Banking Sector

Oral Answers to Questions — Scotland – in the House of Commons at 11:30 am on 29th October 2008.

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Photo of Henry Bellingham Henry Bellingham Shadow Minister (Justice) 11:30 am, 29th October 2008

When he next expects to meet the First Minister to discuss the future of Scotland's banking system.

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Photo of Peter Bone Peter Bone Conservative, Wellingborough

What recent discussions he has had with the First Minister on the operation of the banking sector in Scotland.

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Photo of Jim Murphy Jim Murphy The Secretary of State for Scotland

I am in regular contact with the First Minister and discuss a variety of issues. The Scottish banking system is now well placed to combat these difficult times after the significant intervention by this Government to stabilise the market.

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Photo of Henry Bellingham Henry Bellingham Shadow Minister (Justice)

May I congratulate the Secretary of State on his appointment? Does he recall that the First Minister said earlier in the year that an independent Scotland could look forward to an "arc of prosperity" based on Ireland, Iceland and Scandinavia and underpinned by Scotland's "world class" banks? Will he remind the First Minister in a telephone call today that the Scottish banks would not exist today if the UK Government had not moved quickly, and if they had not been underpinned by English taxpayers in our constituencies? Will he also remind him that it is time for him to abandon completely his misguided campaign—

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Photo of Jim Murphy Jim Murphy The Secretary of State for Scotland

I wish to thank the hon. Gentleman for his warm welcome for my appointment, and to place on record again my appreciation of the work done by my predecessor, my right hon. Friend Des Browne.

Although this is my first time at the Dispatch Box as Secretary of State for Scotland, I know very well that I am not accountable for the words, deeds or actions for Scotland's First Minister. However, I am aware that he has compared Scotland to Iceland, Ireland and Norway. Of course, Iceland is now bankrupt as a country, Ireland faces an austerity budget— [ Interruption. ] I hear an hon. Gentlemen shouting, "Tell us about Norway!" Well, the Norwegian Foreign Minister has today told us all about Norway, and said that the Scottish National party must stop making vacuous comparisons between Norway and Scotland.

Finally, Mr. Bellingham talked about English taxpayers subsidising Scottish banks, but he will be aware from his insight into his own constituency that the Royal Bank of Scotland-NatWest has four branches in his area, and HBOS has one. This is an international problem that needs international solutions. It affects all our constituencies, including his own.

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S

This is one area being a small country like Scotland has its downfall.

However when the Superpowers like the USA, Japan and even the UK and struggling to cope the major banking issues.

However Scotland has a long and great history attached to banking and need to take all steps to protect its independence in Banking. Not just have all its major banks being off shoots of English, Australian and US banks.

Submitted by Stephen O'Brien

Photo of Peter Bone Peter Bone Conservative, Wellingborough

I congratulate the right hon. Gentleman on his well deserved appointment. He has moved from defending an indefensible Union to upholding a vital Union. Does he agree that the Scottish banking sector has fared better in this financial crisis because Scotland is part of the UK than it would have done had Scotland been independent?

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Photo of Jim Murphy Jim Murphy The Secretary of State for Scotland

I absolutely agree. The UK has invested £37 billion in Scotland's banking sector, and that is greater than the entire Scottish Government budget. The entire cost of the investment package is estimated at £100 billion, which is more than the annual budget for the whole of Scotland. I disagree, of course, with the hon. Gentleman's earlier comment. We spent many long months debating whether the UK would be better off outside the EU, but I think we all now agree that Scotland is better off in the UK.

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Photo of Gavin Strang Gavin Strang Labour, Edinburgh East

May I thank my right hon. Friend for his active involvement in the banking crisis? Does he agree that the futures of the Royal Bank of Scotland and Halifax Bank of Scotland are of huge significance to Edinburgh, the south-east of Scotland and to the Scottish economy as a whole? Will he continue to work with the Prime Minister and the Chancellor to support the banking system and above all to sustain as many financial sector jobs as possible in Scotland for the long term?

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Photo of Jim Murphy Jim Murphy The Secretary of State for Scotland

My right hon. Friend has a long history of campaigning on these issues, and he has taken a close interest in the current difficulties faced by Scottish banks and banks throughout the UK. I look forward to discussing these matters with him in further detail over the weeks ahead. Unfortunately, however, some people involved in international banking and banking institutions in the UK took reckless decisions that put at risk other people's savings and mortgages. While risk is an essential part of a market, taking irresponsible risks with other people's well-being must come to an end.

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Photo of Jimmy Hood Jimmy Hood Labour, Lanark and Hamilton East

May I first congratulate my right hon. Friend on his new appointment as Secretary of State for Scotland? I am delighted to see him at the Dispatch Box. Does he agree that the Scottish banking situation is so important that we cannot just leave it to Adjournment debates in the House of Commons? Will he therefore have a word with the Leader of the House to have a Scottish Grand Committee called as quickly as possible, so that we can discuss the matter?

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Photo of Jim Murphy Jim Murphy The Secretary of State for Scotland

Serious times call for serious measures. Where I can, I try to say clearly that as Secretary of State for Scotland I will work with anyone who is working on behalf of Scotland, which is why I convened the first ever gathering of CBI Scotland, the Scottish Trades Union Congress and the First Minister to demonstrate that, where we can, we should be working together. That is the approach that I shall take every day in this job.

We have to look for additional ways to discuss the problems facing Scottish banks, and if my hon. Friend thinks that calling the Scottish Grand Committee is part of the solution, I look forward to his making that case. I would of course have no hesitation in appearing before the Scottish Grand Committee.

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Photo of Alistair Carmichael Alistair Carmichael Shadow Secretary of State for Northern Ireland, Shadow Secretary of State for Scotland, Liberal Democrat Spokesperson (Scotland), Liberal Democrat Spokesperson (Northern Ireland)

On behalf of my party, I welcome the Secretary of State and his Under-Secretary to their new positions and pay tribute to their predecessors. They left the Government in different circumstances, but they gave distinguished service to the Government in their time and I very much hope that they will continue to be part of Scotland's political debate.

Has the Secretary of State seen reports in The Scotsman today, indicating new interest in parts of the HBOS group, namely from Clerical Medical and Insight Investment? Does he accept that that is a further alteration to the situation that pertained when the takeover by Lloyds TSB was first mooted and, accordingly, that it requires to be looked at again seriously? In that context, will he urge his right hon. Friend Lord Mandelson to publish the Office of Fair Trading report so that if we are to abandon competitiveness in the banking sector we at least know why?

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Photo of Jim Murphy Jim Murphy The Secretary of State for Scotland

We wish to see stability in the banking system in Scotland, throughout the United Kingdom and much more widely. Part of that stability would guarantee security for savers, investors, mortgage holders, staff and small businesses across the UK. The argument that HBOS's business model would not be able to survive the current economic climate has been well rehearsed, but the fact is that only one concrete offer is on the table. That is an issue for the boards of the two banks and the shareholders—it is not for the Government to dictate—but although there is press speculation about other bids, there is only one firm bid on the table at the moment.

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Photo of Anne McGuire Anne McGuire Labour, Stirling

I, too, add my congratulations to my right hon. Friend on his new position as a full-time Secretary of State for Scotland.

I do not want us to underestimate the importance of the comments made by the Norwegian Foreign Minister, reported in today's press. When my right hon. Friend next meets the First Minister, will he raise those comments and expose the credibility of the First Minister's arguments? Perhaps he will go one step further and say not only that it is economically unsound to make those comparisons but that it is economically illiterate.

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Photo of Jim Murphy Jim Murphy The Secretary of State for Scotland

My hon. Friend is absolutely correct. On behalf of everyone on our side of the House, I pay tribute to her for her brilliant work over nine years as a member of the Government in various posts. She is right to draw attention again to the comments of the First Minister. In his first speech as First Minister, he said:

"Scotland can...be part of northern Europe's arc of prosperity. We have three countries, Ireland to our west, Iceland to our north and Norway to our east. We can join that arc of prosperity."

It is no wonder that many commentators now talk about an arc of insolvency—the SNP vision of a North sea bubble has well and truly burst.

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Photo of David Mundell David Mundell Shadow Secretary of State for Scotland

I begin by welcoming the right hon. Gentleman to his new role. It is particularly welcome on the Conservative Benches that there is once again a stand-alone Secretary of State for Scotland. Scotland's interests cannot be adequately represented in the Cabinet along with those of the armed forces or any other nation or region of the United Kingdom.

May I also welcome the Under-Secretary of State for Scotland, and briefly pay tribute to the two predecessors at the Department? Des Browne played a pivotal role in the establishment of the Calman commission, which will benefit all the people of Scotland. David Cairns lost his job for speaking the truth, and he is not the first Member of this House to have done so. In that vein, I share the Secretary of State's views about the irresponsibility of the First Minister's comments on the "arc of prosperity", but does the Secretary of State agree that the Prime Minister was equally irresponsible to claim that boom and bust had been abolished? Did that not contribute to the devastating effect of the credit crunch on the Scottish banks?

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Photo of Jim Murphy Jim Murphy The Secretary of State for Scotland

I thank the hon. Gentleman again for putting on record his appreciation for the work of my predecessor, and for his kind words of welcome to my hon. Friend the Under-Secretary and me. The fact is that Scotland is stronger in the United Kingdom at times of difficulty, and more prosperous in the United Kingdom at times of economic prosperity. I disagree with the hon. Gentleman's assessment of the Prime Minister's contribution. The fact is that the UK is showing the world

"the way through this crisis."

The shadow Secretary of State guffaws at that comment, but those are not my words; a gentleman called Paul Krugman, the winner of the Nobel prize for economics, made those comments earlier in the week. Whose economic judgment should I accept—that of the hon. Gentleman or that of a winner of the Nobel prize for economics? I will let the House make that judgment for itself.

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