Cable quizzes Darling on Northern Rock

[Feb 18] Vincent Cable (Twickenham, Liberal Democrat): 'After five months, the Government are now in the best position to ensure the repayment of the taxpayer's money.

They were right to decide that temporary nationalisation is a better option than a bad private sale whereby the taxpayer would have underwritten the risks and the private buyer would have acquired the profits. I am tempted to say, "I could have told you so", but this is too important for that. I will content myself simply with making this comment: when the Chancellor receives a large multi-million-pound invoice from Goldman Sachs for its financial advice, could he perhaps return it politely with a little note saying that he received rather higher quality advice free of charge from me and the Liberal Democrats?

The Conservative spokesman talked about the dark satanic socialism of the 1970s, but will the Chancellor confirm that the last time a private bank was nationalised in Britain was in 1994, when the last Conservative Government acquired National Mortgage bank, paying its owners a total of £1? And was not the last major bank nationalisation in the western world undertaken by that loony left-wing Trotskyite President Ronald Reagan, when he acquired Continental Illinois bank, which was subsequently returned at a profit to the American taxpayer by the Clinton Administration?

Clearly, choices have to be made. The Government have made theirs and we have made ours. Until today, the Conservatives had no alternative. I think that they are now suggesting public administration under a publicly owned Bank of England. What is that but nationalisation in all but name? The hon. Member for Tatton (Mr. Osborne) is so determined to keep one foot on either side of the fence dividing the public and private sector that he is in imminent danger of being castrated by the serrated edge.

However, there are questions for the Chancellor. What sort of undertakings did he give to Sir Richard Branson and others to pay their fees for private bids? When will he commission a fully independent audit through the Bank of England to establish the quality of the assets-the loan book for which this enormous sum of public money has been advanced? When will there be democratic scrutiny of the new business model, which could involve contraction or expansion of the bank? I hope that the changes will put an end to the extreme loans to which the hon. Member for Tatton rightly referred, which lent more than the value of property.

In general, the Government have to face some difficult decisions. The bank will have to contract and there will be job losses. We all recognise that, but at least the bank and the north-east have some long-term hope. For that reason, we shall support the measures in Parliament, while giving constructive criticism. That is the right thing to do.

Alistair Darling (Chancellor of the Exchequer, HM Treasury): I agree with a lot of what the hon. Gentleman says. He is quite right to remind the House that there have been many occasions when Governments have thought it right to intervene to take action to preserve stability or, in some cases, to preserve vital industries. He will remember what happened in the 1970s because I seem to recall that he was in the Labour party then. He is also absolutely right in his description of the Conservatives' policy. Their policy is nationalisation. It involves nationalisation, but the hon. Member for Tatton has the gall to say that he is going to oppose the Bill that will bring that about. The only way he could deliver his policy-in as much as it is understandable and that it will last for the next day or so-would be to nationalise, so it seems extremely odd that he intends to oppose the legislation tomorrow.

On the hon. Gentleman's specific questions, the FSA is responsible for regulating Northern Rock and it judges the mortgage book that Northern Rock holds to be of good quality. On the business model, as I said earlier, Ron Sandler and his team will introduce a model after they have had a chance to consider the options available to them. That will have to be endorsed by the Government, because it has to be cleared by the Commission under the normal state aid rules. Once we have taken that action, assuming that Parliament agrees to it in the next day or so, I believe that there is a good chance that we can help Northern Rock to get through this period, and that seems infinitely better than the Tory options of either bankrupting it or finding some other pretty ill-defined destination for it, which make no sense to me whatsoever.' [http://www.theyworkforyou.com]