asked Her Majesty’s Government:

Whether they have changed the remit to the Bank of England with regard to the funding of commercial banks and building societies.

My Lords, the mechanism by which the Bank of England provides central bank money for banks and building societies is a matter for the Bank, which is responsible for setting the framework of its sterling money market operations.

My Lords, I think that I am obliged for that Answer. As my noble friend will know, our right honourable friend the Chancellor did an interview with the Financial Times in which a major change was proposed, to which my noble friend has not referred. I think that I had better quote the article because it is very important. It states:

“The Bank is said to be relaxed about the ‘Cobra’ committee idea, which it believes clarifies the existing situation where the chancellor ultimately decides whether the central bank”,

should be the bank of last resort. That is quite a major change and I should be glad if my noble friend could confirm it.

My Lords, I am always distressed when my noble friend is not satisfied with my original Answer, but he was asking me about the remit to the Bank of England and the funding of commercial banks and I gave an accurate and proper response to the situation as it is now. In his supplementary he referred to the consultations taking place on possible future changes to those operations. The Chancellor indicated that such changes would be the subject of widespread consultation, which is now taking place, and that they would in due course require legislation. So we have a long way to go before these issues become effective. My noble friend will also recognise that this issue revolves around other aspects of the tripartite arrangement and not only those to which he referred.

My Lords, in the interview that the Chancellor gave to the Financial Times he seemed to anticipate a greater role for himself, as chairman of the COBRA committee, and for the FSA. What could the Chancellor or the FSA have done in the Northern Rock situation under the new powers that he anticipates for them?

My Lords, it is comforting to hear a member of the Opposition asking questions about what we could have done in the past. They have tended to lecture me on what we should have done, so there is some improvement there. It is clear, as has been expressed many times both here and in the other place, that we have lessons to learn from the development of the crisis last summer in relation to each aspect of the tripartite structure. We believe that that structure has stood the test of time and that it will continue to enjoy the confidence of the banking community and the wider public. But improvements may be effected, some of which relate to the Financial Services Authority, and the Chancellor was referring to possible changes there.

My Lords, does my noble friend recall that the legislation that set up the Monetary Policy Committee of the Bank of England referred to it being scrutinised by Parliament, by which was meant both Houses? I understand that our right honourable friend the Chancellor is appearing before the Treasury Select Committee of the other place. Has my noble friend been informed whether the Chancellor proposes to appear before our Economic Affairs Committee during this immensely important consultation period so that he might consult us on the way forward, since several of us here know quite a bit about the subject?

My Lords, although I certainly would not gainsay the latter point, my noble friend will recognise that I am not the Chancellor of the Exchequer’s diary secretary. I know of his diary commitment to appear this week before the Treasury Select Committee of the other place. It is a highly important meeting at which these issues will be covered with considerable intensity and we will all learn from those exchanges. However, I cannot hold out hope for a positive response in the near future to my noble friend’s seductive suggestion.

My Lords, does the Minister accept that the proposal in respect of the COBRA committee in reality reflects what has happened with Northern Rock, in that the Chancellor determined that Virgin should be the preferred bidder and forced that view on the Bank of England and Northern Rock? Will he further confirm or deny recent reports that both the Virgin group and the other group currently in the running to take over Northern Rock are seeking to wriggle out of their previous commitment to make an initial substantial payment back to the Bank of England as part of the deal to take over Northern Rock?

My Lords, the noble Lord is probing in a very sensitive area in terms of the development of the discussions.

Oh!

My Lords, that is all right, but the noble Lord is prone at times to be very definitive in his solutions. When he last spoke on this matter in the House, I think that he was advocating immediate nationalisation of the bank. The Government are properly keeping options open against the distinct possibility that these issues can be resolved by private company action. We must wait and see. The noble Lord and the House can rest assured that the Government want to see the outcome that best serves the public.

My Lords, a few moments ago the Minister said again that the tripartite arrangements had stood the test of time. The plain fact, as he knows, is that they failed their first real test. The Governor of the Bank of England has said that he is happy for his written advice on the tripartite arrangements in connection with Northern Rock to be made public. The Government have so far refused. What are they afraid of?

My Lords, the Government have nothing to be afraid of because we have been clear throughout these developments that we are dealing with the public responsibility. There was very considerable investment in the Northern Rock bank, a private institution which ran into severe difficulties that had the potential to produce the most deleterious consequences for the wider financial community and with a cost to the whole nation. The Government and the tripartite structure responded positively and intelligently. As there was such pressure at the time, we can learn lessons from how all three partners acted. However, as the noble Baroness will recognise, the chief executive officer of the British Bankers’ Association is broadly in favour of sustaining the tripartite system, reflecting the fact that although improvements can be made to its operation, those structures should be in place. That is the view of the banking community and of the Government.

My Lords, can my noble friend confirm—

My Lords, we are into the ninth minute.