I would like to make a couple of preliminary remarks. The first is that the Bill is intended to allow for the nationalisation of Northern Rock, which will then operate at arm's length from the Government, with commercial autonomy for its decisions. However, that will be predicated on a framework agreement covering the relationship between Northern Rock and the Government that is yet to be published. My second remark is that the nationalisation expected to flow from the Bill has apparently been tested against the two private sector bids and deemed to represent the best value for taxpayers' money. I would like briefly to test that assertion.
"banks have estimated that it would require...capital" of
"as much as £20 billion...to successfully refinance Northern Rock."
Given that that figure was likely to have been the maximum taxpayer liability, should everything have been sought from a private sector concern, and given that it may well have been lower, in loans and guarantees facilitating a private bid, I am curious to know how the Chancellor and those on the Treasury Bench can argue, five months down the line, that a £110 billion liability for the taxpayer represents better value for money than a rather more modest contribution in loans and guarantees last autumn.
I said that the framework agreement between Northern Rock and the Government has not been published. In addition, the new framework to regulate banking in the UK and protect depositors is out for consultation. The Chancellor said that that would take some months and require primary legislation. There are a number of questions about the Bill and the sweeping powers that it contains. Given that the bank will operate at arm's length from the Government, why should we pass the Bill in the absence of the framework document?
There are other questions to do with why we should support the Bill, given that we are to have a nationalised bank, with £110 billion of taxpayers' money, operating within a tripartite arrangement that many believe is not fit for purpose and which the Government intend to replace anyway. That tripartite arrangement not only is not fit for purpose, but may have been at least partly responsible for stopping or not facilitating a quick and early private sector takeover of Northern Rock last year, because of the confusion among the FSA, the Treasury and the Bank.
Clause 3(1), entitled "Transfer of securities", says that the Treasury may by order transfer securities to
"(a) the Bank of England;
(b) a nominee of the Treasury;
(c) a company wholly owned by the Bank of England or the Treasury;
(d) any body corporate not within paragraph (c)."
However, clause 8 says that if securities have been transferred to a specific named person under clause 3(1)(a) to (c) following nationalisation, provision can be made for further transfers—that is, transfers back—to the private sector. However, clause 8 seems to exclude any reference—I will stand corrected if I have missed it—to a body corporate that is not a company owned by the Bank of England or the Treasury. If that is the case, primary transfers of assets can be made to that body, but on my reading of the Bill there is no ability to transfer them back to the private sector later.
Clause 4, on the "Extinguishment of subscription rights", allows the Treasury, where it has made an order providing for the transfer of securities from a deposit-taker, to acquire the securities not only of the deposit-taker, but of any of its subsidiaries,
"whether the rights have been granted by the deposit-taker or otherwise."
That provision seems extraordinarily wide, and I am concerned that it might preclude the breaking up of a group that is in trouble, where subsidiaries could be sold as going concerns to raise cash. It does not seem to place any restriction on securities from a subsidiary being acquired, even if they are worth more than the indebtedness of the principal deposit-taker, which could be the reason for the necessity for assistance in the first place. If that is the case, I suggest that this is a gaping hole in the Bill.
The Bill is also riddled with terms such as
"where the Treasury make...an order" and the Treasury
"may by order make provision for".
In the absence of detailed orders or a framework agreement between the bank and the Government, however, it is difficult to know precisely what the Government intend the Bill to do.
The Bill is doubly confusing because clause 13(2)(a) states that orders and regulations
"may make different provision for different cases or circumstances".
The Government are expecting us to vote for a pig in a poke, because the provisions are so wide and utterly undefined, and the secondary information that we need is simply not available.
We are certain that everything that should be done to preserve the integrity of the banking sector must be done, not least because of the 127,000 jobs in Scotland that depend on banking and finance. However, the Bill before us tonight should have been a Northern Rock emergency nationalisation Bill, containing only a few clauses. We have yet to determine whether we will support the provisions at the end of the day, and we will look at the amendments that have been tabled, but we are dreadfully disappointed by the generality of the Bill, by its extremely wide scope, and by the ability of the Government to do almost anything by order, when we should have had a much tighter and more focused emergency nationalisation Bill.