Financial Markets

Part of Olympics – in the House of Commons at 3:34 pm on 6 October 2008.

Alert me about debates like this

Photo of Vincent Cable Vincent Cable Shadow Chancellor of the Exchequer, Liberal Democrat Spokesperson (Treasury) 3:34, 6 October 2008

I thank the Chancellor for his statement. I do not think that any of us envy him for the very considerable weight of responsibility that rests on his shoulders, and we are going to have to work together in the common interest. There will be a time to decide who made mistakes, but the issue now is: have we moved forward?

The Chancellor said that he will do whatever he has to do in the financial crisis. He is right, and I hope that he will, but there are some issues that need clarifying. In the wake of the apparent German decision to give a complete guarantee for all deposits in the German banking system, it seems to us that the British Government will indeed have no alternative but to give a comparable assurance to people in the British retail high street banks. We all know that our bank deposits are safe. Some of my own modest savings are in the Bank of Scotland and some are in the Royal Bank of Scotland, so I am more than usually dependent on both the Chancellor and the Prime Minister and on the First Minister of Scotland not to let me down. However, there are anxieties. People have anxieties about specific questions such as merged banks, large deposits during house sale transactions and small independent businesses, and there needs to be more clarity about the guarantees than the Financial Services Authority has currently given.

Secondly, the Chancellor said in his statement that he is pursuing a case-by-case approach. He is right, and we have no quarrel with what he did in relation to Bradford & Bingley and HBOS-Lloyds—that seemed to be the right approach. However, we are now in a different situation, where banks are being picked off one by one. I set out proposals yesterday, and the Conservative leader said something rather similar this morning— [Interruption]—about the need for recapitalising the banks with a form of partial nationalisation. I hope that the Chancellor will confirm that those specific ideas are under active discussion.

Finally, I would like to say a little bit about interest rates. Of course, the issue is about the availability of credit, but it is also about official interest rates and the implications for mortgage borrowers and small businesses. I have been a very strong advocate of the independence of the Bank of England; I made my maiden speech about it in this House 10 years ago. Does the Chancellor not think it appropriate, in emergency conditions, to make it absolutely clear that the mandate of the Bank of England must include responsibility for averting a meltdown in the financial and economic system? Those members of the Monetary Policy Committee who are going around saying that the problems go no further than the financial system need a line of communication back to planet earth. We do need to be thinking about radical cuts in interest rates.

I know that the Chancellor has said that my comments on this subject are dangerous, and I recognise the dangers. These are very dangerous times, and decisive decisions are going to have to be taken over the next few days and weeks to safeguard millions of jobs and homes. I hope that the Chancellor will give us the leadership that we need on those issues.