Morning:
22°c
Teenager becomes the first person to die of swine flu in London and the fourth in the country
More...
The job needs doing - but this bail-out is no triumph
George Osborne, Shadow Chancellor13.10.08
IN THE end, the Government ran out of options. With the British banking system in danger of collapse, an angry taxpayer has had to step in and risk billions of pounds to rescue some of the biggest high-street banks. Millions of people earning salaries of £15,000 or £25,000 are using their tax money to bail out the bankers who were paid 10 times or even 100 times that. They had to because if the banking system fails then everything fails. People fear for their savings, families can't get mortgages or re-mortgages, businesses fail and jobs are lost because loans aren't extended.
So we had to rescue the banks to rescue the whole economy. That is why David Cameron made the right judgment when he said this kind of recapitalisation might be necessary a week ago and why he showed the right leadership when he said the Conservatives would work constructively with other political parties on solving the immediate crisis.
But to regard today as a triumph, as some in government seem to do, is bizarre. And it misjudges the public mood. For this is no triumph. It is a necessary but desperate last-ditch attempt to prevent catastrophe.
Let us sincerely hope that the billions of pounds of public funds we are putting at risk today do the job, bring some semblance of calm to the financial markets and start the credit flowing again through the veins of the economy. That shouldn't prevent us from seeing this for what it is: the final, sorry chapter of the Age of Irresponsibility. The moment when Gordon Brown was finally forced to confront the consequences of building a 10-year economic boom on a mountain of debt.
For we should never, ever have reached this point. There was nothing inevitable about it. Our banks could and should have behaved more responsibly and taken fewer risks. Indeed, those that did, like HSBC, have been rewarded for their prudence by emerging relatively unscathed. Our regulators could and should have spotted the risky bets many of the banks were taking and stopped them.
That's what some bank regulators around the world did, such as in Spain, but not here in Britain. And our government could and should have used the good years of global growth to set aside money for a rainy day. That's what many governments did by building up budget surpluses, such as they did in Australia and Sweden; but in Britain, Gordon Brown racked up the biggest budget deficit in the western world.
So what next? In the short term, we taxpayers must insist on certain conditions in return for our money. I will look carefully at the small print of the deals signed with the banks over the weekend. I want to make sure that everything is being done to keep the risk to the taxpayer to the minimum possible. That means asking existing shareholders first to stump up the cash. It means ensuring that the taxpayer benefits if the value of the banks increase as a result of this deal.
I will also want to know why the plan changed over recent days so that the Government is now potentially taking majority control of some of the biggest banks like Royal Bank of Scotland, and could put representatives on the board. Just five days ago, Mr Brown and Alistair Darling were telling us that appointments to the board were "entirely a matter for the bank". What changed?
In the medium term, we need to overhaul the banking practices and regulatory system that left us in this mess. When Gordon Brown scrapped the old system and replaced it 10 years ago with the new Financial Services Authority, he also removed the power of the Bank of England to keep an eye on overall levels of debt in the economy. I think that was a huge mistake. We Conservatives want to give that responsibility back to the Bank of England, so someone has the power to call time when bank borrowing gets too high.
Of course, this won't do anything to help families who are struggling now to pay their bills or who are worrying about their jobs. So the Government should adopt our plans to support people in the economic slowdown instead of leaving them to cope on their own. Conservative plans to freeze council tax, abandon the new car tax, keep businesses facing bankruptcy afloat and help low-income families with heating bills could all be put in place in the coming months.
Finally, in the long term, we all have to learn some profound lessons about the way free markets work. Laissez faire is dead. But let us not replace it with suffocating state control, for we know that it, too, leads to economic ruin. When I hear Gordon Brown claim that all the problems we face "came from America" and the expensive solutions devised around the world were "made in Britain", it makes me wonder whether he is prepared to learn anything from his own mistakes.
It was in Britain not America where families borrowed more than any in the world, and where we became so dependent on the success of financial services. It was in Britain not America that a government based its entire economic policy on the delusional belief that boom and bust had been abolished.
It is extraordinary, now that the economic record of the past decade has been shredded and the economic policies pursued by the government over that period are discredited beyond repair, that Mr Brown never once paused for breath and said: "Yes, I was the Chancellor for the 10 years these problems emerged and I acknowledge my responsibility for what has happened."
I can promise you, Prime Minister, that we'll help you with the emergency action to save the banks but we will hold you to account for your failures. You presided over the biggest economic disaster of our lifetime and we will not let you forget it.
Reader views (11)
Here's a sample of the latest views published.
Yesterday Alistair Darling called for bank lending to return to 2007 levels, this government are hell bent on doing all they can to restart the housing boom - which has been the main cause of our troubles, which planet are these guys on?.
Today Gordon brown is basking in the glory of saving the western financial system, it's like the arsonist returning to put out the fire and then being hailed as the hero. If people cannot see this then we are all doomed. As for our great leader comparing himself to Churchill, hopefully he will suffer the same fate as our wartime hero and get swiftly kicked out of power at the next general election, which can't come soon enough.
It's time that we had a change of government, lets give the Tories a chance - Labour have shown us what they are capable of, never again. lets banish them for good this time.
- Mark Burton, St Ives Cambs
So George, the rescue was all you and Dave's idea was it? Shame you forgot to tell anybody isn't it? And of course if, God help us, this should go wrong, you will leap to claim that it was in fact all Gordon's idea and you wanted nothing to do with it.
- C, London
The way George Osbourne is going on one would imagine Gordon Brown has bought a steak in Trotters Independent Traders when we are in fact dealing with what were until recently regarded as some of the best banks in the world.
It would be interesting to know how many past and present tory M.Ps are on the boards of these banks?
As for those who reckon Gordon is being reckless with taxpayers money should remember what would happen if these banks were declared bankrupt!
The real concern for the tories is that bank shares will recover Gordon will make a tidy profit which can then be used to fund tax cuts ahead of the next election.
- Melvyn Windebank, Canvey Island, Essex
A great deal of the legislation regarding the financial services industry comes from European Union and the proposed single European market in financial services will harmonise regulatory systems.
Hence, I doubt the Bank of England will be able to function as Mr Osborne and Mr Cameron wish unless, we have a referendum on the Lisbon Treaty/Constitution, vote NO and renegotiate a trade agreement.
- Gill, Handsworth, Birmingham
Thank God that Dave Camoron and Baby George weren't in power for the last few weeks. I assume Dave would have put Lord Lamont in charge as he not only sorted out the UK economy but also privatised the Russian economy with great success for a few rouble millionaires. We now need to know whether Dave and George are still Thatcherites who believe in monetarism or whether they have learnt anything.
- A Clark, Brentford
So, Prudence McBroon is to take the credit for covering his own huge mistakes with our money is he? Anyone who thinks that this is the end of the story is mad. A recession will follow his bungled year as sure as eggs are eggs and Gordon 'Nowt to do wiv me Guv' Brown will have more and more difficulty explaining why pensioners must choose to either freeze or starve, why more and more kids are falling into poverty, why more British people are homeless, jobless and unskilled. The Nulabour project is an abject failure. This latest 're-launch' has Campbell and Mandelson written all over it but remember just one thing Labourites-truth will out. We are reaping what Gordon has sown, £125,000,000,000 of debt for our kids to pay so Gordy, Mandy, Ali D and Tony B can stay on the gravy train. All the way to gaol, hopefully.
- Steve, Portslade England
The chilling thing is Brown actually believes he's clever. Remember, NO MORE BOOM and BUST at the time I thought who does he think he is! At that time it was very clear the property boom was over and only fools were being given money they could not afford nor could the country. When ever you see 100/125% mortgages run for cover. The trouble with bean counters, they are taught by other bean counters and can't see the wood for the tree's.
- Mike, London
When the tax-payer is paid back, will it be a cash payment into his bank account? What do you think? Or will it be used to 'create a progressive society that will help all hard-working, hard- pressed British families?' Actually, when one thinks about it, that phrase is a bit old hat. Mandelson will no doubt tart it up and make it more swallowable, eh?
- John Problem, Hackney Wick, London, UK
Brown(and his hapless sidekick Darling) is desperate for his latest spin to stick: "This problem started in America and somehow just blew in from the Atlantic to infect our otherwise-sound financial institutions. Thankfully I have single-handedly saved the global financial markets with my unique plan (copied from the Swedish bailout in the early 90's). I can do this because I have been so prudent with Britain's finances over the last 11 years and reduced our national debt."
The chilling thing about all this? Brown may actually get away with it...
- Andrew, Oxfordshire
Osborne is clearly frustrated at being sidelined as an impotent nay-sayer with nothing to add of any use, or any substance. Meanwhile Alistair Darling (unbelievably) is busy shaping and enforcing the plan that takes the country through a global crisis.
Oh dear, Dave and George must be cursing their luck- first a Tory Mayor who is slowly arriving at the same policies and conclusions as Ken and has much more power than them, but now a pesky global crisis to scupper their "do-nothing-watch-Labour-get-unelected" plan!
Even Dave and George's attempts to make it look like they have some say in the plan are risible.
Dave's "Don't hammer the bankers!/ Hammer the bankers!" flip-flopping is exactly what we don't need- Conviction chaps, conviction, NOT confusion.
Admit it guys- this crisis needs character, and you have been found wanting. Badly wanting.
- Fresh, london
George Osborne would make a much better chancellor than the present one. He's clever, capable and knows what he's talking about.
- Delphine, Oxford
