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Brown pressed over £1.1 trillion savers guarantee
Jonathan Prynn, Consumer Affairs Editor1 Oct 2008
Gordon Brown under growing pressure today to clarify whether he would offer a £1.1 trillion safety-net for all savers.
The sense of uncertainty over the Government's response to the financial crisis came after Irish ministers announced a blanket guarantee scheme for its savers yesterday.
There were signs today that the French government is considering a similar move to reassure the public that their money is safe and prevent a "run on the banking system".
The Prime Minister has been careful not to rule out a blanket guarantee of taxpayers' bank deposits in Britain.
But leading bankers want Mr Brown - who says he will do "whatever it takes" to stabilise the financial system - to clear up the confusion swiftly.
Economists said the Government would hold back a 100 per cent guarantee to act as a trump card if the crisis threatens to run out of control.
It has already said the guarantee on savings will be raised from £35,000 to £50,000 shortly - but not exactly when.
Bankers say they were left frustrated by a conference call with the Chancellor late last night as he tried to examine new options to solve the crisis.
The chief executives of Barclays, Lloyds TSB, Royal Bank of Scotland, HBOS and HSBC were among those patched into the call alongside Alistair Darling and Treasury officials.
One person who was closely involved said: "It was an intensely frustrating conversation and frankly most of the bankers were unimpressed by what they were hearing."
The conference call took place within hours of the Irish government saying that it will guarantee 100 per cent of all savings and deposits with the six main Irish banks and building societies, which total about ¤400billion (£317billion).
Shares in Royal Bank of Scotland fell today on fears that savers are taking money out of its Ulster Bank subsidiary - not covered by the Irish guarantee - and moving it into banks that are.
A guarantee for British banks would cover the £660 billion of personal deposits in banks and £228billion in building societies. With small businesses and organisations such as charities the total is £1.08 trillion. Covering major corporate banking, as the Irish government has done, would take the total to almost £2 trillion. Another source close to last night's conference call said: "There was a great deal of uncertainty about a state guarantee. The Government seems to recognise that it needs to do something more but it's not exactly sure what. It seems to be moving towards a much greater guarantee but without any real clarity."
Bankers said the conference call highlighted the gap between the Government and the Bank of England. "The Prime Minister still wants to take things on a case by case basis," said one senior source. "Mervyn King, the Governor of the Bank, is still battling for a market solution."
The £35,000 guarantee covers about 96 per cent of savers in Britain and raising it to £50,000 would cover 98 per cent.
