Banking: Northern Rock

Debate between Lord Sassoon and Lord Shipley

Thursday 30th June 2011 Lords Chamber

[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.

[Lord Shipley]

My Lords, does the Minister agree that the staff of Northern Rock have, in the past three and a half years, done a magnificent job to recover the status of the bank? Does he agree that maintaining a headquarters function for the bank in the north-east of England remains important? In that context, could it be a condition of sale that the Northern Rock Foundation, the largest charity in the north of England, should continue to have support from whoever buys the bank in order to maintain the good work of the Northern Rock Foundation?

[Lord Sassoon]

My Lords, first of all, it is right that Northern Rock is now a highly liquid and well capitalised strong bank, which is why UKFI has been able to recommend the start of a sales process to the Treasury. Incidentally, for all the very significant reductions in the number of employees that there have been, the bank still has a footprint of some 75 branches—little changed since before the collapse of the bank. As for its commitment to the foundation, the bank has a signed agreement with the foundation, signed in March 2011, under which Northern Rock plc agrees to donate 1 per cent of pre-tax profits to the foundation under a covenant with an initial expiry date of December 2012. It will be very much in the interest of prospective purchasers to make clear, if they want the support of people in the north-east, what their plans are for the headquarters, for their support for the foundation and for other matters.