Banking (Special Provisions) Bill

My Lords, the House will appreciate the authority with which my noble friend speaks on this matter. She greatly reinforces my humble attempt to identify the importance of the European Commission’s position. I also emphasise that our own competition laws are not negligible. I am grateful to my noble friend. My third point is that we are asking officials to have urgent meetings and discussion with the British Bankers’ Association, the Building Societies Association and others to reassure them on that position. Even if all those factors were not the case, I could offer three further points of reassurance. First, Ron Sandler has already made it clear that he is acutely aware of competition issues and has no intention of running the bank in a way that abuses its present, temporary state ownership. Secondly, the clear strategic aim that we have set for the management is to move the bank off all forms of government support, including government guarantees, as rapidly as possible. The bank’s business plan, which must be agreed with the Government, needs to be directed towards that aim. A business plan built on abusing the present temporary government support, which in turn reflects the present distorted state of financial markets, would clearly not be consistent with the aims that we have set out for the management, because it would not be sustainable. Finally, let me reassure the House about how the financing of Northern Rock will operate. At present, Northern Rock is subject to the same interest rate premium arrangements and is paying for government guarantees in precisely the same way as it paid for those facilities in the private sector. It has not had overnight access to a different source of financing. In future, financing arrangements and fee arrangements for guarantees will need to be put in place that are consistent with the business plan and the requirements of the European Union. It is too early to speculate sensibly on what those may be but, clearly, we expect to be able to demonstrate both to competitors and to the European Union that the bank is operating in a way that does not distort the market. After 26 minutes, I am now about to fulfil the normal obligations of Second Reading by going through clause by clause what the Bill entails, but such is the insight of the House and knowledge about these matters that some of that may be otiose. Suffice it to say that I want to reinforce the points I made at the beginning. The Bill is a general Bill, but it is brought in as an emergency measure to deal with the particular circumstances of Northern Rock. The provisions regarding state powers have a limited duration: they are subject to a sunset clause of 12 months. I also emphasise to the House that on Monday night, the Government placed in the House drafts of two orders that we propose to make quickly after the passing of the Bill. The first provides for Northern Rock to be taken into public ownership; the other provides a scheme to determine the amount of compensation, if any, that is payable by the Treasury to those whose shares were transferred or whose rights were extinguished by the transfer order.