That was easily the most realistic speech that we have heard from the Government Benches in this debate.
I have learned two things about temporary legislation introduced over the years. The first is that it is rarely temporary. In the end, it is usually extended or converted into a more permanent form, which is why we need to consider the Bill carefully. The second thing is that temporary legislation is usually bad legislation, drafted too quickly, scrutinised too little and with implications that are not easily understood. We already know that the Bill has a life beyond 12 months. We have been told by the Chancellor, quite openly, that some of its provisions may be translated into the major banking reform Bill, which will be presented to us after Easter. We know, too, just how loosely drafted the Bill is, thanks to the excellent speech by the shadow Chancellor. We see the wide-ranging powers that are being taken, not simply over banks, but over building societies.
The key to the Bill is clause 2(2), under which the Chancellor is taking formidable powers to nationalise any bank and prop up any building society, which can be exercised for two purposes. The first is for
"maintaining the stability of the UK financial system" where there is
"a serious threat to its stability", while the second is for
"protecting the public interest in circumstances where financial assistance has been provided".
We have spent too little time in the Chamber talking about this, because we have had so little time, but nowhere in the Bill are those terms defined. What do we mean by "financial stability"? How do we define a "serious threat to financial stability"?
That takes us back to the untested premise of the Government's original authorisation of an operation of lending of last resort. The Chancellor concluded that there was systemic risk. He did not show us what that risk was, he did not define it and he did not have it externally validated. Indeed, he did not do anything to allay the suspicion that some of the systemic risk was to the Government's political stability in the run-up to a general election.
We have had endless discussion about systemic risk without any of us being clear about how we should measure the threat. We need that clarity; otherwise any bank with a significant number of UK customers or any building society will come hammering on the door, saying that there is a threat to the UK financial system. We need to be clear about what that threat is. Is it a series of bank failures—a domino effect through a range of building societies—or a threat to the integrity of the clearing system? We need to be much clearer.
We also need to be clear about who decides whether there is a systemic threat. Under the Bill, it is simply for the Chancellor to decide, all on his own. That is wrong. As the Treasury Committee concluded, the Bank of England should advise the Chancellor. Of course he has to authorise public money to support a particular operation, but he should have to do so on the advice of the Bank of England.
The other thing that I want to concentrate on is the extraordinary provisions in clause 11, which I asked the Chancellor about yesterday. I asked him what a clause enabling him to give any amount of money to any building society that might need financial assistance was doing in the Bill. He said that he thought it "prudent" to include such a clause. That was the only explanation that we had. He said that he would speak about clause 11 today, but he skipped it altogether. Clause 11 is the most extraordinary clause. It empowers the Chancellor to alter any enactment, without any restraint or definition of terms and conditions, and simply to apply public money to any building society that he deems ready to receive it. There is no explanation for that.
This is a bad Bill, for three reasons. First, it says that it is temporary, but it is not going to be temporary—on that, at least, I can agree with Jim Cousins. The Swedish had their banking crisis in 1991, when they nationalised the biggest bank in Sweden, which is still partly publicly owned today, 16 years later. British Leyland was publicly owned for 13 years. We are going to be stuck with Northern Rock for a great number of years, but we have seen no timetable either for the repayment of the money that we have lent or for managing the exit. Indeed, shareholders have seen no timetable for paying them the compensation that they look forward to.
Secondly, the Bill is not a specific measure—a fact that my hon. Friend Mr. Osborne brought out so clearly. It takes general powers, but I am not at all persuaded that hurrying to do that is a good thing. If there is a specific problem that has to be dealt with in an emergency, let us deal with it, rather than taking such sweeping general powers in such a rush.
The third reason I oppose the Bill is that it sends out the most appalling message from the British financial system, which is that any bank or building system, however incompetent its directors or however great the regulatory failure of its supervisors, will now come to the door of the Chancellor and ask to be bailed out. This is bad legislation.