What Northern Rock's relationship with Granite is; and if he will make a statement.

Northern Rock set up Granite as a separate company structure for the sole purpose of raising finance for mortgage lending by Northern Rock. The commercial relationship between them reflects that. Other banks have set up similar securitisation arrangements.

The 2006 annual report says that Granite's

"ultimate controlling party is Northern Rock".

Did the Government nationalise Granite or did they forget?

No, as we have made repeatedly clear, Northern Rock has been taken into temporary public ownership; Granite has not. It is the case that Northern Rock has significant control over Granite, because it sets the mortgage rates and decides whether to sell mortgages to Granite, and it set up Granite solely for the purpose of raising finance for mortgage lending by Northern Rock, so there is a clear commercial relationship between them. However, the hon. Gentleman seems to be proposing that we should effectively buy out the Granite bond holders. That would not be sensible for the taxpayer and could lead to considerable taxpayer costs.

The Chief Secretary told us in the debate on the Banking (Special Provisions) Bill that Granite was not being taken into public ownership—she has just confirmed that again now—and that it was not being guaranteed by the Government. Was she not aware that, in the week before that debate, the Office for National Statistics had determined that Granite's debts would be included in the public sector net debt?

Of course we were aware of the ONS classification, which was set out on the basis of the loans and guarantees provided to Northern Rock at the beginning, and not on the basis of the subsequent decision to take Northern Rock into temporary public ownership. The ONS approach is to look at issues of control, and it is right that it should do that. However, we have to take these decisions in the interest of the taxpayer. Safeguarding those loans and guarantees by taking Northern Rock into temporary public ownership was the right decision for the taxpayer. It would not have been the right decision to buy out Granite's bond holders. They take risks, and it is right that they should do so. Frankly, this is becoming another day, another policy from the Opposition. Now they want us to fork out to buy up Granite as well.

Does the Chief Secretary recall that Ministers kept reassuring us that Northern Rock had a very strong loan book? Will she confirm, however, that all the mortgages that have been hived off to Granite are the best and the early mortgages, and that those remaining with Northern Rock represent a much higher risk?

No; the Financial Services Authority has testified that the loan book held by Northern Rock is of high quality. It is the case that Northern Rock has sold high-quality mortgages to Granite, but Northern Rock also holds high-quality mortgages, as assessed by the FSA, on its own books. That is why we have taken the decisions that we have taken, in the interests of financial stability and of the taxpayer.