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Government suffers Rock defeats Government suffers Rock defeats
(about 5 hours later)
The government has suffered defeats in the House of Lords over parts of its plans to nationalise Northern Rock.The government has suffered defeats in the House of Lords over parts of its plans to nationalise Northern Rock.
Peers have voted for an independent audit of the bank's books within three months, followed by annual checks.Peers have voted for an independent audit of the bank's books within three months, followed by annual checks.
They also voted against plans to exempt the bank from Freedom of Information laws and to have regular assessments from the Office of Fair Trading.They also voted against plans to exempt the bank from Freedom of Information laws and to have regular assessments from the Office of Fair Trading.
Once peers finish debating the bill it will return to the Commons, where any changes by peers will be considered. The bill is back in the Commons, where MPs have already voted down two of the three amendments.
Ministers can choose to accept these, or to reject them and send the bill back to the Lords, where peers are currently seeking to squeeze weeks-worth of scrutiny into one day. They overturned calls for an independent audit by 277 votes to 167 and for the bank to be brought under the Freedom of Information Act by 268 votes to 171.
A key battleground could be Conservative and Lib Dem peers' decision to defeat the plan to exempt Northern Rock from Freedom of Information laws. It paves the way for a session of Parliamentary "ping pong", where measures bounce between the Commons and the Lords.
There is no public interest involved here - it is not as if we are short of mortgage-lending institutions in this country Lord LawsonEx-chancellor What is Granite? The government should have nothing to fear from the truth Lord HuntConservatives What is Granite? class="" href="/1/hi/uk_politics/7254451.stm">Darling hits back over Rock trust
Once the Lords finish with the bill, MPs will decide whether to accept any Lords amendments and vote through the bill, or to reject them and prompt a session of Parliamentary "ping-pong" (where the measures bounce between the Commons and Lords). A key battleground is Conservative and Lib Dem peers' decision to defeat the plan to exempt Northern Rock from Freedom of Information laws.
Ex-Conservative chancellor Lord Lawson told peers on Wednesday nationalisation held "grave risks" and it was being done for political reasons. In the Commons Treasury chief secretary Yvette Cooper said it would not be right to publish "detailed commercial sensitive information" on Northern Rock and accused the Conservatives of "playing games" over a serious issue.
During the Lords debate, he said the emergency legislation was the "second worst solution" - the worst being to give public subsidies to private buyers. But in the Lords Conservative peer Lord Hunt said it was "imperative" that there was sufficient transparency and accountability over Northern Rock's operations as "Its directors' salaries and bonuses will be paid out of taxpayers' funds."
"There is no public interest involved here. It is not as if we are short of mortgage-lending institutions in this country," he said. Independent audit
"There are grave risks in keeping it on. There is a greater exposure of the taxpayer than there would otherwise have been and there is the problem of unfair competition." He added: "The government should have nothing to fear from the truth."
Explaining why he believed Northern Rock should not be exempted from Freedom of Information laws, Conservative spokesman Lord Hunt said "the government should have nothing to fear from the truth". Peers also voted by 154 votes to 142 for an amendment requiring the Bank of England to carry out an audit of the bank after three months in public ownership, then at least annually.
"The public does indeed have a right to know but the government's response is to run entirely in the opposite direction," he added. "There are very important reasons why there needs to be an independent audit by a firm of auditors who are not associated with the previous regime," said Lib Dem frontbencher Lord Oakeshott.
Earlier Liberal Democrat Lord Newby said his party would seek "to strengthen the accountability of the government and Northern Rock, as appropriate, to Parliament". "There are very serious concerns now in the City about the last interim report - the last published report - we have seen from Northern Rock on June 30 last year."
The party is demanding an immediate independent audit of Northern Rock and a regular progress report to Parliament, as well as supporting Tory calls to effectively lay before Parliament the bank's business plan and bring it within the Freedom of Information Act. But Lord Davies, for the government, said it was "vital" in the interests of eventually returning the bank to private ownership, "that we do no apply inappropriate public sector requirements".
'Deplorable' "The Treasury is the public authority subject to the Act and its relationship with Northern Rock as shareholder and lender will be in the public domain."
Lord Newby added: "We contemplate supporting this bill more in sorrow than in anger. The government says the bank's audited annual accounts will be published after an independent audit, by the end of March.
"We have been alarmed at some of the aspects of the dealings of Northern Rock and some aspects of the way the government has attempted to introduce this legislation." Peers also backed an amendment requiring the Office of Fair Trading to report annually to Parliament on the nationalisation's impact on competition in the UK's banking market.
Concerns were also raised about Granite, the Jersey-based trust to which Northern Rock sold £45bn of its most profitable mortgages. The Tories said Northern Rock would have access to "significantly cheaper money" than its competitors - which could damage the whole British banking system.
It has prompted accusations that the taxpayer will be left with the "rubbish" on the troubled bank's mortgage book, such as loans worth 125% of the value of homes. But Lord Bach, for the government, said Ron Sandler - the man now responsible for running the bank - was "acutely conscious of competition issues and has no intention of running the bank in a way that abuses its temporary state ownership".
Lord Lawson said it was "deplorable" Granite was not part of the nationalisation process.
We have made the decision we have to protect the taxpayers, after having weighed up all the various competing considerations Labour peer Lord Davies Darling defends Rock trustSend us your comments
But Lord Davies, for the government, told peers: "Granite, the Northern Rock's securitisation programme, is a special purpose vehicle, a trust, which has no claim on Northern Rock's assets.
"We are dealing in this bill with Northern Rock and its assets and that is the exposure of the taxpayer."
He said it was necessary to take Northern Rock "into a period of temporary public ownership" adding: "It is important for savers and depositors to be reassured that their money remains secure. "
"We have made the decision we have to protect the taxpayers, after having weighed up all the various competing considerations. It was clear that a temporary period of public ownership was the better option."