellor of the Exchequer, HM Treasury; Edinburgh South West, Labour)

I have said on many occasions in this Chamber and elsewhere that we are in no hurry to sell at all. Indeed, we will not sell these assets in relation to Northern Rock until the price that is offered is right and we can get our money back. It is also worth bearing in mind that, of the original £29 billion that was lent to Northern Rock, the amount outstanding is now £14 billion, so we are on the right track. We are in no hurry to sell at all. I recall having said that to the hon. Gentleman on at least two occasions at previous Question Times, and it is not entirely clear why he seems so reluctant to accept that assurance.

John McFall (West Dunbartonshire, Labour)

Is it not the case that about 90 per cent. of the mortgages held by the Northern Rock management asset company, while having risky characteristics, could come good in the long term? That being the case, will the Chancellor take on board the issue of competition? We know that the British banking system suffers from too little competition. In the process of disposing of Northern Rock—at the Government's leisure—will he not rule out the possibility of the mutualisation of the company?

Alistair Darling (Chancellor of the Exchequer, HM Treasury; Edinburgh South West, Labour)

My right hon. Friend is right about the first point: payments are being met on the majority of these loans, and there is every reason to suppose that they will be redeemed, so they will not be a loss to the company. Inevitably, as I said to Dr. Cable, there will be some cases where, because of what Northern Rock was up to towards the end when it was getting into difficulties, there may be continuing difficulties, but perhaps they can be managed out in time.

I shall return to my right hon. Friend's second point about competition when I shortly make my statement on banking reform. I want to see more competition on the high street for mortgages and for loans to small and medium-sized businesses, and I believe that Northern Rock will form an important part of that policy. We are not in an immediate hurry to sell, as I said, but I hope that the proposed split will take place sooner than would otherwise be the case—it might be several years.

On mutuality, I would like to see more diversity in the banking system. I have always wanted to support the building society sector. I would just say in relation to Northern Rock that we cannot put any more public money into it. It is just not possible—state aid would preclude it—to do so. Of course, anyone seeking to take over Northern Rock would need to have regard to the fact that it is necessary to ensure that the taxpayer is repaid. I have no difficulty with the concept of a mutual, certainly in principle, provided that funds for that came from outside Government sources.

Philip Hammond (Shadow Chief Secretary To the Treasury, Treasury; Runnymede & Weybridge, Conservative)

The liabilities in respect of both Northern Rock and Bradford & Bingley have been taken on by the taxpayer because the elected British Government formed the view that this was the best course of action. The Chancellor has previously taken a robust line on the issue of fiscal sovereignty, insisting that decisions on bank bail-outs that impose a burden on the British taxpayer can be made only by the British Government. Unfortunately, the draft proposals currently under consideration in the European Council do not reflect that view, so will the Chancellor take the opportunity today to reiterate that red line and to confirm that under no circumstances will the Government agree to a structure that could allow an unelected European regulatory body to order a British taxpayer-funded bail-out of a bank?

Alistair Darling (Chancellor of the Exchequer, HM Treasury; Edinburgh South West, Labour)

That is a bit rich on the day when the Conservative party is throwing in the towel on its key promise on Europe, but there we are. Yes, I did judge it right to intervene and to nationalise Northern Rock, and I think that most people accept that that was the right thing to do. It is only the Conservatives who were against doing that. Equally in relation to Bradford & Bingley, we used the very legislation that the Conservatives opposed in order to resolve the problem over the weekend.

The hon. Gentleman is asking about the proposals from the de Larosière report that came before the European Council earlier this year. We have made it absolutely clear that we believe that domestic regulation ought to be a matter for our regulators. We do see a case for a European fiscal stability council, because that is important, and we do also see a case for far more collaboration and co-operation, as that would have avoided some of the problems we had with the Icelandic banks, which must be to our advantage. We have made it clear to the Commission, however, that what we agreed to at the European Council in June ought to be implemented as European law, which respects sovereignty at the same time as ensuring that there is a degree of co-operation in a single market. Of course, all that demands an ability to work with allies in Europe, which is something that the hon. Gentleman might want to reflect on, because I do not think—

John Bercow (Speaker)

Order. I am grateful to the Chancellor; I think we got the thrust of his answer.