Banking (Special Provisions) Bill

Part of the debate – in the House of Lords at 11:36 am on 21st February 2008.

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Photo of Lord de Mauley Lord de Mauley Shadow Minister, Cabinet Office 11:36 am, 21st February 2008

This amendment sums up many of my concerns with this Bill and at the approach that the Government have taken to the nationalisation of Northern Rock. The Government have indicated that it is their intention to nationalise Northern Rock as soon as may be possible. To that end, they have limited debate on this Bill to three days across both Houses of Parliament and have already drafted the order under Clause 3 that will kick-start the proceedings. It is, therefore, inconceivable that anything the expiry of the sunset clause would prevent occurring could not be completed in a matter of days after this Bill receives Royal Assent.

I have tabled this amendment to reduce the limit of the sunset clause from one year to one month. With the best will in the world, I can imagine no possible scenario where the order to nationalise Northern Rock, made under Clause 3 would take more than a month to be made. There is also no possibility that my amendment would make it possible for the Bill to trigger hybrid procedures, and so slow the proceedings down unacceptably. My amendment would prevent the future nationalisation of any other bank or building society under this legislation. This should not be a difficult limitation for the Government to accept, as they have repeatedly stated that they have no intention of nationalising any other financial institution, and have deliberately drafted the requirements in Clause 2(2) to be so high that it is apparently inconceivable that another financial institution will trigger them.

If that is the case, there is no benefit to be gained by keeping these extra 11 months. There are, however, clear costs. As your Lordships made it so clear yesterday, this Bill does great harm to the reputation abroad of the United Kingdom's financial systems. For the Government to maintain a long-standing power to step in and nationalise any financial institution is an enormously destabilising situation. What sort of confidence does it show in the robustness of our financial systems if the Government cannot restrain themselves from holding these enormous powers over the heads of banks and building societies for a whole year? Added to that, we have identified a very real threat from hedge funds and large global speculative investors who will be able to sell a bank or building society short, deliberately take action to destabilise it sufficiently to worry the Treasury and then sit back and watch their profits come rolling in as the Government move in to nationalise.

The Bill would cause exactly the sort of instability that the Government seek to avoid. I urge the Minister to resist the temptation to keep these powers for such a dangerously long time, as the Government propose. Even in the worst possible scenario imaginable—that of another financial institution needing to be nationalised—the proceedings for this Bill have shown just how necessary the role of Parliament is and how speedily such a role can be played. It is not only possible, it is desirable, that Parliament be given its chance to assess the need for every single nationalisation that the Government might wish to carry out.