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Banking (Special Provisions) Bill

Part of the debate – in the House of Lords at 11:45 am on 21st February 2008.

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Photo of Lord Newby Lord Newby Spokesperson in the Lords, Treasury 11:45 am, 21st February 2008

Among many other things, the Northern Rock debacle has demonstrated that there are gaps in the regulatory framework. That is why we have this Bill, but also why we are expecting a permanent Bill from the Government to amend the way in which the tripartite arrangement works and new powers to deal with situations such as we have seen with Northern Rock. We understand that that Bill will be introduced in May, which means that it will be through Parliament and on the statute book by the middle of the autumn, probably in October.

The noble Lord, Lord Forsyth, asked the Government to say which institutions they feared might require to be brought under public ownership for the same reasons as Northern Rock in the interim period between today and the new Bill being on the statute book. That question does not need a specific answer. However, this is a time of financial instability when some serious commentators have clear worries about stability here and elsewhere. The Government have been forced to bring in a piece of legislation and to say that they did so to deal with Northern Rock alone. The legislation goes off the statute book in a month and if in six months another bank or building society finds itself in difficulties, we will have to start all over again, possibly in the middle of a Recess, trying to deal with the issue in the absence of any legislative cover. That is not a responsible attitude. It is not to say that we think a bank or building society will go bust, but that there is a reserve power if a problem arises.

Noble Lords have talked about destabilising the situation if this amendment is not carried. I would have thought that there was a higher risk of an unstable situation developing if there was no legislative cover against the possibility of a bank or building society getting itself into difficulties six months down the road. In view of that, we do not support this amendment.