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Mr. Charles Walker (Broxbourne) (Con):
Can we cut through the rhetoric and some of the political consensus? Can I tell the Chancellor how furious my constituents are at the moment? They have been led up the garden path by bankers, the regulators and this Government,
and sooner or later, the right hon. Gentleman and the Prime Minister are going to have to say sorry. A lot of good, decent, ordinary people are hurting as a result of the actions and failure of this Government.
Mr. Darling: I agree with the hon. Gentleman to the extent that every one of us represents people who see what is going on and find it hard to understand how on earth some of the banks have got themselves into their current position. But what they expect the Government to do, and what they expect us as Members of this House to do, is to act together to sort things out, rather than engage in the usual Punch and Judy show, which does no credit to anyone in this House.
Paul Farrelly (Newcastle-under-Lyme) (Lab): I congratulate my right hon. Friend on the action he has taken today. May I remind him of the old adage that when times are good, investment bankers take too much out, and when times are bad, they put absolutely nothing back in? One example is that of Mr. Bob Diamond, who heads Barclays investment banking division. He took £6.5 million as a performance bonus in cash last year, and more than £11 million in shares. I used to work for Barclays bank; it is not taking taxpayers’ support today but may do so in future. It has also bought Lehman Brothers and a ring-fenced bonus pool on Wall street. Could I therefore ask the Chancellor to make sure that where bankers have taken out huge bonuses, they are encouraged to put them back in as fundraising, as an example to ordinary shareholders and the taxpayer? On the example of Barclays, would he agree that it would be obscene to pay out huge bonuses on Wall street when it has cancelled a £2 billion dividend that would have gone into the pension funds of many ordinary people?
Mr. Darling: As my hon. Friend says, Barclays has not taken funds from the bank reconstruction fund, so it would not be affected by the agreements to which I referred. However, Barclays will no doubt have heard what he said.
Mr. John Maples (Stratford-on-Avon) (Con): The next Conservative Government are looking forward to selling back these shareholdings at a considerable profit. One of the things that might endanger that is a return to 2007 levels of mortgage lending. The Chancellor said that that applied only to RBS, HBOS and Lloyds, but those first two were the two worst offenders. I do not know whether the Chancellor is still a monetarist, but that year was the peak year of broad money growth at around 13 per cent., and if we return to that rate, these problems will return. I hope that he does not quite mean what he said in the press release.
Mr. Darling: As I have said on a number of occasions this afternoon, we want to ensure that the availability is there. But of course, we have to ensure that banks do not return to lending money when the person borrowing it has no prospect of meeting the payments or where the security will never be able to meet the value of the loan. Responsible lending is absolutely key to the institutions in question if they are to get through this period, and everyone knows that.
Mr. Gordon Prentice (Pendle) (Lab): Will our three board members at the Royal Bank of Scotland have the power of veto? Will we know when their views diverge from those of other members of the board?
Mr. Darling: Any director of any bank has exactly the same powers and responsibilities.
Malcolm Bruce (Gordon) (LD): Will the Chancellor acknowledge that the demutualisation of many building societies and insurance companies in recent years has reduced the diversity of our financial institutions, causing many of them to overreach themselves? Given that the Scottish banking system is now majority-owned by the Government, will the Chancellor use his influence to keep HBOS and Lloyds TSB as separate institutions in order to maintain diversity, and to find new ways of building financial institutions that will not make the mistakes of the past?
Mr. Darling: No; I do not entirely agree with the right hon. Gentleman. I do think that it is unfortunate, but I think I am right in saying that every building society that demutualised now either belongs to or has merged with someone else, or is not around any more. On the other hand, it has to be said that, if we look back to even a short time ago, the number of products available and the competition in the system were far greater than in the past. It is important that we have a proper, competitive mortgage market, but I do not agree with what the right hon. Gentleman says about Lloyds TSB and HBOS. That is a decision that the boards of those two companies have taken, and that is the right way to proceed. They need to take commercial decisions. Of course we will have directors on the boards, because of our very substantial financial stake, but people have tried in the past to ensure that the structure of the market and the number of people in it do not change, and it simply does not work.
Mr. Michael Meacher (Oldham, West and Royton) (Lab): Surely the purpose of taking public control of a bank should not merely be to stabilise it before returning it to the private sector? Should it not also be to tackle the fundamental causes of the present turmoil by changing the banking system’s approach to speculative trading and to the use of hedge funds, derivatives, offshore accounting and securitisation, as well as to the obscure reporting of corporate risk and sometimes dodgy auditing? Will my right hon. Friend confirm that the £50 billion of taxpayers’ money will not be used purely to fund the bankers, and that it will be used to change the malign banking practices that have brought us to this pass?
Mr. Darling: The problems to which my right hon. Friend refers need to be addressed by the regulatory system, but it is regulatory reform that will do that, rather than the role of the individual directors of two banks. I agree with him, however, that many issues need to be addressed.
Bob Spink (Castle Point) (UKIP): I welcome the Chancellor’s statement on the accelerated payouts to depositors in Icelandic banks. Will he try to put some kind of time scale on when British citizens might be able to get access to their individual savings in those banks?
Mr. Darling: There are two issues here. In relation to the financial services compensation scheme: yes, we have said that we will stand in the place of the Icelandic authorities for the retail depositors who will be covered by the scheme, and I would like to ensure that those payouts take place as quickly as possible. In relation to a broader resolution with the Icelandic Government: yes, I would like that to be resolved quickly too, but that will also involve the Icelandic Government addressing some of the fundamental problems that Iceland now faces.
Clive Efford (Eltham) (Lab): I congratulate my right hon. Friend on the prompt action that he took following the collapse of Northern Rock, in passing the Banking (Special Provisions) Act 2008. That gave him the powers that have enabled him to introduce this rescue package for the banks. I wonder what has given him the greatest sense of relief: the fact that the House passed that legislation in the face of opposition from the Conservatives, or the respect and support that he has received from the Leader of the Opposition and his shadow Chancellor.
Mr. Darling: My hon. Friend is right. Without the Banking (Special Provisions) Act, which the House passed in February, we would have been in an extremely difficult position, because we would not have been able to bring about many of the solutions that we have put in place over the past few weeks. That is why I very much welcome cross-party co-operation. There are lessons to be drawn from February. Of course there is a place for proper scrutiny and constructive criticism, but I hope that, in relation to the Banking Bill, we will get that cross-party support, not least because we need the legislation to be on the statute book by the time the Banking (Special Provisions) Act lapses in mid-February next year. I very much welcome the offer of support that has been given—I am quite convinced that that was done in good faith—by those who speak for the Opposition parties.
Sir Peter Viggers (Gosport) (Con): Does the Chancellor agree that the nearest parallel to the present situation is that of Lloyd’s of London in the 1990s, when a cycle of inter-trading by dealers resulted in all the assets being regarded as suspect and tainted? Is he aware that Lloyd’s of London resolved the problem by identifying and isolating the so-called tainted assets so that the purged body could move on, and that it is in such a purged body that new investment would best be made?
Mr. Darling: I do remember the problems at Lloyd’s in the early 1990s, and I know that they were the subject of much debate in the House at the time. I also know what solution was pursued. The problems then applied to Lloyd’s of London, but today’s problems are much more widespread, so the scale of the problem is much greater. The measures on capitalisation that we are proposing address the problem, albeit in a different way.
Laura Moffatt (Crawley) (Lab): Has my right hon. Friend made an assessment not just of the innovative deal that is allowing the country to move forward with its banking, but also of the Government’s adoption of a leadership role in the world? What benefits will that give to hard-pressed mortgage payers and our business community, which is struggling to act? Will he explain how our leadership role will help to stabilise our communities?
Mr. Darling: The answer is, as everyone knows, that this problem is affecting every part of the world. The problem started in the American sub-prime market last year; it spread within weeks to this country and it has subsequently affected every other country. Even countries that believed that they did not have a problem can now see that they are being affected by it. A global problem needs a global solution, but we will play our part here in the UK. We have been anxious to take action, together with other countries. There has been no reluctance on the part of others. At the weekend, I was struck by the fact that many Ministers recognised that they, too, needed to take action. In some ways, the challenge for everyone is to make sure that we stay ahead of all this. Some things that might have been unthinkable even a month ago, and certainly six months ago, need to be thought about now because they may actually provide a way through.
Mr. James Paice (South-East Cambridgeshire) (Con): The Chancellor is obviously very unhappy about how banks have allowed domestic debt to rise over the last decade or so to exceed £1 trillion. Is he equally unhappy about the fact that his predecessor did nothing about it?
Mr. Darling: I am always intrigued at the line that the Conservatives take on this. If they want to restrict personal debt, there are two ways of doing so: one is to ensure that loans are priced at such a level that people cannot get them, and the other is rationing. I know that the Conservative party is much more interventionist now than it was just a few weeks ago, but that strikes me as odd. There are two other points to bear in mind. Yes, people did borrow more, not only because rates were lower but because their assets had increased in value. The central point is surely this: do we not need to ensure that whatever lending takes place is sensible, prudent and sustainable from both the borrowers’ and the lenders’ point of view?
Sir Nicholas Winterton (Macclesfield) (Con): Does the Chancellor accept that because of the banking crisis, many of my constituents are deeply anxious about their financial future? They say to me, “Sir Nicholas, I hope that those who are responsible within the banking system will not benefit from the rescue package.” They also tell me that they hope that the world, let alone this Chamber, the House of Commons, will be united in what needs to be done until the financial crisis is ended and stability and confidence are restored. Does the Chancellor agree?
Mr. Darling: I am glad that the hon. Gentleman commands such respect and affection in his constituency—and I agree with what he says.
Mr. Elliot Morley (Scunthorpe) (Lab): I very much agree with bodies such as the Engineering Employers Federation that the Government have taken bold and decisive action in dealing not only with the financial system, but with industry and manufacturing industry in particular. I ask the Chancellor to keep a close eye on the need of some manufacturing sectors, particularly capital-intensive sectors such as steel, for funds to be available for essential investment.
I listened carefully to my right hon. Friend’s comments on the Icelandic situation—I very much support the steps that he is taking—but my own council, North Lincolnshire, is one of those affected. He will understand that there is great concern about the £5.5 million, which it cannot access.
Mr. Darling: My right hon. Friend has raised that matter with me and quite rightly he is concerned about the position that his council faces. I refer him to what I have said a couple of times this afternoon: we need to resolve this matter, and I hope that we can make some progress. The discussions that I had with Iceland’s Finance Minister were constructive. That is the best way to resolve the problem, so that we can ensure that people in the UK are not cut off from whatever Iceland’s Government are doing within their own borders.
On the general points made by my right hon. Friend, I come back to a point that has been raised many times this afternoon. Yes, we want to try to get back to a situation in which businesses can borrow from banks and banks feel confident to lend to them. Two things are necessary: we have to get through the blocking up of lending, which is what today’s measures are designed to help with—it will take time, but it is an essential step—and we must ensure that we support the economy at this time, which we fully intend to do.
Our economy has grown strongly for the past few years. Obviously, like the economies of other countries, our economy is slowing down, but we want to get through this period because that is the best way to support businesses, including the steel industry, in the longer term.
Susan Kramer (Richmond Park) (LD): Over Thursday and Friday, I talked with a number of small businesses in my constituency. Many businesses that historically have never had lines of credit need them now because their customers are paying late, but those businesses know that they will not be attractive to the banks as customers. Will the Chancellor please give the banks a kick up the backside to ensure that they help companies of that kind, which are in difficulty only because of a situation generated by the banks themselves?
Mr. Darling: I said last week that I hoped that banks would remember that, just as in the good times, when they go out trying to get as many customers as possible, they need to be good to their customers when times are more difficult.
Rob Marris (Wolverhampton, South-West) (Lab): Well, it is Baroness Margaret Thatcher’s birthday today and Labour is nationalising banks—oh happy days! My understanding is that, this morning, the Royal Bank of Scotland was worth considerably less than £20 billion. Can my right hon. Friend explain why the Government are paying £20 billion for 63 per cent. of something that was worth a lot less than £20 billion?
Mr. Darling: First, the share price of banks and companies varies from day to day. We believe that this level of recapitalisation is necessary and that it is the right thing to do. I am determined to see it through.
Points of Order
Mr. Speaker: Order. I call Mr. John Maples.
Mr. John Maples (Stratford-on-Avon) (Con): On a point of order, Mr. Speaker. Documents published this weekend under the Freedom of Information Act 2000 show that my hon. Friend the Member for Mid-Worcestershire (Peter Luff) and I were deliberately misled in the House in November 1997 by the then Prime Minister about the Ecclestone affair. The documents show that the Prime Minister had decided on 16 October of that year to seek a derogation for Formula 1 from the tobacco advertising ban. That was immediately after he had met Mr. Ecclestone. In answer to us, the former Prime Minister stated that no decision had been made on 16 October.
The House must assert its right to truth from Ministers. Can you, Mr. Speaker, tell me how we can amend our rules to achieve that? I urge you to give us a lead in this matter so that we can insist on full and truthful answers from Ministers and a sanction against those who mislead us.
Peter Luff (Mid-Worcestershire) (Con): Further to that point of order, Mr. Speaker. You will understand that my hon. Friend the Member for Stratford-on-Avon (Mr. Maples) and I would know what to do were the gentleman in question still a Member of the House. That is not the case, so it is all the more important that the record be corrected. Even if you cannot rule in detail today on how we can go about that, will you please set up a review of the rules to ensure that errors of this kind made by former Members of the House, probably deliberately, can be corrected? This is a matter of the utmost importance.
Mr. Speaker: I have been advised often that the content of a reply is not a matter for the Chair, but I am deeply concerned that two hon. Members have said that they were deliberately misled, albeit that the person concerned is out of the House. I suggest that, to pursue the matter, both hon. Members write to me and I will ask my officials to look into the content of the letter.
Promoting Democracy and Human Rights
[Relevant document: The Foreign and Commonwealth Office Departmental Report 2007-08, Cm 7398.]
4.34 pm
The Minister for Europe (Caroline Flint): I beg to move,
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