Financial Stability

I am grateful to the Chancellor not just for his statement, but for discussing it with me this morning. This has, of course, been another day of turmoil on the financial markets, and people watching us remain desperately anxious about their savings, their mortgages and their future jobs. That is why we continue to offer our constructive support for the package announced today, including the important steps on interbank lending that the Prime Minister mentioned at Prime Minister's questions. Of course, as my right hon. Friend the Member for Witney (Mr. Cameron) said, the real test of the success of this rescue will be if credit starts flowing again through the veins of the economy. We want to see banks not just lending to banks again, but also lending again to the small businesses that need a loan extension and to the families who are trying to get a remortgage. So may I ask the Chancellor the following specific questions? He said in his statement that he will require a full commitment to lending to small businesses and home owners. How exactly will that commitment be enforced? Does he have a commitment that the banks, for example, will not be charging small businesses 15 per cent. interest rates of the kind that we described on Monday? Does he have a commitment that the banks will pass on to customers the kind of rate cuts that the Bank of England has just announced today—and, perhaps, will also announce in the future? May I press him again on a question that my right hon. Friend asked of the Prime Minister? Does the Chancellor have a commitment that those banks that are most in trouble and most in need of taxpayer support will not be paying bonuses this year to their senior executives? The Prime Minister did not answer that question clearly and it would be good to have an answer from the Chancellor; there should not be rewards for failure—no bonuses for those who took their banks to the edge of bankruptcy. [Interruption.] Labour Members can ask the new Minister appointed in the House of Lords all about bonuses when they leave the Chamber. The Chancellor says that this is all the Financial Services Authority's responsibility, but it is the Chancellor who is ultimately responsible for tax money, and how is he going to enforce these commitments, because while the Government can give their support now and strike a deal now, they will, of course, find it very difficult to withdraw that support once it is offered without risking further crisis, so what are the real sanctions that the FSA or the Treasury have to help small businesses? Secondly, may I ask the Chancellor about the concerns of people with savings in Icelandic banks? They will welcome what the Chancellor says, but may I ask for some clarification for all our constituents? He says there will be no depositor losses as a result of the closure of icesave. Does that include—I assume it does—deposits of more than £50,000? Does it also include wholesale deposits, because, as I am sure he knows, many local authorities have large deposits with these Icelandic banks? Are their deposits protected as well? Also, where will this money ultimately come from? The FSA compensation scheme will be under considerable strain after the Bradford & Bingley deal. Is the Chancellor expecting, in the end, the industry to make a contribution? May I also ask whether the Chancellor has other plans for other UK deposits in other foreign banks that may be in difficulty at this current time? Thirdly, will the Chancellor be using this moment to start driving through the longer term changes we need to our system of regulation? There will be plenty of time to assess the mistakes that have been made and how we got into this situation, but one thing is clear: we must ensure that in future it is the banks and their shareholders who set aside capital, not the taxpayer. The Prime Minister talked in Prime Minister's questions about the banking Bill and the Bank of England's role in liquidity supervision, but is he going to consider giving the Bank of England new powers to manage overall debt levels in the economy, with perhaps an open letter system with the FSA? Finally, may I also ask the Chancellor about the international front? We welcome the news of co-ordinated cuts in interest rates across the western world. He is, of course, travelling tomorrow to the meetings in the United States. What prospect is there of genuine co-ordination across western Governments on other areas of policy, such as support for financial systems, so that we can perhaps have some common approach to the guarantees that are being offered to different parts of those financial systems? On the broader economy, as we have just heard in questions the International Monetary Fund is now predicting negative growth for the UK, the biggest downgrade it has made of any major economy that it monitors. In the Budget, the Chancellor predicted growth this year of 2 per cent. and 2.5 per cent. next year, and as the Prime Minister very helpfully just confirmed, when he was Chancellor he used the IMF meeting to set out what I think he called a broad pattern of growth, but what I seem to remember being very specific figures—he would often get out his downgrade before the pre-Budget report at the IMF meeting. Will the Chancellor be using this opportunity to predict growth, so that the country is fully prepared and aware of the very difficult economic times that lie ahead? This is an extraordinary moment, when the British taxpayer is forced to step in and bail out the banking system, but let us be clear: we do this not to rescue the banks or the bankers, but to rescue the economy and the millions of families who depend on it. That will be the true test of whether today's package succeeds, and we all hope that it does.