Cable responds to £50 billion bank rescue package

2.57.00pm BST (GMT +0100) Wed 8th Oct 2008

Vince Cable questions the Chancellor over the conditionality of the rescue package, and calls for reposession to be made the very last resort when people are facing difficulties with mortgage repayment.

Responding to the statement in Parliament by Chancellor Alistair Darling, on the Government's bank rescue plan and a cut in interest rates, Liberal Democrat Shadow Chancellor Vincent Cable said:

My colleague and party leader has already made it very clear that we support these measures as being in the national interest. They strengthen the banks and protect taxpayers' interests in a very difficult situation. However, the situation is fast moving: I think that the Chancellor is now aware that it has emerged in the past hour or so that eight London councils-and no doubt many others-have large holdings in Landsbanki. That problem will require his immediate attention.

The key question that I wish to pursue in relation to the Chancellor's statement has to do with how the investment in the banks is to be secured. When the IMF bails out countries, it imposes conditionality. How will the conditionality for the banks be enforced and monitored? How will the Chancellor ensure that the taxpayer's money going into the banks comes out at the other end, so that he is not in effect pushing on a piece of string? What sort of assurance can workers and companies have that, at the end of the month when salaries and bills have to be paid, the money will be there in the banking system?

Also on conditionality, I have been as stunned as the right hon. Gentleman has been by the sudden conversion of the champions of the bonus culture to advocates of a 1970s-style incomes policy. None the less, the Conservatives are right to say that there must be a fundamental change in banking culture. I hope that that will be carried forward in this programme.

I welcome very much the decision on interest rates, which is all the more powerful for having been done collectively. It represents a recognition that we are not, as the Chancellor said, simply dealing with difficult times. We are also dealing with different times that require a fundamentally different approach from central banks. The key point is that we are moving on from problems in the financial system to problems in the real economy. Ordinary people are going to ask, "If the banks can be bailed out, why can't we be?" In that context, will the Chancellor speak to the Justice Secretary about introducing new procedures for the courts, to ensure that repossession is the very last resort when people are experiencing serious difficulties with their mortgage payments? That is not the case currently for many of the creditors.

The Chancellor has been able to find £50 billion for the banks, so will he now ensure that the £8 billion that has been approved already for social housing is used rapidly to acquire the land and property that is becoming available at very big discounts, so that it can be made available for affordable housing? That would save many builders' jobs and prevent the new accumulation of toxic loans in the banking system. I think that we all acknowledge that this is the first and not the last step in what will be a very difficult process of recovery.

Click here to read the exchange and the statement in full