Mark Hoban (Shadow Minister, Treasury; Fareham, Conservative)

The provisions refer to loans that might be made by the national loans fund. We have established our long-standing difference of principle about pre and post-funded schemes, but what is important is the access to money in the event of a default by a bank. Amendment No. 37 would limit the interest rate payable on money borrowed from the national loans fund to no higher than the Bank of England base rate. I instinctively assume that it would not be higher than the base rate, but we have seen examples in the last few months where a penalty rate has been levied on money borrowed as part of the special liquidity scheme. I would like clarity from the Minister about the rate that will be used to determine the interest payable on moneys borrowed from the national loans scheme, because clearly the cost will fall on the levy payers and they will need to understand what rate will be applied. That is happening at the moment to cover the amount that has been borrowed to deal with the transfer of balances from Bradford & Bingley to Santander and its UK subsidiary, Abbey.

Amendment No. 38 relates to what happens when moneys are borrowed from the national loans scheme and what the period of repayment is for those loans. The current situation for the money borrowed to cover the transfer of balances to Santander, and to Abbey, makes a three-year delay on repayment of principal, and the loans will be paid thereafter. The amendment would ensure that a penal or pro-cyclical loan repayment scheme was not put in place.

In the previous debate we talked about the impact of payments being made after the event. There is no guarantee that a pre-funded scheme will have sufficient capital to cover all the costs of a default. The main question is, in a situation where money has been borrowed, what will the period of repayment be, or how will it be determined? We do not want a situation where the level of repayments made to the national loans fund is potentially damaging to the wider financial services sector or the banking sector. I should be grateful for clarification from the Minister on the rate of interest paid and how the period of repayment will be determined.

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