Banking (Special Provisions) Bill

Part of Orders of the Day – in the House of Commons at 7:11 pm on 19th February 2008.

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Photo of Mark Todd Mark Todd Labour, South Derbyshire 7:11 pm, 19th February 2008

I support the Bill, but with considerable concerns. For me, the measure is emphatically the least bad option. I have listened carefully to the option that Conservative Members presented and it held some appeal for me. However, the Bill offers greater control over the process of realising the assets that we require to get back the loans that we have made to the business. Control makes the difference, enabling us to manage matters to achieve the outcome that we seek. I shall consider that outcome shortly.

First, I want to list some of the reasons for my considerable hesitation. Many have already been covered, so I shall deal with them in shorthand. We do not know whether we will survive a shareholder court challenge. As has been said, the companies involved are well resourced and had thought their way into the outcome when they bought into the business. I am optimistic that we will survive, but there is nevertheless a risk.

Competition is a predictable concern in the marketplace and I have some sympathy with it. I expect dealing with challenges from competitors to occupy a significant amount of the business's resources, if it is run in a particular way.

Staffing has been mentioned. The state will now be responsible for retaining staff and maintaining the morale of those employed in the business, as well as for some of the redundancies that are likely to befall under any business model.

We do not know the company's asset base. Mr. Redwood was accurate about that. We know neither the assets thoroughly enough to decide whether we are buying what we are told is as good as any mortgage-lending business in the land nor the liabilities that we are taking on. I doubt whether I have bought businesses on the scale that the right hon. Gentleman has handled but I have dealt with business acquisitions and I would expect to know a great deal more about a business that I was acquiring than the information that we have been offered to date.

We will have to take on running a bank at a time—though I have not followed the shares in the past couple of days—when banks' values have been hit hard in the past month or so and I would expect competition to be vigorous. I cannot say with certainty that the business will thrive in that environment. We do not know.

We also have the task of clearly communicating our limited purpose. Nationalisation can suggest greater state engagement in the financial services sector than is perhaps intended by the move.

Accommodating the governance of a retail bank into a state system will be uncomfortable and provoke difficulties, such as dealing with repossessions and other matters that colleagues have mentioned. I have plenty of anxieties about what may lie ahead.

We desperately need clarity of purpose. My purpose is risk limitation. From a business perspective, we are taking on many unknowns. I therefore look to holding our risk to the absolute minimum. I am worried about how easy that will prove. The most obvious strategy for achieving that is, as several Opposition Members said, to pursue an ordered—or, I suspect in some instances, less ordered—run-down of the business and basically farm money from the existing loan book as far as possible and look for buyers at appropriate times. The debate has shown the difficulty of doing that—I put it gently—when the bank is in political hands.

My hon. Friend Jim Cousins spoke powerfully for his community and I suspect that many would have done the same. There will be challenges from those who perceive other perspectives and purposes in the state owning the bank. It will be difficult in a political context to maintain a focus on the narrow objective of returning to the state the assets that the bank has temporarily held. I am worried about that.

Some of the remarks made in the first few days conveyed inappropriate signals. Suggestions were made of the possibility of aggressive strategies by the bank as well as understandable assertions of support for the Northern Rock Foundation. Again, that is an indication of a wider purpose beyond the narrow issue of recovering our resources, and it should concern us. I am worried about the mixed messages and I want reassurance that we have a firm purpose of recovering the assets loaned to date as rapidly as is reasonably possible. The advantage of state ownership is that it at least allows us to dictate the timetable in a more ordered way, and more sensitively to the communities that are involved. I firmly believe that a clear statement of that purpose is required as early as possible.

I support the Bill, but the critical questions are why we are taking such action and how we intend to achieve the outcomes. Let us clearly express the answers as early as possible. That would be easier for the communities involved than maintaining perhaps an illusion that we will build some great financial institution in the north-east. I do not perceive that as a reasonable purpose for Government or a reasonable use of the risks that we have deployed today.