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MPs approve Northern Rock plans Northern Rock bill clears Commons
(about 7 hours later)
MPs have taken the first step towards nationalising Northern Rock, by backing plans to put the troubled bank into "temporary public ownership". The government has taken steps towards the nationalisation of Northern Rock after emergency legislation was rushed through the Commons in a day.
Despite Tory opposition the bill was approved by a majority of 203 MPs. The emergency measure is expected to clear the Commons tonight. The Banking (Special Provisions) Bill was given a third reading by 293 votes to 167 despite Conservative opposition.
The decision to rush through the bill was criticised by MPs, but Chancellor Alistair Darling said it was essential. The bill now goes to the Lords later, with ministers hoping it can be on the statute books by the end of the week.
He said it was impossible to run a bank while it was unclear who was in charge. It will put the troubled bank into what the government has described as temporary public ownership.
The Banking (Special Provisions) Bill to nationalise Northern Rock was published on Monday and is expected to become law by the end of Thursday. The bill will spend at least one day in the Lords, before the Commons considers any amendments on Thursday.
On Tuesday evening MPs backed it by 367 votes to 164 at its second reading - a government majority of 203 - allowing it to go on to its next Commons stage, where it is examined in more detail, all in one day. The decision to rush through the bill on Tuesday was criticised by some MPs, but Chancellor Alistair Darling said it was essential to "proceed quickly".
Support for savers Shadow Treasury chief secretary Philip Hammond said MPs had been expecting a "narrowly focused" measure, not a 24-page bill, which he said could allow other banks and mutual building societies to be nationalised.
Once through the Commons it will spend at least one day in the Lords, where governments are less able to force the pace of bills. Liberal Democrat Simon Hughes accused ministers of treating the Commons "disgracefully".
The Commons will then consider any amendments on Thursday and will keep going until the bill is passed. The chancellor said the bill could be used only in "very defined and exceptional circumstances".
The strict timetable was the subject of some criticism during the debate.
Shadow Treasury chief secretary Philip Hammond said MPs were expecting a "narrowly focused" measure - not a 24 page bill, which he said could allow other banks and mutual building societies to be nationalised.
Lib Dem Simon Hughes accused ministers of treating the Commons "disgracefully".
The chancellor said it was "essential we proceed quickly" and the bill could only be used in "very defined and exceptional circumstances".
"It is impossible to run a bank - let alone any other company - unless it is clear who is in charge of that bank," he said."It is impossible to run a bank - let alone any other company - unless it is clear who is in charge of that bank," he said.
Liberal Democrat support for the emergency law means it is likely to be approved.Liberal Democrat support for the emergency law means it is likely to be approved.
An independent figure will then be appointed to value the bank's shares and decide how much compensation shareholders will get.An independent figure will then be appointed to value the bank's shares and decide how much compensation shareholders will get.
The action comes after the bank ran into problems last autumn amid the US sub-prime lending crisis and the global credit squeeze.
Ministers opted for public ownership of Northern Rock after rejecting a bid from a consortium led by Sir Richard Branson's Virgin Group and a proposal from the board of Northern Rock.
'Protects taxpayer''Protects taxpayer'
Taxpayers are subsidising the bank in loans and guarantees to other lenders to the tune of about £55bn, which will rise to £110bn under the new strategy, equivalent to £3,500 per taxpayer.
Mr Darling told the Commons: "We are proposing a course of action that will maintain financial stability.Mr Darling told the Commons: "We are proposing a course of action that will maintain financial stability.
"It will support the savers and it also gives a chance for this company to refocus and restructure. It is also a proposal that protects the taxpayer.""It will support the savers and it also gives a chance for this company to refocus and restructure. It is also a proposal that protects the taxpayer."
While ministers will not be involved in the day to day running of Northern Rock, they will need to approve its business plan, he said. class="lp" href="http://news.bbc.co.uk/1/hi/talking_point/default.stm">HAVE YOUR SAYDue to greed, political and financial incompetence, the taxpayer has been left with a huge billHoss, Edinburgh class="" href="http://newsforums.bbc.co.uk/nol/thread.jspa?forumID=4307&edition=1&ttl=20080219054439">Send us your comments
It has become the policy that dare not speak its name George Osborne He said that while ministers would not be involved in the day-to-day running of Northern Rock, they would need to approve its business plan.
Shadow chancellor George Osborne said the Conservatives supported an alternative plan of Bank of England-led administration and said the government was writing "a huge blank cheque".Shadow chancellor George Osborne said the Conservatives supported an alternative plan of Bank of England-led administration and said the government was writing "a huge blank cheque".
"Not only do we not know what we are paying for this bank, we don't know what we are buying into," he said."Not only do we not know what we are paying for this bank, we don't know what we are buying into," he said.
"The government simply refuses to tell us how risky this exposure is.""The government simply refuses to tell us how risky this exposure is."
He accused the government of avoiding the word "nationalisation", adding: "It has become the policy that dare not speak its name". He accused the government of avoiding the word "nationalisation", adding: "It has become the policy that dare not speak its name."
Competition questionsCompetition questions
But Labour's Newcastle MP Jim Cousins accused the Tories of wanting a "rapidly managed run-down" of the bank.But Labour's Newcastle MP Jim Cousins accused the Tories of wanting a "rapidly managed run-down" of the bank.
Lib Dem Treasury spokesman Vincent Cable raised concerns about the "very messy area" of competitive principles in relation to other banks.Lib Dem Treasury spokesman Vincent Cable raised concerns about the "very messy area" of competitive principles in relation to other banks.
"What is the kind of deposit interest rate that can be offered? Can it offer a higher rate of interest in attracting deposits or the same? How is it going to be constrained. What are its lending practices going to be?" "What is the kind of deposit interest rate that can be offered? Can it offer a higher rate of interest in attracting deposits or the same? How is it going to be constrained. What are its lending practices going to be?" he asked.
HAVE YOUR SAYDue to greed, political and financial incompetence, the taxpayer has been left with a huge billHoss, EdinburghSend us your comments
The running of the bank and any restructuring will now be the responsibility of City trouble-shooter Ron Sandler, who will be paid £90,000 a month and, it has emerged, is a non-domiciled taxpayer.The running of the bank and any restructuring will now be the responsibility of City trouble-shooter Ron Sandler, who will be paid £90,000 a month and, it has emerged, is a non-domiciled taxpayer.
BBC business editor Robert Peston said Mr Sandler had lived and worked in the UK since the mid-1980s, paying UK tax on what he earns here, but he was brought up in Zimbabwe, has a German passport and holds assets overseas.BBC business editor Robert Peston said Mr Sandler had lived and worked in the UK since the mid-1980s, paying UK tax on what he earns here, but he was brought up in Zimbabwe, has a German passport and holds assets overseas.
And the woman he has chosen as his £75,000-a-month chief financial officer, Ann Godbehere, is resident for tax purposes in Switzerland and is also likely to adopt non-dom status.And the woman he has chosen as his £75,000-a-month chief financial officer, Ann Godbehere, is resident for tax purposes in Switzerland and is also likely to adopt non-dom status.
Job cuts
The government is currently targeting non-domiciled taxpayers - people who live in the UK but who say their real home or "domicile" is elsewhere and pay no UK tax on their overseas earnings.The government is currently targeting non-domiciled taxpayers - people who live in the UK but who say their real home or "domicile" is elsewhere and pay no UK tax on their overseas earnings.
A Treasury spokesman said they would be "very relaxed" if Mr Sandler had the non-dom tax status: "Contrary to what some might think we don't have a problem with non-doms." A Treasury spokesman said they would be "very relaxed" if Mr Sandler had the non-dom tax status.
Ministers opted for public ownership of the bank after a bid from a consortium led by Sir Richard Branson's Virgin Group, alongside a proposal from the board of Northern Rock.
Mr Sandler, who has the task of finding a strategy for the bank, said it was too early to discuss potential job cuts among its 6,000 employees.
Taxpayers are subsidising the bank in loans and guarantees to other lenders to the tune of about £55bn, which will rise to £110bn under the new strategy, equivalent to £3,500 per taxpayer.
Trading in Northern Rock shares was suspended on Monday morning, ahead of the introduction of the emergency legislation.
Groups representing Rock shareholders, who are likely to receive very little in the way of compensation, say there are "good grounds" for legal action over the government's move.