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Northern Rock plan debated by MPs | Northern Rock plan debated by MPs |
(about 1 hour later) | |
The chancellor has defended a decision to rush legislation through the Commons to nationalise Northern Rock, set to be approved by MPs tonight. | |
Alistair Darling told the Commons it was impossible to run a bank while it was unclear who was in charge. | |
Ministers want to put the troubled bank into "temporary public ownership" in the hope of finding a long-term buyer. | Ministers want to put the troubled bank into "temporary public ownership" in the hope of finding a long-term buyer. |
Meanwhile the BBC's Robert Peston has discovered that Ron Sandler, the Rock's new boss, is a non-domiciled taxpayer. | |
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 Banking (Special Provisions) Bill to nationalise Northern Rock was published on Monday and is expected to become law by the end of Thursday. |
Support for savers | Support for savers |
It is going through all its Commons stages on Tuesday and will spend at least one day in the Lords, where governments are less able to force the pace of bills. | |
The Commons will then consider any amendments on Thursday and will keep going until the bill is passed. | |
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 said 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. | |
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. |
'Protects taxpayer' | |
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. | |
It has become the policy that dare not speak its name George Osborne | |
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". | |
Competition questions | |
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. | |
"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?" | |
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. | |
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. | |
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. | The government is currently targeting non-domiciled taxpayers - people who live in the UK but who say their real home or "domicile" is elsewhere. |
At present, these "non-doms" pay no tax in the UK on their overseas earnings. | At present, these "non-doms" pay no tax in the UK 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: "Contrary to what some might think we don't have a problem with non-doms." |
Taxpayers have been saddled with debts the private sector did not have much appetite for Matthew SinclairTaxpayers' Alliance | |
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. | 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. | 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. |
The Unite union, which represents 4,500 of Northern Rock's staff, called for the government to guarantee nationalisation would not lead to compulsory redundancies. | The Unite union, which represents 4,500 of Northern Rock's staff, called for the government to guarantee nationalisation would not lead to compulsory redundancies. |
Share trading frozen | |
Taxpayers are subsidising the bank in loans and guarantees to other lenders to the tune of about £55bn. | |
Under the new strategy this will rise to £110bn, an equivalent of £3,500 per taxpayer. | Under the new strategy this will rise to £110bn, an equivalent of £3,500 per taxpayer. |
Matthew Sinclair, from the Taxpayers' Alliance, said: "Taxpayers have been saddled with debts the private sector did not have much appetite for." | |
Trading in Northern Rock shares was suspended on Monday morning, ahead of the introduction of the emergency legislation. | 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. | 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. |