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Dr. Vincent Cable (Twickenham) (LD): We all accept that the intervention had to happen and that it was right in principle to have confidentiality. That confidentiality has to be balanced against accountability to Parliament for the expenditure of very large sums of money. The question is why only yesterday it was judged sufficiently safe for the public and Parliament to be given the information. Why, for example, were we not told about it on 7 March, when those banks entered into the asset protection scheme, or in the Budget a few weeks later? If there was still some major doubt about the stability of the banks, why was that not revealed a month ago when the Chancellor made a statement on the completion of the asset protection scheme? Why was Parliament not told then? Why has he waited so long to give us this
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information? One has to note, as the shadow Chancellor did, that yesterday's announcement occurred not in Parliament but in the middle of a statement from the Governor. That statement was a devastating indictment of the Government's policy of not splitting up the banks, and this announcement was hidden in the middle of it.

My second question is about the Chancellor's clear statement that there was no cost to the taxpayer. Is that true? My understanding of the lender of last resort facility is that it carries a commercial rate of interest, but my understanding of these loans is that there was no interest involved. Will he clarify the position on this? If there was a concessional element to the lending, that would mean that a very large public subsidy was involved, even though the loans were repaid. A very large risk was taken with taxpayers' money, and there was an enormous potential cost. We need to be absolutely clear that that cost was paid for by the banks. Will the Chancellor clarify what the interest rates actually were?

My third question is on the link with Lloyds. The Chancellor has just brought the historical record up to date by reading out what was said by the directors at the time. Indeed, he is quite right to say that there was a general warning that continuing liquidity was required for HBOS, but was it not clear on 1 October, when HBOS became the first bank to require major liquidity help-indeed, half the major package was for HBOS-that this was a can of worms, and that the situation was far worse than had initially been believed? That has been made clear in his statement today. Would not the correct course of action at that time have been to take HBOS into full public ownership in the way that Bradford & Bingley was taken in? Instead, the Lloyds shareholders continued to be encouraged in their belief that this takeover should take place.

My final question is this: are there any other loans that we do not know about? Can the Chancellor give us a categorical assurance that no other financial institutions have outstanding records of loans that have taken place in this emergency about which he has not yet told the House of Commons?

Mr. Darling: I am sure that, when the hon. Gentleman has time to reflect on what he has said, he will agree that his last question was really ridiculous. No Chancellor of the Exchequer or Governor of the Bank of England is going to provide a running commentary on what they may or may not be doing, for perfectly obvious reasons that I would have thought even the hon. Gentleman would recognise. In fact, he did recognise them when Northern Rock was at the height of its difficulties. His question was just plain daft.

I can tell the House that, to a large extent, because of the action that we and the Bank of England have taken, the banking system is now far more stable than it was. We have got through many of the difficulties that we faced, and we are working our way through others. Only by taking that decisive action were we able to do that. I appreciate that the hon. Gentleman has the luxury of being a commentator, as opposed to someone who actually has to do these things, but speaking from the other side of the fence, I can tell him that, because of the action we have taken, the banking system is now far more stable, not just here but in other countries as well.

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The hon. Gentleman went back to the question of Lloyds. I will not read out what I have already said, but the directors of Lloyds clearly have an obligation to their shareholders, and they clearly had an obligation in anticipation of their takeover of HBOS. It was for them-properly advised, as I said-to disclose what they needed to in the prospectus. As the hon. Gentleman knows, there then followed a vote by the Lloyds shareholders and a vote by the HBOS shareholders. Both those votes were overwhelming. It is for the members of the Lloyds board itself to decide what to disclose to their shareholders, and there are all sorts of legal considerations that they have to take into account. It is for them to be satisfied that that was the case.

I really do not accept the hon. Gentleman's argument about splitting the banks. We discuss this at just about every statement and Question Time, and I refer him to what I have said on previous occasions. He should bear in mind that Northern Rock was a narrow bank-a classic retail bank-and it got into deep trouble. At the other end of the scale of exotic activities, there was Lehman's, which did not take a single deposit. It, too, got into terrible trouble. The US authorities at the time did precisely what some people suggested and let it go down. We do not have to speculate about what happened: it brought the entire system down at the same time. I disagree with the hon. Gentleman on that matter.

Several hon. Members rose -

Mr. Speaker: Order. Many right hon. and hon. Members want to take part in these exchanges, and I would simply remind the House that we have a further statement and the continuation of the debate on the Loyal Address to follow. I therefore issue my usual appeal to all hon. Members that each of them should ask a single, short supplementary question, and I ask the right hon. Gentleman on the Treasury Bench to provide us with an economical reply.

John McFall (West Dunbartonshire) (Lab/Co-op): At the time of Northern Rock, the Governor came before the Treasury Committee and said that his inability to ensure lender of last resort facilities on a confidential basis was a grievous omission. It is therefore important to remind ourselves that discretion has to be given to the Bank of England and to the Governor in relation to all these issues. There is a separation between the Bank and politics, but the Chancellor knows-as he said in his letter to me yesterday-that emergency liquidity assistance was advanced to HBOS and RBS in October. Was that decision a short-term notice, or part of a long-term contingency plan? Was any consideration given to the right of the Lloyds TSB shareholders to have that information disclosed to them?

Mr. Darling: My right hon. Friend asks me about the decision, and I think that, at the time, the Governor was of the view that we had to provide emergency liquidity assistance. I therefore had to indemnify the Bank for that. Let us remember that the decision related to banks in general; it was not about a specific institution. At that time, we were seriously concerned about the banking system as a whole. This was not about an individual bank, although subsequently-this is obviously how
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the system works-the Governor had to form a view about HBOS, as he did about RBS. However, my decision-his decision-was taken in relation to the general principle, and that was why we took it.

I should have said to the hon. Member for Twickenham (Dr. Cable) that, yes, RBS and HBOS did pay a fee in respect of the facilities that they got.

Mr. Edward Leigh (Gainsborough) (Con): Chapter 5 of the Treasury's own document "Managing Public Money" says that when indemnities are given by the Chancellor and full disclosure is not possible, he should write in confidence to the Chairman of the Public Accounts Committee immediately to explain what has happened. Will the Chancellor now explain to the House how this procedure was followed at the time?

Mr. Darling: The hon. Gentleman is quite right: there are long-standing provisions that require that, when the Government take on a contingent liability, we write to him in that way. He no doubt forgot to mention that I have written to him on numerous occasions for very obvious reasons, drawing his attention to contingent liabilities. This particular issue of lender of last resort facilities was actually carried out by the Bank of England, however, and not by the Government. When Parliament decided-pretty much unanimously-that the Bank should have discretion as to when to report, it clearly had in mind that there would be times when it would be dangerous to report exactly what it was doing, because to do so might destabilise the system. So there is a distinction between the emergency liquidity assistance provided by the Bank-which is provided for in the Banking Act 2009, although its origins date back to long before that-and the normal procedures that we have, which we have followed at every single turn.

Jim Cousins (Newcastle upon Tyne, Central) (Lab): It is plain that the workers and shareholders of Lloyds were mugged. Does the Chancellor agree that all those who were knowingly party to the mugging should go, if they have not gone already?

Mr. Darling: I am not sure that I accept the general premise underlying my hon. Friend's question. I have said on a number of occasions-today and previously-that the responsibility to shareholders lies with the board of directors, who are there to represent them, and I have read out to the House what they said in the prospectus that they published last November.

Mr. Michael Fallon (Sevenoaks) (Con): Will the Chancellor confirm that neither the amount nor the scale of these loans was reported properly on page 19 of the HBOS prospectus or on page 33 of the Lloyds prospectus, or reported fully in the Bank of England's report and accounts? If shareholders cannot trust a prospectus, and if the public cannot trust the Bank of England's accounts, who can they trust?

Mr. Darling: The prospectuses issued by HBOS and Lloyds are a matter for those banks, and the hon. Gentleman needs to direct his question to the directors who were responsible at the time.

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On the Bank of England, I assume that the hon. Gentleman was at the Treasury Committee sitting yesterday, where I think the Governor made the point that he was of the view, when his report was published, that those operations should remain confidential, so he exercised his judgment to withhold the precise nature of what was being done. However, by yesterday, he had judged that the time was right to reveal what had been done. I refer the hon. Gentleman to what I said earlier: it is always a fine judgment on the question of when to make such information available. Had the information been released prematurely and had it caused further problems in the banking system, I am sure that he would have been the first to jump up and complain about it.

Ms Sally Keeble (Northampton, North) (Lab): Does my right hon. Friend agree that, if the Governor had not had the courage to take the action that he took, instead of sitting here nit-picking about the timing of the announcement, we could have been contemplating the collapse of the banks and the devastating consequences for our constituencies? Will my right hon. Friend therefore congratulate the Bank on having had the courage to put up the money, get it back with fees and charges and protect the national and public interest?

Mr. Darling: The reason why all central banks throughout the world have the power to provide emergency liquidity assistance is obvious: there will be times when a bank or several banks get into difficulties. However, the system will work only if central banks are able to carry out such operations, where appropriate, confidentially. Of course, once the crisis and the difficulties are over and the system is stabilised, the central bank can disclose what it has done, but, as countless debates in this House have reflected, the need for that facility is beyond question.

Mr. Graham Brady (Altrincham and Sale, West) (Con): In the post-mortem on Northern Rock, it became clear that the impediment to covert intervention was disclosure requirements not on the Bank of England, but on the company concerned. Would that still have been true if such covert intervention had been contemplated in the instances under discussion?

Mr. Darling: No, I do not think that there was any difficulty in operating the support for RBS and Lloyds. There was, as the hon. Gentleman knows, a lot of debate about the precise strictures on Northern Rock, and whether a particular European Union directive was a problem, and we are pursuing that. However, I have never taken the view that that was the major problem. Northern Rock appeared then to be an isolated case, although it was clear to many that it was not. The major problem at the time was that, despite the Bank's provision of lender of last resort facilities, far from reassuring people it had the opposite effect. However, I do not think that the European directive was ever the major sticking point, but we are pursuing the matter.

Mrs. Anne McGuire (Stirling) (Lab): I, like my hon. Friend the Member for Northampton, North (Ms Keeble), congratulate the Bank and, indeed, the Chancellor on the speedy action that they took 12 months ago. There is a danger, 12 or 13 months after the event, of trying to second-guess judgments that were extremely difficult at the time. This morning, as I listened to Radio 4, I
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thought it faintly bizarre that one criticism of the whole effort was that it had been kept confidential, and that not even Robert Peston had managed to find out the information. Does my right hon. Friend share that thought? I congratulate those who maintained that confidentiality over the past 13 months. Perhaps we could have a little more of it.

Mr. Darling: I am grateful for what I take from my right hon. Friend to be a general message of support.

Sir Robert Smith (West Aberdeenshire and Kincardine) (LD): In the Chancellor's answer and supplementary answer to my hon. Friend the Member for Twickenham (Dr. Cable), he mentioned the fee that was paid, but he did not address the interest rate. Was it a commercial rate of return, or was there an element of public subsidy?

Mr. Darling: The fees are meant to reflect the cost to the public purse. At the time when such work is done, it has to be done very quickly, so the arrangements are not like a normal commercial loan. However, the most important thing is that the money was repaid, and it was fully covered.

Mr. Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab): I congratulate the Chancellor on an excellent statement and on his firm grasp of complex issues. However, what advice would he give to a constituent of mine-a small business person-who phoned me this morning and said that he employs 30 people and has done everything that Lloyds has asked him to do, yet there is a danger to his company because the cash-flow problem is simply not being dealt with? He congratulates the Chancellor, as I do, but wonders why the Chancellor's policy of extending the commitment of the banks to small businesses appears in this case not to have been applied.

Mr. Darling: As my right hon. Friend knows, part of the arrangement with Lloyds and RBS is that we have lending agreements. I am not familiar with the individual circumstances of the company to which he refers, but I strongly advise him to take the matter up, as I do, with the person who is responsible for, in this case, the bank's Scottish operations to see whether it can be resolved. I have found that that can be fruitful, at times, although I should not want anyone to think there are not any difficulties even for my constituents.

Mr. Charles Walker (Broxbourne) (Con): Was the HBOS merger a good deal for Lloyds staff?

Mr. Darling: I think that Lloyds staff would no doubt have a view on that matter, but the key thing is that the shareholders of those banks decided whether they wanted to go ahead with the merger. The responsibility for passing information to shareholders and prospective investors lies fairly and squarely with the boards of directors of both banks.

Mark Durkan (Foyle) (SDLP): Will the Chancellor confirm that at no point did he instruct or advise the Governor not to disclose before yesterday? When did the Chancellor become aware of the Governor's decision to disclose?

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Mr. Darling: The Governor and I have many discussions about a wide range of matters, as the House will know. However, it is quite clearly for the Governor to decide whether those operations are necessary-especially at that time, the end of 2008 and the beginning of this year. Of course, we talked about those things regularly, and it was for him to decide when he decided to make the disclosure.

Anne Main (St. Albans) (Con): What, if any, bonuses were paid to the banks during the period of the emergency loans?

Mr. Darling: I need to write to the hon. Lady. My recollection is that the bonuses for that financial year would have been announced subsequent to that, but I do not want to mislead her. Bonus payments are generally announced in spring, and that would have been after the payments were repaid.

On the hon. Lady's general point, I must say that there is not a bank in the world that does not owe a great deal to taxpayers throughout the world, because, if they had not stepped in, every single bank would have been affected-not just those that we had to support directly. If we had not stepped in, the banks that we are discussing would have gone down, and the wider problem for all of us is that the situation would not have stopped there: it would have brought down the rest of the banking system and large parts of the economy. No Government could possibly have contemplated that.

Mr. Graham Stuart (Beverley and Holderness) (Con): Covert lending is one thing; encouraging a bank to merge with a recipient is quite another. Surely a merger without complete information, but with a gargantuan loss of shareholder value, should simply not have been allowed in those circumstances.

Mr. Darling: As I said, the decision to go ahead with the merger was eventually taken by the shareholders of both Lloyds and HBOS. They had a vote, and the obligation, as the hon. Gentleman well knows because I can see it from his smirk, lies fairly and squarely with the directors to tell the shareholders what they know.

Mr. Stuart: They weren't allowed to.

Mr. Speaker: Order. I say to the hon. Member for Beverley and Holderness (Mr. Stuart) that I have been good to him: I have got him in-he has asked his question. He must listen to the reply.

Mr. Darling: I am not so sure that the hon. Gentleman is interested in the reply, but as I said earlier the Lloyds directors were fully aware of the circumstances in relation to HBOS. They were told by the Bank of England.

Mr. Brian Binley (Northampton, South) (Con): I will be good, Mr. Speaker. The Government have thrown billions at the banks while the banks have hardened their attitude enormously to small business, to the point where they refuse to extend overdrafts and force expensive loans on small businesses, which do not want them but have no option but to take them. Will the Chancellor look into that business and come back to the House to tell us that he has changed what is an unsatisfactory process for small businesses?

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