Banking (Special Provisions) Bill

I am grateful to all noble Lords who have addressed the Committee on these amendments, which suggest two alternative institutions to take responsibility for auditing—the Bank of England and the National Audit Office. Of course I agree with the principle behind the amendments. There certainly should be clear, independent auditing arrangements in place for Northern Rock. The Government’s proposal, however, is that the audit should be conducted in the normal fashion for private sector companies. We have already confirmed our intention that Northern Rock should be subject to the requirements of the Companies Acts 1985 and 2006. This will mean that the company’s annual report and accounts must be independently audited by a professional firm and filed with the register of companies for public access. It may be helpful if I set out how we propose to apply these requirements to Northern Rock’s 2007 accounts. Once the shares have been transferred, I am sure that Ron Sandler and the new board will want to consider and review whether he has an appropriate audit team in place. I can assure the Committee that the company’s accounts will be published at the end of March, and I will ensure that a copy is placed in the Library of the House. I contend that these are far more appropriate arrangements than the alternatives before us in the two amendments. The Government’s proposal reflects our policy that the company should be run at arm’s length from the Government on a normal, commercial basis to ensure that it is well placed to return to the private sector at the earliest opportunity. Neither the National Audit Office nor the Bank of England are well qualified to take on responsibility for the auditing of large and complex financial institutions. To state the obvious, the Bank of England is a central bank and not an auditing firm; its expertise lies elsewhere. Moreover, the skills and experience of the National Audit Office, and its statutory role, lie in auditing the financial statements of government departments and agencies, not a large mortgage-lending and deposit-taking institution. Independent professional auditing firms with experience of the City are surely far better placed to provide the necessary expertise and scrutiny. The noble Lord, Lord Forsyth, asked whether accountants’ reports were prepared for the bidders. Some analysis would have been done, but that was undertaken for their own purposes, not for public accountability purposes, which is the concern of these amendments and very much the concern of the Government as regards the auditing of Northern Rock. The noble Lord, Lord Oakeshott, returned to the issue of Granite—