Prime Minister's question asked in the House of Commons, by Lord Cameron of Chipping Norton (Conservative). It was answered on Wednesday, 26 March 2008 on behalf of the Prime Minister.

Engagements

Question: People around the world are making a contrast between Bear Stearns, where a rescue was organised in just a few days, and Northern Rock, where there were months of dithering. I know that the Prime Minister created the regulatory system, but he needs to be frank about its failings. Today's FSA report is a remarkable report, which says:"““The supervision of Northern Rock revealed the most significant combination of shortcomings””," yet not a word about that from the Prime Minister. The director general of the CBI says that this was the first new test of the tripartite system, and it failed to deliver the goods. So that we are better prepared in future, does the Prime Minister agree that the Bank of England, not the Financial Services Authority, should be in charge of rescuing banks that fail?

Answer: First of all, until a few weeks ago the right hon. Gentleman supported what we did on Northern Rock, so it makes no sense for him to criticise now. Secondly, as far as the Financial Services Authority is concerned, it is true that it has been regulating for solvency, and it has done a good job. The problem arose in terms of liquidity, and that is where further efforts have got to be made. That is true, as the President of America's report is saying, for the American financial system, and it is true of the French and the German financial systems as well. All countries are realising that more has to be done to protect against illiquidity, and they also know that there has to be greater transparency in the financial system. I repeat: the lessons that are being learned are being learned around the world. The Conservative party published a document in the past two days saying that far from Britain doing badly, real living standards in Britain among pensioners had risen by £1,500 since 2001; for single women pensioners, by £1,000; and for couples, by £700. That is on page 16 of the Conservatives' own document.

Secondary information