Clause 6 — Transfer of property, rights and liabilities

Part of Delegated Legislation – in the House of Commons at 8:15 pm on 21st February 2008.

Alert me about debates like this

Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury 8:15 pm, 21st February 2008

We have listened to 30 minutes of rubbish and waffle from the Minister, and we now have precisely 29 minutes left to scrutinise the House of Lords amendments and to consider the very significant points that were raised in the other place. There is clearly no prospect of this measure receiving proper scrutiny in this House. Indeed, the one part of the Bill that has been properly scrutinised is the bit that the Delegated Powers and Regulatory Reform Committee looked at in the House of Lords. The Government have tabled five amendments of their own in recognition of the weakness of the original drafting—testimony to the value of proper scrutiny.

There was no reason at all to impose the farcical timetable that we have had for this Bill. We could have sat through the night tonight; we could have sat tomorrow. The only possible reason was to prevent proper debate and to obscure the extraordinary powers that the Government are taking, not only for Northern Rock but on a wider basis. We are witnessing a shocking abuse of this House's willingness to expedite legislation in an emergency, with many of the powers in the Bill simply not necessary to resolve the situation of Northern Rock.

The amendments that have come back to us from the Lords fall into three groups: those dealing with transparency, the one dealing with fairness, and those dealing with procedure. Amendments Nos. 1 and 2 deal, respectively, with audit and freedom of information. There is a clear need for an audit of the situation in Northern Rock, including an analysis of the quality of the loan book, which would not necessarily be undertaken in depth in the course of the ordinary statutory audit that the Minister talked about. The public are being asked to buy a pig in a poke. No one is sure what we are getting, how much we are paying, or what we are buying it for.

An additional complication has come to light—that of Granite—and I want to take a minute to touch on that. We are all agreed that some of the best of Northern Rock's assets are included in Granite, but Granite also includes a Northern Rock seller's share worth about £5 billion to Northern Rock, which would be an early casualty of a default on the covenants in the Granite documentation, quickly undermining the solvency of Northern Rock. One of the requirements of an auditor would be to look at any impairment to the value of that seller's share as a result of the change in Northern Rock's situation. Specifically, Northern Rock must feed Granite with new mortgages; if it fails to do so, the Granite entities will collapse and go into wind-up with all the cash flows diverted to the bondholders, putting the seller's share, which belongs to Northern Rock, at risk. To try to avoid that, Northern Rock may be forced, if it is not originating new business, to take the good-quality assets that it has within its own portfolio and feed them into Granite. That is the way in which Granite can become a sponge sucking the high-quality assets out of Northern Rock. That is why an audit is so important, and that is why we have consistently argued for an alternative method of dealing with Northern Rock that puts the taxpayer at the top of the pecking order, not at the bottom, which the Chief Secretary's solution would do.

Lords amendment No. 2 would be unremarkable anywhere but in the wonderland that this Government inhabit. It says that what is a publicly owned company shall be deemed to be a publicly owned company for the purposes of freedom of information. But we know from the draft order that the Government intend to ordain by statute that this particular publicly owned company is not a publicly owned company. We have heard a new definition from the Chief Secretary this evening; she says that it is not a "public purpose company". The order talks about a "publicly owned company". At this rate, next week we can anticipate a piece of legislation allowing the Government to designate by order that black is white.

If Granite's loan book is as good as the Chancellor and the Prime Minister claim, and if, as the Prime Minister said at his press conference on Monday, they have

"made at all times the right decisions", what do they have to fear from an audit? What do they have to fear from a freedom of information request?