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Mark Durkan (Foyle) (SDLP): I join the Secretary of State in offering sincere condolences to the family of Patrick Azimkar and Mark Quinsey, their colleagues—those
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who travelled, and those who had to stay behind, both as witnesses and to offer support and comfort to the families. I also offer my sympathy to the injured soldiers and their families, and the injured civilians.

Does the Secretary of State recognise that on Saturday, the Real IRA attacked not just a British Army base but the chosen will of the Irish people, which was for a peaceful future and shared political institutions? Does he agree that, as all the parties in the Assembly seem to be saying today, the message needs to go out very strongly that it may cut down two young men on a Saturday night, but it will not bring down our political institutions, mandated by the people of Ireland, north and south?

It may gravely wound civilians, but it will not be allowed to injure the integrity of the new beginning to policing, which has been so central to delivering the degree and strength of condemnation and call for information that has been so apparent at this time. That has been on a level and to a degree not seen before, not even in the aftermath of the Omagh bombing.

Does the Secretary of State share the resolve of all the parties speaking today in the Assembly that we will allow no difficulty or difference that exists between us on any issue to be exploited by these vicious terrorists who, with their callous violence and their vicious language justifying it, want to bring us back? They may be steeped in the violence of the past, but they will not plunge the rest of us back there.

Mr. Woodward: I agree with every single word.

Sir Patrick Cormack (South Staffordshire) (Con): I am sure I speak for the whole of the Northern Ireland Affairs Committee in endorsing what the Secretary of State, the First Minister and the hon. Member for Foyle (Mark Durkan) have said.

Does the Secretary of State agree with me on two points? First, is it not crucial that every politician from whatever party who expresses support for Sir Hugh Orde, who so magnificently leads the PSNI, should accept that it is Sir Hugh’s decision and his alone where he calls for assistance in trying to anticipate attacks and to find out who has committed these barbaric attacks? Secondly, does the Secretary of State agree that it is crucial that when those who have caused such brutal murder are brought to justice, they should not think that any future political move would ever shorten their sentence?

Mr. Woodward: Of course I agree with the hon. Gentleman’s second question. In relation to the first, I endorse the fact that the Chief Constable must always enjoy operational independence.

Mr. David Anderson (Blaydon) (Lab): The clear message today is that the people of Northern Ireland will be the ones who will send the clearest message that they will never, ever let those people take them back to where those people want them to go. Will the Secretary of State join me in welcoming the decision by the Northern Ireland committee of the Irish trade union movement to call a series of peace rallies with other non-Government organisations for Wednesday lunch time, and wish them well in asking as many people as possible to support those rallies?

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Mr. Woodward: I thank my hon. Friend for his remarks, and join him in wishing the peace rallies on Wednesday every success as a show of solidarity with those who were murdered and those who were injured.

Rev. Ian Paisley (North Antrim) (DUP): It has been said that great grief is not great at talking. We know that. There is a silence in the House today; there is a silence all over Northern Ireland today. There is grieving and despair, but behind the despair there is being born a unity that we have not seen before. I am sure that the Secretary of State will want to commend the people of Antrim from all denominations who showed that they were one in condemnation and one in unity, standing together by the forces of the Crown and the police to bring those who have committed these murders to the laws of this land and to make them obey the laws of our country.

I commend publicly here today the Roman Catholic priest of Antrim. He made one of the greatest speeches that I have ever heard from any of the cloth, and he set it down to everyone that he did not want in his parish anybody like the men who did that task. Those of us who know Northern Ireland know that it takes some strength to say those words in a place like Antrim, and I trust that we will see out of this something that we never expected we could see.

I share the sentiments that have been expressed in sorrow for those who have laid down their lives. We are coming up to St. Patrick’s day. St. Patrick preached the gospel of Jesus Christ in Ireland. I was just thinking today that the only thing that these murderers have done is to desecrate the shamrock by trying to pour the blood of their innocent victims upon it. But it will not be: the truth of the gospel will prevail. I am glad of that, and I am glad that today the House has taken aboard what has been said by the Secretary of State. I am glad that the Prime Minister was able to be in Ulster and see and hear for himself what is happening. Good will come out of this evil, and we will see progress towards an absolute peace in our Province, rather than a retrograde step back to trouble and murder.

Mr. Woodward: The people of Antrim are indeed an example to us all. The right hon. Gentleman spoke of grieving, despair but also unity; perhaps he might add hope. Whatever evil may have occurred on Saturday evening, from that evil we are seeing people stronger and the institutions stronger, and very clearly resolved that they will not be damaged in any way by the acts of these barbaric few.

Stephen Pound (Ealing, North) (Lab): I hope that I may be allowed to say—on behalf, I am sure, of everybody in the Chamber and many people without it—how deeply impressive I found the statements made by the right hon. Member for Belfast, East (Mr. Robinson) and my hon. Friend the Member for Foyle (Mark Durkan). I also congratulate the Secretary of State and the Prime Minister on their rapid response, which was both right and, above all, respectful.

May I draw the Secretary of State’s attention to the remarks made by the hon. Member for Belfast, West (Mr. Adams) a few hours after the appalling incident on Saturday night? He said:

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I ask my right hon. Friend to give the House the assurance that it seeks: that there is no threat to that popular will.

Mr. Woodward: I thank my hon. Friend for his remarks and I totally enjoin myself to what he said. I entirely endorse his view that we will not allow this, in any shape or form, to be any kind of challenge to the popular will of the people of Northern Ireland. We will only do even more to ensure that democracy succeeds in Northern Ireland.

Mr. David Curry (Skipton and Ripon) (Con): Until last year, 38 Engineer was based in Ripon in my constituency and had been for many years. Does the Secretary of State appreciate the deep pride of the citizens of the second oldest city of England in the bravery of its soldiers, demonstrated notably in Afghanistan and Iraq? If any soldiers can be described as peacemakers, the Engineers must certainly qualify for the description. Would not the greatest tribute to the two soldiers, who expected to face death in Afghanistan but in fact found it on the streets of the United Kingdom, be for everybody to seek to bring to justice the people who have carried out this murder and to demonstrate, above all, that what those people did will not make the blindest bit of difference to the peace process in Northern Ireland?

Mr. Woodward: I entirely agree with the right hon. Gentleman. I extend my sympathy to him and his constituents, who will feel particularly wounded by the events of Saturday evening.

John Robertson (Glasgow, North-West) (Lab): I associate myself with the condolences that everybody has offered today; there have been many fine condolences. Little did I know when I asked my question at Northern Ireland questions that something such as this was about to happen. My right hon. Friend will be pleased, as I know other Members of the House are, that the Prime Minister’s measured response today has been well received.

I am a Member of Parliament for the city of Glasgow, and we have more than a close relationship with all sides of the divide in Northern Ireland. I am sure that the people of Glasgow will send their condolences as well. Will my right hon. Friend make sure that there are plenty of resources for the police, that they get any help that they need to make sure that the parasites who did this are taken to justice, and that the courts do everything to make sure that those people never again walk the streets of Northern Ireland?

Mr. Woodward: I can give that undertaking, as well as the reassurance that my hon. Friend the Minister, who is responsible for security in Northern Ireland and to whom I would like to pay tribute for working so tirelessly throughout the weekend, will ensure that those resources are there when they are needed.

Mr. Andrew Mackay (Bracknell) (Con): While noting that the reaction in Northern Ireland over the past 36 hours and reaction here today at Westminster makes it absolutely clear that the objectives of these callous murderers have totally failed and that the peace process will continue, I ask the Secretary of State to clarify one
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very small point. He referred several times to the “self-styled” Real IRA. Is he implying that this is not the same Real IRA that committed the awful atrocities at Omagh and elsewhere?

Mr. Woodward: I thank the right hon. Gentleman for his comments. The reason why I refer to it as the self-styled Real IRA is that it chooses another name. Of course, they may well be the same group of individuals responsible for the barbaric act in Omagh, but I say “self-styled” because we should be under no illusion: these are barbaric criminals.

Mr. Jeffrey M. Donaldson (Lagan Valley) (DUP): The Secretary of State will be aware that the young soldiers based at Massereene were part of the international security assistance force destined for Afghanistan. My right hon. Friend the Member for Belfast, East (Mr. Robinson) and I had the privilege of meeting some of those young men and women in Afghanistan last year. They are working for peace and democracy in Afghanistan, but the Real IRA—so-called—is on the same side as the Taliban and al-Qaeda; it trades in terror and in violence. As we approach St. Patrick’s day, with a focus on that in the United States, we should be driving that message home to the Americans. A tiny number of Americans still support these organisations, and they need to understand what they are supporting.

Members of the Northern Ireland security guard service, which is responsible for guarding military bases in Northern Ireland, are concerned about a review of
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that service that has been undertaken. They are concerned for their own safety, and they want to have proper equipment. Will the Secretary of State speak with his right hon. Friend the Secretary of State for Defence to ensure that the service is well equipped and has the resources that it needs to improve security at military bases so that this kind of attack can be prevented in future?

Mr. Woodward: I know that the right hon. Gentleman takes a very close interest in security matters in Northern Ireland. I wish to reassure him that we will ensure that everybody engaged in protecting the public in Northern Ireland has the equipment that they need. However, it may be appropriate for me to say that, in relation to the attack on Saturday night, there is no suggestion that had the equipment been any different it would have made any difference whatsoever. Those who were determined to murder on Saturday night came there to murder—to execute—the people at the Army base, and they drew no distinction between off-duty soldiers and civilians, as we know from the attacks on those who were delivering the pizzas.

I immediately had contact with the United States on Saturday evening. We immediately saw expressions of support from Senator Clinton and from President Obama, and from the Senate and Congress. Indeed, I refer the right hon. Gentleman to the statement by Congressman Richie Neal, which is a very fine statement of condemnation that precisely records the fact that across America this is felt to be an evil act.

Several hon. Members rose

Mr. Speaker: Order.

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Banking (Asset Protection Scheme)

4.14 pm

The Financial Secretary to the Treasury (Mr. Stephen Timms): With permission, I shall make a statement on the asset protection scheme, and the agreement in principle reached on Saturday between the Treasury and Lloyds Banking Group. My right hon. Friend the Chancellor is travelling to Brussels ahead of the meeting of European Community Finance Ministers tomorrow to discuss the G20 Finance Ministers meeting this weekend, so he has asked me to make this statement.

The asset protection scheme was announced in January. In my right hon. Friend’s statement of 26 February, he gave details of the participation by the RBS Group, and he mentioned the negotiations under way with Lloyds. The approach that we adopted with Lloyds is similar to that adopted with RBS; discussion involved a large amount of complex detail and it was important to take time to reach a satisfactory conclusion. An agreement in principle has now been reached that helps to ensure financial stability, to safeguard the interests of the taxpayer and to support the real economy by increasing lending.

Under the asset protection scheme, the Government will provide protection against certain credit losses on particular assets in exchange for a fee. A first loss, similar to the excess in insurance policies, remains with the institution. Lloyds will meet all of that. The protection provided by the Government will cover 90 per cent. of the remaining loss. The other 10 per cent. will remain with the institutions as an incentive to manage the assets prudently. The Government will accept applications to the scheme for other eligible institutions until 31 March.

Lloyds announced on Saturday its intention to place £260 billion-worth of assets in the scheme, on which it has already taken impairments of £10 billion. Through the first loss mechanism, it will retain a further exposure of £25 billion. Of any losses beyond that, 90 per cent. will be borne by the Exchequer and 10 per cent. by Lloyds. The protection will cover a range of assets including mortgages, unsecured personal loans, corporate and commercial loans and Treasury assets.

Lloyds will pay a fee of £15.6 billion in new, non-voting B shares. Those will count as core tier 1 capital. The Treasury has also agreed to replace its existing £4 billion of preference shares. Current shareholders will be able to purchase these ordinary shares as part of an open offer. The Treasury will take up its pro rata share of the open offers, maintaining its minimum voting share at 43.5 per cent., and will subscribe for any additional shares not taken up by existing shareholders. If no other shareholders take up their entitlements, the Treasury’s ownership of ordinary shares will increase to 65 per cent. Taking into account B shares paid as a fee, its economic ownership would reach 77 per cent.

As my right hon. Friend the Chancellor set out, the asset protection scheme is a key step to put banks on a stronger footing, to insure their balance sheets and to boost lending to businesses and individuals. As part of that deal, in return for access to the asset protection scheme, Lloyds has agreed to increase its lending by an additional £14 billion over the next 12 months —£3 billion for homebuyers and £11 billion for business lending—and it has made a similar commitment for
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2010. Consistent with RBS, Lloyds will be required to present a detailed implementation plan to the Government, and to report monthly on compliance with the lending agreements. The Government will publish an annual report on these arrangements, which will be made available to Parliament. The agreements are binding and will be reflected in the performance-related pay of bank staff involved.

Another condition for Lloyds, as for any bank participating in the scheme, is a requirement to develop a sustainable long-term remuneration policy. That means reviewing policies and implementing new policies consistent with the Financial Services Authority’s recently published code of remuneration practice. We have agreed that no discretionary bonuses will be paid in 2009 except to junior staff earning an average of £20,000, and that there will be no annual free share award at all.

At the heart of the current financial and economic problems around the world is a crisis of confidence about bank assets. That lack of confidence is having profound effects on UK companies and on individuals who are not able to secure business loans or mortgages. The critical obstacle to expanding lending is uncertainty about the value of banks’ balance sheets, so we are acting now to enable the banks to clean up their balance sheets, making them better able to lend to individuals and businesses.

Transformation will not happen overnight, but that is the essential starting point, and it must go hand in hand with broader reform of banking supervision and regulation. Action must be taken not only here but by Governments across the world. The alternative would be a failure of the banking system here and elsewhere, which would make the recession longer and more painful and put more jobs at risk. Getting the banks to lend again is essential to economic recovery and to our fight against the global recession.

The Government are clear that British banks are best owned and managed commercially, rather than by the Government. The future of the UK as a financial centre, and the future of our economy and of many thousands of jobs, depends on being able to run banks commercially. All countries are having to deal with the same problem—how to isolate assets that are damaging confidence in the banking sector and preventing banks from lending more. Over the coming weeks, we will continue to discuss with other countries, including the United States and the European Union, how best to co-ordinate our approaches to the shared challenges that we face. As part of our presidency of the G20 this year, my right hon. Friend the Chancellor recently wrote to Finance Ministers setting out a set of shared principles for dealing with asset protection and insurance.

It is essential to restore confidence in the banks, allow them to clean up and rebuild and get lending going again. Economic recovery and thousands of jobs depend on that, and I commend this statement to the House.

Mr. Philip Hammond (Runnymede and Weybridge) (Con): I thank the right hon. Gentleman for his statement and for his courtesy in allowing me to see a copy of it in advance.

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