Bill To Nationalise Northern Rock Will Go Before Parliament
This week the bill to nationalise Northern Rock will go through parliament following the government's announcement on Monday to put the troubled bank into "temporary public ownership."
The debate over the Prime Minister’s decision to revert to nationalisation has already struck up strong opposition from the Conservatives. David Cameron and his party are set to vote against the bill and have unleashed an attack on Mr Brown calling for the resignation of Chancellor Alistair Darling. The Tories are calling the Northern Rock outcome a 'disaster' for taxpayers.
George Osborne, Shadow Chancellor, claimed that the tax payer was now exposed to a risk of £110billion, some £3,500 for every family in Britain.
The bill, which was first published on Monday, is expected to become law by Thursday. It will be fully examined in the House of Commons with a whole day spent on going through its stages. The House of Lords will then make any necessary amendments before further review by the Commons.
Just how much compensation the shareholders will be awarded rests on the assessments made by an independent figure, who will value the bank’s shares.
The Northern Rock crisis has evoked fears that Britain's reputation as a solid financial centre has been tarnished. However John McFall, Labour chairman of the Commons' Treasury Select Committee has assured that this is not the case.
In an interview with BBC Radio 4's Today programme he said, "I spoke to the European Commission particularly on the legislative issues associated with Northern Rock a couple of months ago. What they are saying is maybe there is a flesh wound being experienced by the City of London, but it's robust enough to turn things around."
He added, "What they were saying to me was they need the UK in there to argue on the big issues of globalisation and to ensure we get regulation right in the future."
Regarding potential job losses the new boss at Northern Rock, Mr Ron Sandler, said it was too soon to discuss figures but that the bank's size would be reduced. An early prediction estimated some 1,000 job would go amongst the Rock's 6,000 employees.
Unite Union which represents 4,500 of staff at Northern Rock has called for the government to guarantee nationalisation will not lead to compulsory redundancies. The Union's deputy general secretary, Graham Goddard, said he was hopeful that an alternative could be found.
Regarding taxpayers, Yvette Cooper Chief Secretary to the Treasury, has refused to confirm the official figure of the cost of the bill for obtaining advice from banks and lawyers. The Newcastle based bank sought expert advice during its efforts to secure a private sale. It is estimated that taxpayers are faced with a bill of at least £100billion.
Ms Cooper said, "I can’t tell you the precise figures that are involved at this stage. It is right that the bank should take expert advice and the bank will pay for it."
Already taxpayers are subsidising the Northern Rock in loans and guarantees to other lenders in the region of £55bn.This figure is expected to easily rise to £110bn under nationalisation.
A spokesperson from the Taxpayer's Alliance said this was "a very big price for taxpayers," and that "Taxpayers have been saddled with debts the private sector did not have much appetite for."
Before the emergency legislation was announced on Monday all trading of Northern Rock shares were suspended. As a result, shareholders were unable to sell their holdings and are now using the government's move as 'good ground' for strong legal action.
The Northern Rock bank got into difficulties last year when its ill prepared business model collided with the freeze-up of the global credit markets.
Published on February 20, 2008
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