Page last updated at 23:32 GMT, Thursday, 21 February 2008

Northern Rock bill gets approval

Northern Rock branch
The government says it is acting in the taxpayers' interests

The bill to allow Northern Rock bank to be nationalised has become law after peers backed down in their demands for extra safeguards.

The Banking (Special Provisions) Bill, which cleared the Commons on Tuesday, ran into opposition in the Lords.

But MPs rejected peers' demands for an independent audit, and for the bank to come under Freedom of Information laws.

The Conservatives said it was a matter of "deep regret" that ministers had rejected the amendments "out of hand".

A third amendment requiring the Office of Fair Trading to report annually to Parliament on the impact on competition in the UK's banking market, was rejected without a vote by MPs, after ministers offered a compromise.

Royal assent

The Lords inflicted three defeats on the government, calling for extra safeguards when the troubled bank is put into "temporary public ownership".

MPs reversed the decisions and late on Thursday peers agreed to back down, allowing the legislation to be given royal assent.

Speaker Michael Martin then informed the Commons that the bill had been given Royal Assent.

The government should have nothing to fear from the truth
Lord Hunt
Conservative peer

If peers had not backed down, both Houses could have been kept sitting all night as ministers were determined to get the emergency bill onto the statute book by Friday.

In the Commons MPs overturned calls for an independent audit by 277 votes to 167 and for the bank to be brought under the Freedom of Information Act by 268 votes to 171.

Conservative and Lib Dem peers opposed the government's decision to exempt Northern Rock from Freedom of Information laws.

In the Commons, Treasury chief secretary Yvette Cooper said it would not be right to publish "detailed commercial sensitive information" on Northern Rock and accused the Conservatives of "playing games" over a serious issue.

But in the Lords, Conservative peer Lord Hunt had said it was "imperative" that there was sufficient transparency and accountability over Northern Rock's operations as "its directors' salaries and bonuses will be paid out of taxpayers' funds".

Independent audit

He added: "The government should have nothing to fear from the truth."

Peers had also backed an amendment requiring the Bank of England to carry out an audit of the bank after three months in public ownership, then at least annually.

Northern Rock facts and figures

"There are very important reasons why there needs to be an independent audit by a firm of auditors who are not associated with the previous regime," said Lib Dem frontbencher Lord Oakeshott.

"There are very serious concerns now in the City about the last interim report - the last published report - we have seen from Northern Rock on June 30 last year."

But Lord Davies, for the government, said it was "vital" in the interests of eventually returning the bank to private ownership, "that we do not apply inappropriate public sector requirements".

"The Treasury is the public authority subject to the act and its relationship with Northern Rock as shareholder and lender will be in the public domain."

The government says the bank's audited annual accounts will be published after an independent audit, by the end of March.

In response to calls for an annual Office of Fair Trading report on the impact on competition, Ms Cooper said that the government had held talks with the OFT and recognised that Northern Rock should not "enjoy inappropriate unfair competition" with other banks or building societies.

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