My Lords, I thank the Minister for that substantive reply, but after the Government have forced through Parliament the biggest takeover ever anywhere of a failed private company, we still do not have much of the information which we ought to have. Will the Minister clarify two points arising from his Answer? First, he rightly says that the Government have taken over Northern Rock by taking over its shares, which of course own its assets and liabilities, but the Granite trust was consolidated on the group accounts of Northern Rock. How then has the Granite trust not been nationalised?
Secondly, before nationalisation, the Government said that the Granite trust was effectively controlled by Northern Rock. Is it still controlled by Northern Rock and, if so, has it not been nationalised?
No, my Lords. The Granite companies are separate and therefore have not been nationalised. Let me make it clear to the House that the relationship between Northern Rock and Granite is paralleled in a number of building societies with similar securitisation companies related to them. The concept of securitisation is that the companies are separate from the main company. They raise their money through bond holders and it is to the bond holders that they are responsible. Granite is responsible for that, which is why the Government cannot be and are not responsible for Granite and its assets. The Government are responsible for Northern Rock.
Lest it be thought that the Government are less than clear on these matters, which may be a reflection of competence at the Dispatch Box in my case, all these issues are clearly in the public domain on the Northern Rock website. Anyone with a keen interest in the relationship of Granite to Northern Rock has full access to the position, where they will see that the two groups of companies are separate.
My Lords, I appreciate that my noble friend is trying hard to explain exactly what has happened. But I remain, I must confess, confused. The fact is that yesterday he told us that,
“Granite has no relevance to the public position”.—[Official Report, 26/2/08; col. 553.]
But the Chancellor, in his technical note to Vincent Cable, said—the noble Lord, Lord Higgins, has repeated it—that Granite is effectively controlled by Northern Rock. It goes on to say that Granite is consolidated in Northern Rock’s group balance sheet. Perhaps I am a bit out of touch with accountancy matters, but if a group balance sheet has the assets and liabilities consolidated, how is it not part of the group we have taken over? If my noble friend does not feel able to answer a technical question, I would be happy if he would let me have a technical note explaining it in full.
My Lords, I would be happy to furnish that to my noble friend, but that might not meet the full needs and requirements of the House. The Government have taken over Northern Rock because it is separate from Granite. The fact is that Granite appears in the group accounts, but we have not taken over the group. We have taken over Northern Rock plc. Northern Rock controls Granite because Granite cannot get resources from any source other than Northern Rock. It is not getting resources at present because Northern Rock has not sold any mortgages to Granite since September 2007. These mortgages are the basis of the resources that Granite controls. Therefore, when the Government take over Northern Rock plc they have a position where Northern Rock plc is the only controller of Granite, but that does not mean that Northern Rock is responsible for the liabilities of Granite. The bond holders are responsible for that.
My Lords, at the end of 2006, there were £550 million of liabilities in Northern Rock’s Whinstone SPVs, which were intimately bound up in guaranteeing the Granite arrangements. Are those Whinstone liabilities included in the nationalised balance sheet or not? How can they be kept separate from Granite?
My Lords, I welcome the noble Baroness’s return, as does the whole House. She will have detected that in her absence, various odd names have popped up in our debates. We had Dolerite last week, and I was able to dispense with it. The company she identifies has never appeared on the radar of any note that I have ever seen in relation to this issue. I assume that, like Dolerite, the noble Baroness is talking about a redundant vehicle.
My Lords, Northern Rock controls Granite because Granite cannot and does not function beyond the sale of Northern Rock mortgages to Granite. I repeat, Granite has not been receiving additional resources from Northern Rock since September 2007. But because of its structure, the liabilities of Granite, which are the issue of the Government’s guarantee and the taxpayer exposure, are in fact the bondholders, not Northern Rock. That is why the taxpayer is not exposed to any issue with regard to Granite.
My Lords, does my noble friend recall that I said at Second Reading that the Government had not bought Granite because its liabilities should not be the responsibility of Northern Rock? That explanation should have been sufficient not only for my noble friend, but for noble Lords opposite. I do not understand why they go on asking about it.
My Lords, I imagine that my noble friend has a siren voice rather than the voice of the prophet in these terms, and therefore does not carry quite the authority we need, and clearly I do not either.
Let me reassure the House on this score. There is nothing exceptional about the Granite group of companies. Other hugely respected building societies have securitisation vehicles on exactly the same legal basis as Granite. The Government have nothing at all to hide on this issue. Let me also make the obvious point that it is only a month until Northern Rock produces its accounts and only a month until the relationship between the Treasury and Northern Rock with regard to its future is made public in the strategic plan. Given that, why on earth would the Government be involved in any exercise other than one of complete openness on what I admit is a difficult issue?