This was the report in "Hansard" of Vince Cable's superb critique of the Northern Rock situation. So much for Gordon Brown's reputation for financial prudence:
Dr. Vincent Cable (Twickenham) (LD): I congratulate the Chancellor on brilliant originality. The Government, through their bond guarantees, are solemnly undertaking to repay the Government. The taxpayer is standing behind the taxpayer and we have a private sector solution without private money as well as nationalisation of liabilities and losses and privatisation of profits. It requires a special sort of genius to dream up such an idea and I hope that the Government’s financial advisers have been well rewarded.
I am tempted to recall the Danish economist, Hans Christian Andersen, who told the story of the two conmen who visited a particularly credulous king to sell him an imaginary suit of gold to cover his nakedness. We have a naked King Gordon, desperately trying to cover his embarrassment over the “n” word “nationalisation”.
It was said this morning in the City that the financial value in the insurance markets of the guarantee of the bonds was £2 billion. Since the private buyers are not providing that money, where will it come from? Are we talking about a guarantee of a guarantee? How else will it be funded?
The Chancellor said that there would be a profit-sharing arrangement between taxpayers and the private owner, but no numbers were given. Is it true, as the Financial Times reported this morning, that the proposal is likely to be for a 5 to 10 per cent. Government equity stake, with 95 to 90 per cent. of the uplift going to the private owner? If the proposal is of that order of magnitude, what is the position, if there is to be profit sharing, of the Northern Rock Foundation? The Chancellor mentioned it in the context not of profit sharing but of nationalisation.
Since we have heard from the north-east of England, the Chancellor will know that the Treasury’s private sale document made not a single, solitary reference to jobs or the future of the region, so what is its role under the proposals?
This morning, the BBC’s political correspondent described Mr. Branson as the “cat what got the cream”. I do not know what that is, but Mr. Branson appears to be the Government’s preferred bidder. Can the Chancellor tell us what Mr. Branson is going to contribute? My understanding is that he is proposing to put in £250 million in kind, not cash, to acquire a bank worth £100 billion, or 40 times that value. He has never run a bank, and I believe that the profits will be routed through a Caribbean tax haven, so what benefit does the taxpayer derive from his participation?
Finally, as the Conservative spokesman has already noted, Northern Rock shares have soared, while the British and other international stock markets have fallen. The only cheerful faces this morning were those of the two equity fund investors who made a speculative punt on Northern Rock a few months ago and have now recouped their investment. Meanwhile, the taxpayer is being taken for a very big ride. That will continue until the Government adopt the honest, transparent solution of taking the bank into public ownership.