Cable and Kramer quiz Darling

1.39.25pm GMT Sat 1st Nov 2008

[Oct 13]: Vincent Cable (Deputy Party Leader; Twickenham, Liberal Democrat): . . I particularly welcome what the Chancellor said about small business lending, stemming repossessions and bonuses.

I share some of the concerns of the Conservative spokesman, which the Chancellor has partly answered, about the commitment to 2007 lending, even if it applies only to those three banks. It was the case that 2007 was the very peak of irresponsible lending, when mortgage lending was fuelling the unsustainable boom in house prices, and it clearly cannot continue.

I welcome the Chancellor's modesty about the Government's ability to manage banks, but bankers were not very good at managing banks either, so now that Stalin in No. 10 has rediscovered his confidence I wonder whether this might be the time for a Beria in No. 11 to launch a purge of irresponsible bankers. The Chancellor might want to draft in some of the experienced, mutually governed building societies, which have not been seduced by the bright lights and profits of the City, to run some of those banking institutions.

I welcome the return of sanity and co-operation among the developed countries after the chaos of last week and the beggar my neighbour policies they were starting to pursue. Now that the Government have demonstrated their influence with eurozone Finance Ministers, how will that influence be sustained, as the Chancellor is not a regular member of that group?

In relation to the Group of Seven, why are the Chinese not involved, given that they are absolutely central to the issue, both as lenders of last resort to the United States and as a main source of growth? Were they not invited, or did they decline the invitation?

Finally, I hope and suspect that we are in the darkest hour before the dawn, as regards this crisis, but I hope that the Government will not be carried along, as they have been before, by hubris and excessive self-confidence, and that they will recognise that we are entering a period of recession. There must be as much sensitivity to the needs of the large numbers of people who will be hurt by it as has been shown to the banks in recent days.

Alistair Darling (Chancellor of the Exchequer, HM Treasury; Edinburgh South West, Labour): I am grateful to the hon. Gentleman. He is right that we need to proceed with caution. I said that I thought that the step that we are taking is essential, because stabilising the banking system is a precondition of helping the very people whom he talks about. After all, we are helping people and businesses in this country and, through them, the whole economy. That is why we are taking this step.

Last week, Members on both sides of the House said that one of the things that they wanted was the freeing up of lending to businesses and mortgage payers. Indeed, the shadow Chancellor mentioned that issue specifically. That is precisely what we have sought to achieve with the institutions with which we have these agreements. We are not saying that they should simply lend, willy-nilly, to anyone who turns up; that would be ludicrous. They must assess how much someone can afford to borrow, and whether there is adequate security. Banks have got to ensure that their lending is prudent and properly thought out, and the availability of funds will help. That is what Members on both sides of the House want, but nobody wants a return to the more irresponsible practices of the past.

The hon. Gentleman asked about board membership. It is important that we nominate people who have the relevant experience and can bring their influence to bear. I have made this point before: the boards are the first line of defence, not just in preventing banks from getting into difficulties, but in the wider system.

I agree with the hon. Gentleman on co-operation among countries. We had extensive discussions at the G7 meeting in Washington over the weekend, and at the IMF. He asked about China; it is, of course, a member of the G20, which we will chair in the coming year. The governor of the Chinese central bank was present at the IMF discussions and, I think, at the G20 meeting.

The hon. Gentleman made a point about the eurozone. Of course, we are not members of that group, but my right hon. Friend the Prime Minister addressed it yesterday, because it was recognised that Britain is an extremely important part of not just the European financial system, but the global financial system. It is quite right that our views are taken into account, and equally right that if we are to convince people that we need to act together, we need to be involved at every level. That is another advantage to our being fully involved in the European Union; I think that that is very important.

. . Susan Kramer (Cabinet Office; Richmond Park, Liberal Democrat): Over Thursday and Friday, I talked with a number of small businesses in my constituency. Many businesses that historically have never had lines of credit need them now because their customers are paying late, but those businesses know that they will not be attractive to the banks as customers. Will the Chancellor please give the banks a kick up the backside to ensure that they help companies of that kind, which are in difficulty only because of a situation generated by the banks themselves?

Alistair Darling (Chancellor of the Exchequer, HM Treasury; Edinburgh South West, Labour): I said last week that I hoped that banks would remember that, just as in the good times, when they go out trying to get as many customers as possible, they need to be good to their customers when times are more difficult.