Banking (Special Provisions) Bill

I probably can confirm that but, as the noble Lord has raised this, if the framework document can be delivered by that stage, I will insist that it is. He is probably right that I will be pressed to have it in the House as rapidly as that. I take the noble Lord’s point and I shall endeavour to do that. Consistent with the Government’s three key objectives for Northern Rock, the clear strategic aim that we have set for the management is to move the bank off all forms of public support, including the guarantee arrangements, as soon as possible, while ensuring that the taxpayer is exposed only to an acceptable level of risk. The bank’s business plan, which will be developed in the coming weeks and must be agreed with the Government, needs to be directed at those aims. Ron Sandler and his team therefore are clear on what they have to do. As he stated, his priority is to develop a sustainable business plan for Northern Rock that enables the company to return to the private sector on a stand-alone basis as soon as possible. We look forward to discussing and developing that plan with the new board. I can commit to keep the House fully informed as that planning work reaches a conclusion. The Government will also be committed to reporting on the future strategic direction of Northern Rock regularly to both Houses. I hope therefore that the noble Lord will think that this amendment is unnecessary. The board is clear on the strategic objectives. The framework for the relationship between the Government and the company will be made clear and a strategic plan will be communicated to the House in due course—not quite as rapidly as the noble Lord has pressed me to deliver, but there certainly will be no delay. The noble Lord, Lord Newby, spoke forcefully on Amendment No. 5 and in principle won the support to a large extent of my noble friend Lord Desai. Of course we should set out the principles and objectives that have been laid down for the new board. I hope that that reassures the Committee that we expect the company to be managed in a prudent manner. I take this opportunity to make some further points and to answer some of the questions that I notably failed to answer last night in my lengthy reply to the debate. I think that the whole Committee is agreed that during this period of temporary public ownership Northern Rock should be run on a commercial basis at arm’s length from the Government. The Government are not best placed to make decisions on the sort of products to offer and how they should be designed for customers. The role of the Government is to set the strategic framework within which the bank can operate by agreeing a business plan. Let me be clear: Northern Rock has been taken into public ownership only on a temporary basis. The Government are not about the business of running banks. It will be for Mr Sandler to develop a sustainable business plan for the company and to decide which financial products to offer. I want to comment on one financial product, which was referred to several times in yesterday’s debate and in recent weeks has been raised in questions in this House and, I think, in another place. There has been concern about the 125 per cent mortgages. The noble Lord, Lord Newby, asked a specific question on that. I reiterate what I said when I answered that question, which reflects answers given in the other place. It is far from unusual for lenders to offer products of this nature and the lenders understand well the risks that they are taking on. These products are often sold on a commercial basis to individuals with appropriate credit ratings, which is why I indicated to the noble Lord, Lord Newby, that I was not entirely surprised that his personal application might have received a favourable response. That is standard practice across the industry. It is worth noting that the problems of Northern Rock have not been a result of lending at high multiples; they arose from raising liquidity in difficult international financial circumstances. I make it clear that the Government will approve Northern Rock’s business plan and subsequent major decisions. Ron Sandler’s job will be to act in the best interests of the taxpayer, the consumer and financial stability. However, it would be inappropriate for the Government to interfere with the day-to-day operations of Northern Rock. It should be operated on a commercial basis and returned to the private sector as soon as is feasible. I assure the Committee that, as Ron Sandler has said, his business plan will need to stabilise the business and establish a solid future in which the business can be returned to the private sector. As a part of this, he will look carefully at the quality of the assets of Northern Rock. He will agree the business plan with the Treasury. The Government will look at the business plan to see that it meets the three tests of protecting the taxpayer, maintaining financial stability and protecting depositors. Operational decisions of course will be a matter for the board of Northern Rock, but I assure the Committee that the Government will consider the plan to ensure that the risk to the taxpayer is appropriate. I hope that the noble Lord will accept—