So far my approach to HM Government (or HMT) has been to try to embarrass them into offering compensation. However, it appears that it will be very difficult to embarrass the present government in view of all that has happened recently.
An alternative is the exact opposite. Offer HM Government a blame-free and almost painless exit.
How can this be achieved?
The Banking (Special Provisions) Act 2008 was a piece of legislation with a life of only one year. It was hurriedly put together because it was known that a much more comprehensive and longer Act was required to cope with the situation that Northern Rock (NR) presented, one that was likely to be repeated.
Presumably guided by its advisor, Goldman Sachs, the temporary act incorporated “assumptions” that had to be made by a valuer who would be appointed by the Chancellor of the Exchequer on behalf of HM Government. At that time, the assumptions were such that the only value that could be assessed on the NR shares was that they were worthless and that therefore no compensation was appropriate.
Before a professional valuer could reach that conclusion, he had to devise a means of demonstrating that NR must be insolvent. He did so by revaluing NR Assets so that they appeared to produce a deficit of 2.4 Billion pounds.
Because the 2008 Banking Act was a “stopgap” hurriedly put together and passed into law in less than one week, it was recognised that it was only a temporary solution to quickly deal with the immediate problem presented by Northern Rock at a time when it was impossible to know what the future held and all the indications were that it could spread and seriously affect other UK banks, which it did, although this did not result in the Nationalisation of the other banks.
In 2021 the nationalisation of NR was terminated, leaving HM Government with excess assets amounting to a profit of £7.82 billion.
It is proposed that, whereas the premise for the original 2008 Act was that the outcome was uncertain and could only be assessed in the uncertainties of the time, it is now known that NR had a substantial value and in fact has produced a profit for the Government, even after the shareholders have been compensated. It is appropriate for compensation to be reassessed on the facts, as they are now known.
1 March 2022
