Transparency: financial assistance

Part of Employment Opportunities – in the House of Commons at 5:30 pm on 10th February 2009.

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Photo of Stewart Hosie Stewart Hosie Shadow Chief Whip (Commons), Shadow Spokesperson (Treasury) 5:30 pm, 10th February 2009

I wish to speak mainly to Lords amendment 83 and the Government's alternative to it.

I was struck by the Economic Secretary's saying that the Government had acted quickly during the banking crisis. This is 10 February 2009, and I believe that it was 30 January 2008 when the consultation on financial stability and depositor protection was published—five months after the run on Northern Rock began. This is effectively a carry-over Bill. We have secured Northern Rock after an interminable delay and recapitalised the banks, and there has been a facilitated takeover of Bradford & Bingley, with the taxpayer now holding the liability on its mortgage book. Whatever else the Government or the Economic Secretary have done, it has not been decisive or quick. However, now that we are reaching the endgame in the Bill, which we are committed to supporting, transparency is important, not least because of the giant sums involved.

The Economic Secretary knows that transparency has caused concern since the publication of the consultation last January, and at various stages of the Bill's passage. I am therefore especially struck by proposed new subsection (2) in the new clause that the Lords amendment proposes. It states:

"The Treasury shall ensure that the report contains sufficient detail to enable Parliament to understand the actual and potential commitment of public money to financial assistance".

That is sensible given the hundreds of billions—possibly a trillion or more—of pounds that are actually and, more important, potentially committed. Taxpayers have a right to know what they are in for and what the loss and liability may be.

Transparency is also important because of what the Economic Secretary said: the Bill uses public money. Again, transparency is important because clause 235 removes the need for the Bank of England weekly return—people have commented on that for some time—and clause 236 allows the Bank of England to determine what it reports, when and to whom.

I make no apology for repeating points that have already been made. Transparency is important because support now extends beyond the banks, financial institutions and deposit-taking institutions. Already, around £200 billion has been put in the special liquidity scheme. We have had the £37 billion recapitalisation of the banks, some of which was lost through the removal of the preference share into ordinary capital. We have the £250 billion guarantee scheme for new inter-bank lending—I am not sure what the draw on that was or is.

There are also: the £10 billion working capital scheme; the enterprise finance guarantee scheme of potentially £1.3 billion; the £75 million capital for enterprise fund; the unlimited Government insurance for banks for expected excess bad debt, which is an extraordinary liability; and the £50 billion for the Bank of England to buy assets in all sectors. If I have understood the press reports, that process might continue, if the £50 billion runs out, through quantitative easing, which means the bank printing money to buy assets. That has not been denied and it worries me greatly.

There is also the £50 billion of bank credit guarantees, the £1 billion of direct loans to the car industry, and the additional £1.3 billion of EU funding, which is to be unlocked. There is therefore a massive need for transparency. We are considering scary, big numbers, which have the potential to do huge damage to the public finances in the medium and long term if things begin to go badly wrong.

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