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| Government suffers Rock defeats | |
| (29 minutes later) | |
| 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. Once peers finish debating the bill it will return to the Commons. | |
| Ministers will have to decide to accept any changes peers make - or reject them and send the bill back to the Lords. | Ministers will have to decide to accept any changes peers make - or reject them and send the bill back to the Lords. |
| A key battleground could be Conservative and Lib Dem peers' decision to defeat the plan to exempt Northern Rock from Freedom of Information laws. | |
| 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? | 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? |
| If and when the bill completes its Lords stages - which could be as late as 2000 GMT - it will return to the Commons. | If and when the bill completes its Lords stages - which could be as late as 2000 GMT - it will return to the Commons. |
| MPs will then 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). | MPs will then 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). |
| Ex-Conservative chancellor Lord Lawson told peers on Wednesday nationalisation held "grave risks" and it was being done for political reasons. | Ex-Conservative chancellor Lord Lawson told peers on Wednesday nationalisation held "grave risks" and it was being done for political reasons. |
| During the Lords debate, he said the emergency legislation was the "second worst solution" - the worst being to give public subsidies to private buyers. | During the Lords debate, he said the emergency legislation was the "second worst solution" - the worst being to give public subsidies to private buyers. |
| Political reason | Political reason |
| "There is no public interest involved here. It is not as if we are short of mortgage-lending institutions in this country. It is not as if there is any strategic national interest in maintaining one more such institution," he said. | "There is no public interest involved here. It is not as if we are short of mortgage-lending institutions in this country. It is not as if there is any strategic national interest in maintaining one more such institution," he said. |
| "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." | "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 accused the government of trying to save the bank for political reasons because it was "sensitive about feelings in the North East". | He accused the government of trying to save the bank for political reasons because it was "sensitive about feelings in the North East". |
| Earlier Liberal Democrat Lord Newby said his party would seek "to strengthen the accountability of the government and Northern Rock, as appropriate, to Parliament". | Earlier Liberal Democrat Lord Newby said his party would seek "to strengthen the accountability of the government and Northern Rock, as appropriate, to Parliament". |
| 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. | 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. |
| Lord Newby added: "We contemplate supporting this bill more in sorrow than in anger. | Lord Newby added: "We contemplate supporting this bill more in sorrow than in anger. |
| "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." | "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." |
| Unsecured loans | Unsecured loans |
| Concerns were also raised about Granite, the Jersey-based trust to which Northern Rock sold £45bn of its most profitable mortgages. | Concerns were also raised about Granite, the Jersey-based trust to which Northern Rock sold £45bn of its most profitable mortgages. |
| 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. | 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. |
| Lord Lawson said it was "deplorable" Granite was not part of the nationalisation process. | Lord Lawson said it was "deplorable" Granite was not part of the nationalisation process. |
| It is now critical that there is a full independent audit of the quality of Northern Rock's remaining assets to determine how many of these are dodgy unsecured loans Vince CableLib Dem Darling defends Rock trustSend us your comments | It is now critical that there is a full independent audit of the quality of Northern Rock's remaining assets to determine how many of these are dodgy unsecured loans Vince CableLib Dem 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. | 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." | "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. " | 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. " |
| 'The better option' | 'The better option' |
| He said the future of the bank "ultimately" lay in the private sector but the two private sector bids the government had considered involved risk to the taxpayer and a "very significant implicit subsidy" from the Treasury. | He said the future of the bank "ultimately" lay in the private sector but the two private sector bids the government had considered involved risk to the taxpayer and a "very significant implicit subsidy" from the Treasury. |
| "By contrast, under public ownership the taxpayer will secure the entire proceeds of the future sale of the business, in return for bearing the risks during the present period of market uncertainty," he said. | "By contrast, under public ownership the taxpayer will secure the entire proceeds of the future sale of the business, in return for bearing the risks during the present period of market uncertainty," he said. |
| "Therefore 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." | "Therefore 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." |
| Chancellor Alistair Darling defended a decision not to nationalise Granite after criticism from the Lib Dems and Conservatives. | Chancellor Alistair Darling defended a decision not to nationalise Granite after criticism from the Lib Dems and Conservatives. |
| The Lib Dems are expected to support nationalisation but Vince Cable said Chancellor Alistair Darling had not answered key questions on Granite when he met Mr Darling to discuss the plan on Wednesday. | The Lib Dems are expected to support nationalisation but Vince Cable said Chancellor Alistair Darling had not answered key questions on Granite when he met Mr Darling to discuss the plan on Wednesday. |
| "It is clear that many of Northern Rock's best assets have already been hived off to Granite, said Mr Cable. | "It is clear that many of Northern Rock's best assets have already been hived off to Granite, said Mr Cable. |
| "It is now critical that there is a full independent audit of the quality of Northern Rock's remaining assets to determine how many of these are dodgy unsecured loans. | "It is now critical that there is a full independent audit of the quality of Northern Rock's remaining assets to determine how many of these are dodgy unsecured loans. |
| "Despite some reassurances from the Chancellor, the government has still failed to make clear what the relationship between Northern Rock and Granite will be in the future." | "Despite some reassurances from the Chancellor, the government has still failed to make clear what the relationship between Northern Rock and Granite will be in the future." |