Financial Markets

I notice that the shadow Chancellor is finding it increasingly difficult to maintain his stance of bipartisanship. In the course of the last year, I have noticed that he finds it impossible to avoid quickly getting into a situation where he seems more concerned with scoring points than with addressing what I think is quite a serious matter. The hon. Gentleman asked a number of questions, which I would like to answer. His first point was about the cost, and he appeared to be critical of the fact that we are making available substantial funds, although he accepts that that is necessary. A person either supports such a scheme or does not, and should do it properly, not in half measures. Indeed, if people have learned anything over the past year, it is that action should be taken decisively and quickly to ensure that the banks are properly capitalised. The hon. Gentleman also asked about the accounting. I said that accounting is a matter for the ONS—Northern Rock is classified with the public sector and the ONS will make its judgment in relation to RBS, HBOS and Lloyds TSB. It would be ludicrous, in reaching a judgment about the Government's fiscal position, to say that having to take such action with banks would distort decisions made about the economy in general. I would have thought that most people accept that as a sensible thing. The hon. Gentleman asked a couple of technical questions about preference and ordinary shares, and I would have thought that he is aware of this. I said last week that we wanted to take preference shares to secure the Government's interest and I also said that we would be prepared to take ordinary shares. Given the scale of what is necessary—particularly in relation to RBS, HBOS and Lloyds TSB—the balance has to be struck in a way that is workable. The advantage of preference shares is that we are repaid first, but if too many preference shares were put into an organisation it would impede its ability to get through this period and recover, so, acting on proper advice, we have sought the right balance between preference shares and ordinary shares. In relation to ordinary shares, we will get a dividend when dividends are payable, and when we sell our shares the money will come back to the taxpayer. We have put in place a perfectly sensible way of restructuring the banks because our objective is to help them get through this difficult period and in due course sell on the shares. In relation to bonuses, yes, some board members and, indeed, other members of staff are paid in shares. I would have thought that the shadow Chancellor welcomes that because anything that ties the interests of senior management to the long-term health of a company must be a good thing. Indeed, we are trying to stop irresponsible remuneration, whereby people are encouraged to do something that damages the banks and, therefore, the rest of the financial system. What we are suggesting means that in future the rewards will be tied to the long-term interests of the bank. The hon. Gentleman asked about lending. I said today, and I said in the statement, that we want the availability of lending to be the same as it was in 2007, but of course that applies only to two particular institutions—RBS and Lloyds TSB-HBOS—because they are the only two using the bank reconstruction fund. That is where the conditionality attaches. We said that availability levels need to be the same, but it will of course be up to those banks to judge each application for a loan on its merits. We do not want to return to the irresponsible problems and difficulties we have had in the past. The Council of Mortgage Lenders put out a statement earlier today in which it had clearly misunderstood the position, but I understand that it is now correcting what it said in the light of what is actually the case rather than what it imagined was the case. The hon. Gentleman might like to follow that course of action on occasion, as well. However, I, too, am anxious to maintain the bipartisan approach that has worked with at least some success over the past few weeks. I think that the House and the wider country will recognise that, although it is difficult at times for people fully to understand what is going on, they understand that we had to take action, and that we had to do so decisively and in sufficient measure to make it work. There is more turbulence along the way, I am sure, but I believe that the measure is significant; it is a necessary measure and it will be seen not just in this country but across the world as entirely the right thing to do.