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The hon. Gentleman asked about the Icelandic banks, and the hon. Member for Tatton, who speaks for the Conservatives, also raised the question of councils. What we can do is make sure that we look after the retail depositors—the ordinary men and women who put in their money, and might not have fully appreciated that Icesave is a branch of a foreign bank and not incorporated in the UK. I understand the position of
local authorities, but they are in a slightly different situation, in that they are a more informed investor. However, as I said earlier, the situation is evolving; we are trying to sort the matter out with the Icelandic Government. I have had conversations with Icelandic Ministers—both the Prime Minister and the Finance Minister. In addition, one of my ministerial colleagues hopes to speak to the Icelandic Finance Minister again today.
On the point about the Justice Secretary, I have spoken to my right hon. Friend about the points relating to repossessions—not just today—and I am sure he will pursue the matter.
Mr. Michael Meacher (Oldham, West and Royton) (Lab): If £250 billion has been pre-emptively committed to securing the banks, for reasons that we all understand, how does my right hon. Friend envisage funding, presumably, stage 2 of his recovery plan—securing the real economy, manufacturing industry and jobs—if in fact a recession has already been set in train? I recognise that, of course, safeguarding the banks must come first, as clearly it must, but what leverage do the Government and taxpayers have to ensure that credit starts to flow freely again to businesses, mortgages and employment if long-term incentives have been given to the banks without—it appears—any enforceable conditions?
Mr. Darling: I am glad that my right hon. Friend agrees that we need to support the banking system. I refer him to what I said in the last few exchanges about how we propose to enter into agreements with the banks concerned. He rightly says that we shall need to take further steps to ensure that we protect the economy and jobs, which is something that I will return to in the pre-Budget report.
Mr. Michael Howard (Folkestone and Hythe) (Con): Does the Chancellor accept that yesterday’s gyrations in the markets were due in large measure to leaks and briefings from the Government? Is it not the case that such preferential disclosure is both highly improper and probably illegal, so will he invite the Financial Services Authority to carry out an investigation into his Department and No. 10 to identify those responsible for such disclosure, and take all appropriate action in the light of the findings?
Mr. Darling: No, I do not agree with the underlying premise of the right hon. and learned Gentleman’s question. Speculation, especially in relation to things that are highly market-sensitive, is deeply regrettable and it should not happen. I agree with him on that, but I do not agree at all with the other suggestions he was making.
Mr. Chris Mullin (Sunderland, South) (Lab):
I am sure that my right hon. Friend shares the joy of the whole House that the shadow Chancellor has managed to wipe that perpetual smirk from his face. May I put it to my right hon. Friend that memories in the City are short? There is a danger—is there not?—that once this crisis has blown over, although it may take some time to do so, old habits will be reverted to. He may recall that in the 1970s the building societies got themselves into similar trouble, although not quite on this scale, and had to be bailed out by the then Labour Government,
but before long they were back at it again. What assurance can he give that the measures he takes to deal with the excesses of the past will make sure that they never recur?
Mr. Darling: My hon. Friend raises a valid point. Memories can be short. In another 15 years, when there is another generation, there is that risk. That is why we have to make sure that our regulatory system is constantly kept up to the mark, to take account of the fact that markets change, practices change and people change. People forget what happened in the past, so it is important that we maintain a collective memory both in the private sector and also, I suspect, in the public sector. It is very important, and we need to make sure that the regulatory system helps us to do that. Companies themselves have a responsibility. The first line of defence against irresponsible risk taking ought to lie in the boardrooms of British companies, and directors of companies should never ever forget that.
Mr. George Galloway (Bethnal Green and Bow) (Respect): When the Liberals sound like Labour and the Conservatives like communists, the kaleidoscope has definitely been shaken—but while the pieces are in flux, why do we not reorder this world? What is so wrong about the taxpayer having a seat in the boardroom? Fifty thousand million pounds will buy a chair in any boardroom in the world. It would be taxation without representation, and will run the risk that the hon. Member for Sunderland, South (Mr. Mullin) has just adumbrated—that without a Government presence in the boardroom, those habits will soon be reverted to again.
The Chancellor and the Prime Minister have performed admirably and impressively over the last couple of days, but the real test will be how they respond to the crisis in the real economy. The country will not understand if banks can be bailed out but factories can go to the wall, jobs can be lost and the public can lose their houses.
Mr. Darling: I am grateful to the hon. Gentleman for his unaccustomed support for our position. I shall make the most of it.
In relation to Government nominees sitting in boardrooms, I never thought that a particularly useful course of action to follow—
Mr. Darling: Oh no I didn’t—and now I know who wrote that column in Private Eye; I always thought it was the hon. Gentleman. I appreciate what he says, but as with so many of the other things he has said, we shall probably have to part company on it.
Mark Durkan (Foyle) (SDLP):
I join other Members in welcoming the Chancellor’s statement, the scale of the action the Government have taken and the calibration of the risk involved. The Chancellor said that in return for Government support for the banks, the Government will be looking at executive pay, dividend payments and lending practices. Will they also keep an eye on the banks’ investment practices, so that they do not get back into speculating on futures and commodity indices so that they fuel energy and food price rises in ways that we have all suffered from? Can he assure the House that no matter what it takes, this will never turn into the
taxpayer being taken for whatever? To help in that regard, will he support the establishment of a special Committee of the House to oversee these exceptional measures—to oversee both how the banks use and respond to them, and the returns that come to the taxpayer?
Mr. Darling: I expect that the Treasury Committee, with good reason, probably believes that is one of the things it is supposed to do. I am sure that our right hon. Friend the Member for West Dunbartonshire (John McFall) will want to reflect on what the hon. Gentleman has just said. However, he makes a fair point. For good and understandable reasons, which I think are shared everywhere in the House, we have had to intervene in these exceptional circumstances, to maintain stability in the banking system. Banks, too, have to remember that they need the public’s support. Just as in the good times they go out trying to win customers, I hope they also remember that in more difficult times people will appreciate it if the bank stands by them.
Mr. John Greenway (Ryedale) (Con): The Chancellor referred to the regulation of the Financial Services Authority. Another feature I should like to remind him about is the requirement for retail banks to abide by the principles of treating customers fairly. He has announced a very welcome cut in interest rates today, and we hope there will be further cuts to come. Surely, any banks helped by this system should treat their customers fairly by ensuring that those interest rate reductions are passed on to home owners and borrowers.
Mr. Darling: I am sure that many, if not most, people in this country agree with those sentiments.
Mr. Gordon Prentice (Pendle) (Lab): Given that we are compensating people who lost money in the Icelandic banks, does the Chancellor agree with me that it would be fair to look again at the collapse of Equitable Life, which, the parliamentary ombudsman tells us, was a result of a decade of regulatory failure? Would not people who lost money in Equitable Life look askance at people who put their money overseas being compensated when they were not?
Mr. Darling: The reason for my decision in relation to the Icelandic banks is the systemic problems that we now face in the banking industry. The Government will report on Equitable Life shortly, and of course the ombudsman’s findings will be taken into account, but we also need to take account of the findings of Lord Penrose, who investigated what happened at Equitable Life at some length and concluded that that company was substantially the author of its own misfortunes. We have a duty to treat policyholders fairly, but, as people have been saying today, we also have a duty to be fair to taxpayers. I will report back to the House as soon as I can.
Stewart Hosie (Dundee, East) (SNP): I thank the Chancellor for advance notice of his statement. I very much welcome it because it is systemic and comprehensive, which I had asked for, and because the package as a whole is big enough to be very credible and to deliver confidence and stability. I hope that it does so. I particularly welcome the additional liquidity, and the fact that the Government will stand behind interbank loans.
The Chancellor said that he would guarantee that no depositor would lose money as a result of the problems at Icesave, and implicit in much of what he has said recently is that no depositor will lose money in the event of the failure of a UK institution. Notwithstanding my welcome for the package, I must ask him whether he stands ready to make his implicit all-deposit guarantees explicit, if required?
Mr. Darling: I am grateful to the hon. Gentleman for his comments on Icesave and what I said about the retail depositors there. I have always been clear that it is very important to protect the interests of savers and depositors and to give people reassurance. I have also said on many occasions that I will never rule anything out. In what we have done so far, approaches have varied from institution to institution. For example, there are legally binding guarantees in place in relation to Northern Rock, and in relation to Bradford & Bingley, we were able to transfer people’s savings accounts to Abbey Santander, so they have the backing of one of Europe’s biggest banks. We deal with these matters as we think appropriate, but the hon. Gentleman is correct: giving confidence to savers is important.
Joan Ryan (Enfield, North) (Lab): I welcome the package of proposals and the decisive action announced by the Prime Minister and the Chancellor this morning. Hard-working families in my constituency want assurances that the package will afford them greater protection and will not just be a bail-out for the banks. Will my right hon. Friend assure me that in the coming weeks and months, he will continue to communicate to those hard-working families that this Government’s priorities are their savings, their pensions, their jobs, their homes and their security?
Mr. Darling: My right hon. Friend is absolutely right: we should all remember that, at the end of the day, we are here to look after the interests of the people we represent—the people of this country and their businesses. That is what we are here for. We talk about ensuring the stability of the banking system, but we must remember what that actually means to people: if we do not have a banking system that functions properly, the first to be affected are our constituents. We need to make sure that they are protected.
Angela Browning (Tiverton and Honiton) (Con): I welcome what the Chancellor said about Icesave today. A recently retired couple in my constituency sold their home and deposited all they have—the £740,000 proceeds of the house sale—in a six-month bond with Icesave, so they will be particularly pleased. The Chancellor said that he would give more information later today. Will he tell us when depositors will be given clear guidance on how to recover their money—I suspect that they will want to do so as soon as possible—and what sort of time frame he is working to?
Mr. Darling:
The hon. Lady asks a perfectly good question. The financial services compensation scheme, which is the lead organisation for dealing with this matter, has already issued guidance and it will issue further guidance as soon as it can. For our part, as I said in reply to the hon. Member for Twickenham (Dr. Cable), we shall continue to pursue with the Icelandic
Government their responsibilities here. When one has responsibilities to people outside one’s own country, it is important to stick by them. I understand Iceland’s problems, and I hope that the authorities there will work closely with us to resolve them.
Phil Wilson (Sedgefield) (Lab): Does my right hon. Friend agree that the financial support for banks that he has announced today is the most comprehensive package in the world, that it puts us ahead of the game, and that it proves that the Government is not in the hands of a novice?
Mr. Darling: The steps that we have taken today are important, but I would say to the House that they are part of a process. What is going on in the world today has had severe implications in almost every corner of the world, and the reasons for these events are sometimes quite complex. Today’s steps are important, but I hope that other countries will help. We need to do what we can to help our banks and the banks here in this country, but that support must be replicated in other parts of the world.
John Hemming (Birmingham, Yardley) (LD): The Chancellor will be aware that the tier 1 and tier 2 capital ratios are a better indicator of a bank’s stability than its share price. The Financial Services Authority will not publish those capital ratios, although the banks themselves might do so. Will the Chancellor discuss with the FSA the potential for a mechanism whereby ordinary investors can have access to a list of the tier 1 and tier 2 capital ratios, so that we do not have this unhealthy concentration on daily movements in the share prices?
Mr. Darling: I cannot give the hon. Gentleman any undertakings on that today, but I will raise the matter with the FSA. I shall write to the hon. Gentleman and arrange for a copy of the letter to be placed in the Library.
Colin Burgon (Elmet) (Lab): Will the Chancellor put my fears to rest? I see the market putting its invisible hand into the pockets of the taxpayer, taking £50 billion away and perhaps putting up two fingers as well. Can we arrest that? Does he agree with me that, in the wider context, what the international crisis represents is the end of neo-liberal ideas about the supremacy of the market, and all that that means in the social and political spheres and every other sphere of our lives?
Mr. Darling: I was going to say, in the nicest possible way, that my hon. Friend sounds like a new Conservative, but I am sure that he does not mean to. I do not agree with everything he says. On the availability of funds, if banks choose to use the recapitalisation fund rather than raise money on the markets, it will be in return for, usually, preference shares, and they will be remunerated in the usual way. As I said, other agreements will go with that.
Mr. Andrew Tyrie (Chichester) (Con):
I am glad that the Government have finally acted to recapitalise the banks. Of course, the litmus test of whether it works will be whether the interbank market unfreezes. The Chancellor has been closeted with the key banks for the past 24 hours. What estimate have they given him of the likelihood of an early unfreezing of that market—
particularly before Christmas, which is one of the deadlines in his press release on the implementation of the scheme?
Mr. Darling: The hon. Gentleman knows very well that there is a lot of uncertainty in the market at present, but I hope that the measures will help. It will be helpful if our action is complemented by action taken in other parts of the world. One of the reasons why I attach so much importance to the meeting of the European Finance Ministers yesterday and the G7 meetings this weekend is that countries can do a lot themselves. Our interbank rate is lower than the United States’ rate at the moment, and obviously we would all like to see it lower still, but it is important that countries—especially the larger developed economies—act together in relation to both the banking system and their wider economies. It is all about restoring and building confidence.
Mr. Geoffrey Robinson (Coventry, North-West) (Lab): I congratulate my right hon. Friend on his comprehensive and substantial set of proposals to restore confidence in the banking system, in which every citizen of this country has such a large vested interest. In particular, I congratulate him on his coup in obtaining a co-ordinated reduction in interest rates on a wide international scale, in which we know he played a leading role. As far as small businesses are concerned, I congratulate my right hon. Friend on the great measure that he has taken to provide liquidity and working capital requirements, which, as we all know from experience in our constituencies, is now very necessary. Only one point in his statement was not clear: are the shares that he proposes the Treasury have the right to subscribe to intended to be convertible? If not, I urge him to consider making them convertible, as that would ensure a further return to the taxpayer on another front.
Mr. Darling: Again, I am grateful to my hon. Friend for his support, and I agree with him about the decision taken by the Bank of England, which of course is independent of the Government; I attach considerable importance to that. The fact that it and the other central banks of all the major economies took the same decision at the same time sends a very important message. That very much complements what we have announced today.
Mr. Hugo Swire (East Devon) (Con): Many smaller companies, particularly those trading in the emerging markets, are reliant on central banks to minimise regulation. There has been evidence recently of some central banks blocking money. Given the importance of cash flow to those smaller companies, will the Chancellor consider extending the export credits guarantee system to cover some of those smaller trading companies?
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