This is the full text of the response by Shadow Chancellor George Osborne to the Chancellor’s emergency statement to the Commons this afternoon as issued by CCHQ.
“Mr Speaker, as we see again from today’s markets these are clearly times of great instability for our economy and great anxiety for the people we all represent here.
Families are deeply worried about their savings, their homes, their jobs and it is up to us to try to work together to get the country through this current crisis.
I don’t think the British public would thank us if they saw happening here in this House of Commons what everyone saw happening in the American Congress.
That is why we offer to look constructively at any proposals brought forward by the British government.
For let’s be blunt about it.
If the banking system fails, it’s not just the banks that go bust.
Businesses fail. Families can’t get mortgages. People lose their jobs – not just in the banks but across the wider economy.
The Prime Minister said we’d never see a return to 15% interest rates –
well this week one of our high street banks has written to many of its
small business customers increasing their interest rate to 15.8%.
All of us need to work together to stop Britain sliding from a banking crisis into a deep recession.
Of course, constructive support does not mean we are suspending our critical faculties.
We will return at a later date to ask how on earth Britain found
itself, at the end of this age of irresponsibility, with more personal
and public borrowing than any other advanced economy in the world.
But today I want to ask the Chancellor about the immediate issues
facing the banking system: about the issues of confidence, liquidity
First, he mentioned the Banking Bill. Can he confirm he will create
the Bank of England resolution regime that we think should have been
used to deal with North Rock and Bradford & Bingley.
As I told him last week when he met, this Bill will have our support.
We also welcome the decision to raise the limit of protection on retail deposits to £50,000.
We’ve been proposing this for almost a year from this despatch box and it is clearly the right thing to do.
Even so, events are moving fast with the broader guarantees issued by
first Ireland and Greece, then Germany and Denmark and others.
Will the Chancellor confirm that none of these countries informed the
British Government in advance and does he agree that it is not helpful
for European leaders to call for international co-ordination at summits
and then hours later act unilaterally?
As he implied in his statement their confusion is adding to market anxiety today.
He is going to ECOFIN tomorrow.
What reassurance can he give us that we can avoid descending further
into a beggar-thy-neighbour approach that will in the end help no one?
Turning to the issue of liquidity:
The increasing reliance of our banks on the overnight money markets is
creating a ‘hair trigger’ effect, which leaves individual institutions
more and more exposed to events.
This clearly must be undone, and so we all support the Bank of England’s decision to extend funding to the banks from tomorrow.
This should address the urgent liquidity problem, but let’s be clear about what’s happening here.
The Bank of England is becoming not just a lender of last resort but the lender of only resort.
Does the Chancellor agree with me that in the medium, term and the long term that is unsustainable?
We need to address not just the symptoms of the crisis but the cause.
That brings me to the issue of capital.
The cause of this crisis is that we built an economy on debt-fuelled
bubble – and now the bubble has burst and the debt is being called in.
This leaves banks undercapitalised and their balance sheets weak.
There are steps that can be taken now to stop for example the ‘mark to
market’ accounting rules adding to the downward spiral of falling asset
values and restricted lending.
Now the Chancellor’s immediate reaction was to say it would make ‘no difference’.
Many many banks disagree with him and so do many other European countries.
If he won’t accept our argument, will he at least engage with theirs’?
That still does not address the central challenge – the need to recapitalise the British banks.
Does he agree with me that this must, in the first instance, mean shareholders accepting their responsibility?
As I said to the Conservative Conference, banks that pay out dividends
instead of rebuilding balance sheets should be held to account by
Now I know the Prime Minister said, when he went to New York, that he wanted to handle this crisis on a case by case basis.
But events have moved on and does the Chancellor accept that the ad hoc approach is running out of road?
No one is expecting the Chancellor to get up here and speculate on
every single option available but he himself confirmed yesterday that
big steps are being considered by the government.
And would it not be irresponsible to not at least consider more
dramatic measures to help our banks – including support from creditors
and government injections of capital.
Of course there must be very strict conditions to protect taxpayers and ensure that they benefit first from any gain.
We could not contemplate taxpayers’ money being used to prop up the kind of salaries and bonuses we have seen in recent years.
The Chancellor can ask his new city minister about that in the House of Lords.
And we must make sure that in return for any support the banks start lending again.
But in the end, for all the risks to taxpayers involved, there is one thing worse than government action.
And that is inaction in the face of this crisis.
For then the far-greater risk to the taxpayer, and the country, is of a long and lasting recession.
Boom has turned to bust.
Now bust must not become something worse.
That is why Conservatives stand ready to help.”
Added 7th October: Video highlights of George Osborne’s speech