It is pleasure to follow Mr. Hoban, and I agree with his opening comments on the quality of the debate; the tone in which it has been conducted has been exemplary. I compliment my right hon. Friend John McFall on introducing the debate, and I compliment the work of his Select Committee on its report, a large part of which we acknowledge has huge merit. The Select Committee clearly cherishes the report, as witnessed by the number of the members of the Committee who have taken part in the debate this evening. Even Mr. Dunne has stayed throughout, despite struggling with his voice.
I will try to respond in a way that does the debate justice, as is always the case with debate of this nature. If any hon. Member is looking over my shoulder, they should not be surprised to see a great deal of red on my prepared notes. I will try to deal with a number of points, but I hope that hon. Members who have raised issues that have been well rehearsed will forgive me for perhaps focusing on some of the other issues that the Select Committee report has quite properly raised, to which it is important that I give an early response or an indication of what our response might be.
Just for a moment or two, I shall set out my version of the background. A number of Members have offered their versions and some interesting analysis of what happened and why the circumstances came about. As hon. Members will know, not least because of the detailed description of last summer's events in the Select Committee's report, the emergence of problems in the American sub-prime mortgage market led to banks either lending money to one another at much higher rates than previously or not doing so at all. That, in turn, created severe problems for Northern Rock in accessing the financing that its business model relied on, and it had no alternative strategy to cope with those problems.
To prevent Northern Rock from going under, which would have risked instability spreading and serious consequences for the UK's financial system—something that hon. Members on both sides of the House generally accept—and to prevent risks to the wider economy, the Government authorised the Bank of England to provide special liquidity support, and the Government arrangements for retail and wholesale depositors were also put in place.
The Select Committee's report criticises the timing of those guarantee arrangements, but as the Chancellor made clear in his evidence to the Committee, it was not at all clear that an earlier announcement would have stopped the queues forming over the weekend. It was also important to be clear about exactly what was being guaranteed and to make an announcement once the markets had closed.
Since those events in September, the Government have explored every option to resolve the situation with regard to Northern Rock and to meet the three principles that we have consistently set out: protecting the taxpayer, protecting depositors and maintaining financial stability.
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