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

I cannot let the clause pass by without making some comments, which I know will be of particular interest to my hon. Friend the Member for Hammersmith and Fulham. The clause gives the Treasury the power to introduce by way of statutory instrument the reinstatement of tax advantages that would have been lost if holders of individual savings accounts in Northern Rock had taken out their money when the run on Northern Rock took place. Although it does not immediately leap out from the explanatory notes, it is clear from the regulations that the Minister kindly supplied last week that they relate to Northern Rock. Indeed, the press notice that was published last year made it clear that, after it was leaked that the Bank of England was acting as a lender of last resort to Northern Rock, a number of members of the public sought to withdraw their deposits from the bank because they felt that it was not a safe place to keep their cash. That triggered queues around the block, both literally and metaphorically, as many tried to withdraw their money over the internet.

Some of those customers held their money in cash ISAs. To lure back depositors and try to rebuild the retail deposit base of Northern Rock, the Minster announced that people who put their money back into the ISA with Northern Rock would have their tax relief reinstated. That also applied to people who redeposited  their ISA money with other ISA providers, but as I understand it, the measure was particularly aimed at rebuilding the deposit base of Northern Rock. This debate is one of the rare occasions that we have for parliamentary scrutiny on what is happening with Northern Rock.

Greg Hands (Hammersmith & Fulham, Conservative)

Does my hon. Friend share my general concern that it does not matter what is asked about Northern Rock, because it is being held at arm’s length in a special purpose company, so that Ministers are unable to answer any questions. I hope that my hon. Friend has greater luck today.

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

My hon. Friend is right. We have both experienced the problems of trying to ask questions about Northern Rock, and we get poor answers in response, if we are answered at all. However, I might chance my arm and ask the Minister how much that change will cost the Government. What additional tax relief will be granted to customers who took their money out of their Northern Rock ISA and redeposited it with Northern Rock or another provider? Given that banks, as I understand it, must provide returns to the Treasury on ISAs and such things, I am sure that they have that information. Therefore, perhaps she could also tell us how much money has been redeposited in Northern Rock and, therefore, what the tax cost would be—[ Interruption. ] The Minister is looking quizzical. Can she tell us how much of the money that was originally taken out from cash ISAs in Northern Rock has been redeposited, and what the tax cost of doing so has been?

Kitty Ussher (Economic Secretary, HM Treasury; Burnley, Labour)

I will answer the hon. Gentleman’s question, but I also want to make some remarks on the background, because he implied that the purpose of clause 37 was to help us rebuild Northern Rock’s retail base, which is not true at all. It was a logical point of fairness that I feel followed absolutely from the decision to guarantee normal retail depositors. The clause will allow retrospective ISA regulations to be laid, committing those individuals who withdrew cash from their Northern Rock ISA between 13 and 19 September 2007 to reinvest it in another ISA by 5 April 2008 and restoring the tax advantage that they would otherwise have lost. That is because in that window from 13 to 19 September inclusive, some ISA holders withdrew money from their ISA held with Northern Rock. By withdrawing their funds in cash, those individuals lost their ISA tax advantage for money deposited in 2007-08 and in earlier years.

Under existing ISA rules, if they had wanted to transfer their funds to a different ISA provider and retain their tax advantages, they should have arranged for Northern Rock to transfer their investment to another ISA provider. Before the Government gave that guarantee, I think that it was reasonable for them to presume that Northern Rock might be unable to transfer to another provider, so we are simply compensating for the actions taken at that time. We decided that the need to protect the financial interests of those ISA savers in exceptional circumstances justified a departure from the usual transfer rules. Therefore, on 18 October I announced that the funds that had been withdrawn between 13 and 19 September inclusive could be put back into any cash  ISA with any provider by no later than 5 April this year and that the tax advantages would be restored. We announced that we would do so in this way. It was not an attempt to rebuild the retail base; it was a matter of fairness.

The hon. Gentleman asked about the cost to the Exchequer. There will be no tax cost at all, because we are simply restoring a tax advantage that customers already had. I do not have the figures for the overall amount of retail deposits currently in the bank. They will be made available through the business plan in the normal way.

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

I am sure that when the announcement on the matter was spun, back in October, it was not a benign gesture by the Government to encourage people to put their money back into other providers. It was pretty much aimed at encouraging people to put their money back into Northern Rock, since the retail deposit base was a key factor in its problems. It was a way of rebuilding the Rock.

I am grateful to the Minister for suggesting that information on the deposit base might be in the business plan. The only problem is that so far we have been denied sight of the business plan, so that was not a satisfactory answer. Also, I would have thought that there would be a tax cost if people were unable to redeposit money into ISAs. Under normal circumstances, there would have been a tax saving to the Government from the money coming out, because people could not reinvest it in ISAs.

The Minister’s answers were not particularly satisfactory, but we do not wish to deny tax relief to people who have already suffered uncertainty as a result of the problems of Northern Rock and how the lender of last resort was handled. I therefore do not propose to vote against clause stand part.