Banking (Special Provisions) Bill

The noble Lord has distinguished himself by his contributions so far both on Second Reading and in Committee, but his contention in the speech just delivered ill becomes him in light of the argument that I put forward on the Government’s behalf. I hope that that argument will be accepted. How can it be suggested in the wake of the months of assiduous work by the Government to avoid nationalising Northern Rock that they are about nationalisation on the sly? If there is one thing of which the Government cannot be accused, it is enthusiasm for nationalising the banking and building society structures. As I have said on numerous occasions, the Bill’s provisions obtain for only 12 months to bridge the gap between the current position, where we have inadequate legislation to respond to potential emergencies—and I cannot emphasise enough that we are talking about emergencies—and the ability to take necessarily drastic and dramatic action to meet a threat to the financial system, such as a potential run on a bank or building society and the destabilisation of the financial markets. That is the nature of the emergency addressed in the Bill. The Government do not intend to act when, as we all fervently hope and expect, such an emergency does not materialise in the next 12 months. But how imprudent would it be if we had nothing in place? The reason for the Bill’s temporary nature is that, after the 12 months, after the fullest consultation with the banking and financial sector and all other interested parties, and after the most intensive debate in the other place and undoubtedly in this place too, we are planning to produce a reform of the banking and financial system later in the year. But we presently have a gap in dealing with any potential emergency. We do not foresee using the provisions, but the nature of emergencies is that they cannot be foreseen. Equally, however, it is prudent to be able to cope if an emergency materialises. As the Committee will recognise, the international financial market is disturbed and troubled. That is why all serious actors on the world stage are bending themselves in taking action to protect the world’s financial structures as best they can and to improve the position over the coming months. It is a challenge that all of us face internationally. It is a challenge that states also face nationally. This is the British Government’s proper response to an emergency that has already occurred with Northern Rock. We are merely being prudent in making provision for our ability to cope, if in fact such an emergency materialises. That is the basis of the Bill. It is why we are saying on this occasion that, if an emergency did occur, it would be different from any other kind of emergency to which the Delegated Powers Committee referred or legislation on which it contributed—because of the sheer shortage of time in which a Government could act. I recognise the consistency of the noble Earl, Lord Ferrers, in arguing that the Bill should have been conceived of in entirely different terms—that it should have applied only to Northern Rock and been a hybrid measure. If so, our solution to Northern Rock would have related to the somewhat distant future and we could not have dealt with the issue promptly now. In addition, such a Bill would contain no provisions about how to cope with troublesome times if an emergency occurred. We do not anticipate that one will—we cannot foresee any emergency—because, like the rest of the Committee and the rest of the country, we expect this country to get through these troubled times successfully. However, we would be exceedingly imprudent if, given the necessity of acting on Northern Rock, we did not at the same time make provision to enable us to cope with any such emergency.