Banking: Northern Rock

Debate between Lord Sassoon and Baroness Turner of Camden

Thursday 30th June 2011 Lords Chamber

[Baroness Turner of Camden]

To ask Her Majesty’s Government what are their plans for the future of Northern Rock, in view of its status as a major employer and provider of financial services in the North-East of England.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, on 15 June my right honourable friend the Chancellor of the Exchequer announced that a sales process for Northern Rock should commence, following a recommendation from UK Financial Investments. Prospective acquirers will be asked to provide a view on the impact of their acquisition on competition. UKFI also expects prospective acquirers to lay out their plans for the company’s headquarters and branches.

[Baroness Turner of Camden]

I thank the Minister for that response. Since tabling the Question, I have been visited in this House by representatives of the workforce, whose chairman and organiser came to see me. They are still very worried people, although they appreciate the sympathetic response that the Minister gave on 16 June when this question was originally raised. On the other hand, they are very concerned because of the employment situation there and very keen on mutualisation, which they believe would be much better from the point of view of employment and as far as the community is concerned. Would the Government give serious consideration to that?

[Lord Sassoon]

My Lords, the Government, through UKFI, will consider all options for the disposal process, including stand-alone remutualisation. However, it is important to recognise that the Chancellor believes that a sales process is most likely to generate the best value for the taxpayer, and that is why that is being explored as the lead option. Of course, the Government are committed to promoting mutuals and we very much welcome bids from mutuals as part of the sales process that is to start.

Regulatory and Banking Reform

Debate between Lord Sassoon and Baroness Turner of Camden

Thursday 16th June 2011 Lords Chamber

[Lord Sassoon]

I am grateful to my noble friend Lady Kramer for her general support for what we are doing and her recognition of how far the Government have already gone in pushing forward with the structural and regulatory reforms. On the micro/macro link, I refer noble Lords to the full, and very interesting, remarks by the Governor last night at the Mansion House because he talked with great coherence and good sense about what the failure of the previous regulatory regime was, which was to collect a huge amount of detailed data that it was unable to analyse to draw out the conclusions.

However, in the new world, experienced bank supervisors are needed who are able to analyse and draw out the picture, which was never difficult—whether it was on securitisation or on a lot of other matters or funding models—before the crisis. There should be meaningful discussions with the banks in terms of the individual banks that they supervise about what this translates to in terms of the exposure of the individual bank’s business model. If my noble friend were to read the Governor’s full remarks, she would see that the Bank is absolutely where she would like it to be on its thinking on this. I got no sense of swing-back in it.

On ownership of the banks, we are well aware of the proposals that have come in, including that from Stephen Williams on mass retail participation. We and UKFI are actively considering mass retail participation as we think ahead to returning the banks into the private sector, which of course is not the same thing. A subset of it would be distributing the banks’ shares for free or on some other basis, which raises value-for-money considerations and quite a lot of technical market considerations. But I can reassure my noble friend that all these proposals will be given due consideration.

[Baroness Turner of Camden]

My Lords, I have here a letter from Unite, the union representing the workforce at Northern Rock. As can well be imagined, the workforce is extremely concerned about its future. It points out that at its height Northern Rock had 6,500 employees. It also ran the Northern Rock Foundation with £200 million of investment in the area. Those in the workforce are concerned not only about their own jobs but about the general impact on the situation in the north-east, where there is a very high level of unemployment and where people have great difficulty in getting alternative work. In any situation in regard to restructurings and so on, it should be a major concern for the Government to ensure that whatever decisions are taken do not worsen the unemployment situation in the area. Everything possible should be done to ensure that employment is kept at a reasonable level. As regards Northern Rock, that does not seem to be the situation.

I am very glad that my noble friend on the Front Bench raised mutualisation because it seemed to me that that is a way in which it might be possible to maintain a much higher level of employment in the area. It is very important to bear in mind concern not just about the financial stability, important though that is, but about what happens to employment in the area and the general standing in the area of not only the financial situation but the economic situation generally.

[Lord Sassoon]

I am grateful to the noble Baroness, Lady Turner of Camden, because these considerations will be ones which prospective bidders for Northern Rock will be asked to address in their bids. Of course, the Government are very mindful of the situation in the north-east and its dependence on the public sector in particular. I am sorry that my noble friend Lord Bates is not here today because I am always refreshed by his reminder to the House that a lot of vibrant new business is being generated in the north-east. But I very much recognise, as do the Government, the problems, and the bidders will be asked to make a lot of these things clear when they come forward with proposals.