Cable: Government must be clearer

October 6, 2008 5:21 PM
Originally published by UK Liberal Democrats

UK Money - notes and coinsLiberal Democrat Shadow Chancellor, Vince Cable has called for the Government to be clearer in its response to the financial crisis. Speaking after Alistair Darling pledged to do whatever was necessary to support the banking system, Mr Cable called for all parties to work together in the national interest.

He insisted it was "not a time for recrimination about past mistakes", but argued that the Government must be clearer about its plans while people are so anxious about their savings.

Mr Cable said: "In relation to bank deposit guarantees, it seems to us that if the Germans are to make an explicit guarantee to protect depositors savings we shall have to do the same for the UK high street banks.

"Of course deposits are totally safe.

"But people are anxious and the Government needs to make it clearer than it is doing, what depositor protection actually means. There are questions about accounts in merged banks, small private businesses and large sums temporarily on deposit during a house sale.

"Second, the Government's case by case approach to bank failures has been sensible so far and the right one in the case of Bradford and Bingley and the Lloyds-TSB - HBOS proposed merger. But we are in a dangerous environment in which banks are being picked off one by one.

"I made proposals yesterday in a Sunday newspaper and the Conservatives have done the same, supporting re-capitalisation of banks based on part-nationalisation. Such a scheme would protect the taxpayers' interests better than a US style bail out.

"If the Chancellor cannot say any more now can he confirm that this issues is under discussion with the bank chiefs at their regular meeting at 6pm.

"Third, the central question is the availability of credit as much as the cost. But official interest rates are also vitally important for millions of mortgage borrowers and businesses.

"I have been for the last decade a strong supporter of the independence of the Bank of England and made my maiden speech on the subject in 1997. The Bank must remain politically independent.

"I believe, however, that it must be spelt out by the Chancellor that its mandate must include the possibility of decisive action, including a radical cut in interest rates, to head off financial and economic meltdown.

"Deflation, not inflation is currently the risk. Some members of the MPC who are arguing that the crisis is confined to the financial sector need a line of communication to Planet Earth.

"The Chancellor has called my comments dangerous. I recognise the dangers but we live in very dangerous times and emergency action is needed. Millions of jobs and livelihoods depend on decisive action in the next few days and weeks."