PMQs and Darling statement As-It-Happened
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Well, here we are again after the summer recess. No prizes for guessing what the main topic of conversation will be at today’s prime minister’s questions, with the part-nationalisation of Britain’s banking industry likely to figure pretty heavily. But don’t expect too many stand-offs. Politicians – especially party leaders – feel a little tetchy at laying into the government during times of national crisis, and the last few weeks certainly constitute a national crisis. Instead, there should be some fairly in-depth discussion of this morning’s bailout package, with David Cameron and Nick Clegg asking formal, constructive questions rather that piercing, hostile ones. That’s the plan anyway.
It’s five minutes until the prime minister enters the Commons. The session today will be followed by Alistair Darling explaining to MPs what has been happening over the last two days. Reception to the part-nationalisation package has been generally positive so far. Backbench Labour MPs are relieved to no longer face calls of ‘dithering’. Most other politicians are closing ranks around the government, fighting desperately to present a united front. The scenes in Congress last month – where partisan conflict held up a US bailout package – clearly had an effect on British MPs.
Mr Brown pays his tribute to the British soldiers who died in operations over the summer. The list is depressingly long. He adds a section about a recent visit to Afghanistan and the pride of the House in “the efforts of our soldiers”.
Shock announcement: Interest rates will be cut by half a per cent. Mr Brown says the governor of the Bank of England is making a statement on the move as he speaks. US rates have also been cut by the same amount as have European rates.
It goes without saying the PM is presenting himself as the statesman of Britain, introducing the macro-strategy of interest rate cuts along with the micro-strategy contained in the rescue package. He is asked by one MP about the extent of the limits on fat cats. Instead, Mr Brown says he will try his hardest to maintain public spending on schools and hospitals etc. He also mentions that excessive risk taking will be punished and rewards pegged to achievement.
David Cameron stands up. He reminds everyone about his calls last month for support for the economy. Labour MPs laugh. Things have not started in the cooperative manner many of us had predicted. Cameron basically tries to get an assurance about Brown’s commitment to British capitalism, by asking a searching question about the importance of (private) banks in the economy on a day when the government is sort of part-nationalising the industry. Labour MPs meet this with irritation and even some minor shouting. Brown concentrates on how he will maintain stability.
“Restructuring of the banks is designed to ensure credit lines remain open to small and medium sized businesses of this country,” Mr Brown says. Cameron stresses the huge investment taxpayers are making, but when he starts criticising the City’s irresponsible behaviour Labour MPs are back to guffaws and barely concealed irritation. Mr Brown insists executive remuneration, especially bonuses, will form the cornerstone of bank commitments when they accept the deal. “The FSA will publish a consultation document if excessive risk taking put the company at risk,” he continues. The FSA will propose a new way to deal with remuneration.
“Those banks that are most reliant on this scheme are those which took the most risks,” Cameron replies. So can the PM guarantee those banks won’t get any bonuses? Brown isn’t really answering. He says the government will insist on remuneration being based on hard work and enterprise etc, but nothing as concrete as Cameron was angling for. But everything Cameron says which sounds remotely left-wing is greeted by angry jeers from the Labour benches who can barely control their nausea at the old Etonian making noises about irresponsible behaviour. In the front of their minds is the fact that much of the Conservative’s funds come from short-sellers and other very rich white men with a tenuous grasp of responsible financial behaviour.
“I hear what he says” about irresponsible City behaviour, Mr Brown says, but he then reminds Cameron of his comments on the Andrew Marr show, when he promised not to take “easy shots” at bankers and the like. This is met with mad happiness from Labour backbenchers and even Mr Brown breaks a grin as he sits down. The laughter doesn’t die down for a full minute. Labour know the Tories can’t get a handle on this issue yet.
Nick Clegg stands up to speak. “This is indeed a day of reckoning for the British economy,” he says. But it’s also a day of reckoning for the Commons, he says, and stresses the need for unity. “When the ship is sinking you send for the lifeboats, you don’t argue about who sailed it into an iceberg,” he adds.
What’s Brown doing to make sure the EU works together? Brown says the coordinated cut in interest rates shows the world will come together to deal with the situation. On Friday the G7 will agree coordinated action on accounting standards etc. The IMF meets on Saturday. An international leaders meeting will follow.
“Whilst this package is hugely important, it is only one part of the jigsaw,” Clegg replies. Struggling families need more money in their pockets now, he argues. Tax loopholes for the super-wealthy need to be shut down and the money redirected to struggling families. Mr Brown says he always closes tax loopholes anyway. Not strictly true, but anyway. He then does his list thing, where he reels of a set of policies to help “the hardworking families of this country”.
PMQs comes to an end, but stay online for Alistair Darling’s statement on the bailout package. Labour MPs are weirdly ecstatic. Lib Dems and Conservatives don’t know how to behave when they have to appear united but you can almost see their stomach churning with inner resentment. Labour MPs should not be as pleased as they appear. They are handing over copious amounts of taxpayer money with no guarantee of a return and some pretty lukewarm controls over the banks sucking up the funds.
Darling says the interest rate decision will help bring stability back to the global financial system. There are three strands to today’s announcement. Sufficient liquidity, new capital and providing the funds for banks to maintain lending. Today’s move will safeguard taxpayers and play an important role on the international situation, he continues.
Darling has a strangely useful quality to him fon days like today. His ability to make anything and everything utterly boring is profoundly reassuring. Instead of the breathless whispers of global financial meltdown, we have the slow, monotone persistence of his droning voice. It’s the nicest sound most of us have heard for a while. Even today, MPs are visible struggling to maintain their concentration. Wonderful.
Darling, rather predictably, says the government reassurance will mean banks have the confidence to lend to one another. He will work towards strengthening international supervision. We’ve heard all this before. Through some liquidity structure I don’t understand all the risk will be taken by the banks, not the taxpayers. This is hard to believe, but I don’t have the economic skills to dismantle it.
IMG has received the funds of British savers who banked with Icesave. Darling accomplished this using his special powers, whatever they are. He promises no depositor will lose money from the Icesave debacle and expresses irritation at Icelandic actions. He ends with a general description of his plans. “Failure to act would mean far greater risk to the economy,” he says. He earns loud cheers from behind him on the Labour benches.
George Osborne, shadow chancellor, stands up to reply. He says the Tories will maintain their position of constructive cooperation with the government. He wants the commitment to maintaining lending to small businesses explained in detail. Basically he’s searching for out-and-out commitments. Will there be a commitment that those banks which have really messed things up will be barred from giving bonuses? It’s the same question Cameron asked Brown, but Osborne rightly reminds Labour MPs that the PM didn’t really answer it.
On Iceland, Osborne wants clarification on exactly which deposits will be protected and where the money will come from given the various strains on the government purse. Will longer term changes to the system be implemented through today’s announcement? Will the chancellor make clear to the public just how bad our future economy might look?
Darling says it is important to learn from what’s happened. That seems true to the point of triviality. If he said the opposite I’d be seriously worried. The culture of regulation needs to change, he accepts, but he doesn’t want to go back to the “old days” of having nine or so different regulators “tripping over themselves”. The individual agreements with the banks will be where the rules on bonuses etc are hammered out – that was Darling avoiding the question by the way. “It is important, when we deal with damaging effects of bonus system, that we deal with that,” he offers.
Vince Cable stands up to hearty cheers from his party. He makes it clear the Lib Dems support the package. His key question: how will the conditions imposed on banks be secured? “How is chancellor to ensure the taxpayers’ money going into the banks comes out the other end?” he asks. “I’ve been stunned as he has been by the sudden conversion of the Conservatives” to being opposed to the bonus culture, he adds mischievously.
Cable welcomes the coordinated effort towards interest rates. He says we’re progressing from problems in the financial system to the real economy. He wants the justice secretary to ensure repossession is the very last option when people face difficulty. Loud cheers for that one. “We all acknowledge this is the first and not the last step in what will be a very difficult process of recovery,” he says before sitting down. Cable lives up to his hype on days like this. He is easy to understand, authoritative and asks excellent questions.
Darling tries to assure him about the rules banks have to stick to on bonuses etc. He says the FSA can impose regulation, and banks would simply have to accept it.
With that the debate moves onto statements from other MPs, meaning politics.co.uk can move on as well. It’s been a longer PMQ As-It-Happens than usual, but then this is no ordinary day. Come back next week when maybe – maybe – things will be a little less historical.
