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Banking (Special Provisions) Bill

Part of the debate – in the House of Lords at 1:30 pm on 21st February 2008.

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Photo of Lord Davies of Oldham Lord Davies of Oldham Deputy Chief Whip (House of Lords), HM Household, Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords) 1:30 pm, 21st February 2008

I had hoped that I had covered that issue to a degree yesterday. We have a later amendment that will address the issue more specifically. I assure the noble Lord that in addition to the fact that there will be scrutiny and regular parliamentary reports on the operation of Northern Rock, we are consulting the Building Societies Association and the British Bankers' Association on the future operation of Northern Rock. We will be taking the best advice that we can get from all quarters on seeking to meet our broad objectives on the operation of Northern Rock while at the same time seeking that it should operate at arm's length from government and be in a state to return to the private sector as rapidly as possible.

We are clear on the need to keep the House informed. We will publish shortly the framework document and set out the operating agreement between the bank and the Government. It is our intention to do that at the earliest opportunity. It will include confirmation of the Government's strategic objectives, which are the protection of the taxpayer and the consumer and the maintenance of financial stability; the board will be expected to operate the company in a manner that is consistent with those objectives. Ron Sandler will publish his strategic business plan in due course. That will outline the strategic objectives of the company and will need to be agreed with the Government and be compliant with EU state aid rules.

Of course the Committee will not expect the company to publish any commercially sensitive information but the document will include the overarching strategic direction of the business. As I emphasised, Ministers will continue to keep Parliament informed on progress through, for example, the regular—at least six-monthly—update reports to be placed in the Libraries of both Houses. We will expect Northern Rock in temporary public ownership to be run in a prudent manner, which is the burden of one of the noble Lord's amendments. I assure the Committee that the Government will ensure that there is no inappropriate risk for the taxpayer when considering the business plan.

My right honourable friend the Chancellor has already explained that, having assessed all the alternatives for the future of the business against those objectives, he does not consider administration to be in the best interests of the taxpayer. In order to comply with state aid rules, the company will be subject to growth constraints. That will be entirely consistent with the Government's view of a company that has had to rely on government support to keep it afloat. We do not expect the company to return to the aggressive strategy of recent years that has proved so unsustainable. I hope that noble Lords will recognise the strength of the Government's response to the amendments and I hope that the noble Lord, Lord Newby, will withdraw his amendment.