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TOPICAL DEBATES Financial Stability

The context of today's debate is the understanding that every economy needs a functioning banking system. Businesses and individuals have to be able to borrow money to invest. Without that confidence, the economy as a whole and, indeed, our whole society, is adversely affected. We on the Liberal Democrat Benches therefore welcome the financial rescue package that the Prime Minister and the Chancellor announced yesterday. It was in the national interest; it was the right thing to do. That does not make it any less galling that the greed and excesses of the banks have put us in this position. However, when a house is on fire, recriminations about how it started are secondary to putting out the fire. That is the task that we have now embarked upon. Changes in the rules of engagement between the taxpayer and the banks are nevertheless inevitable as a result of the Government's intervention, as well as being desirable. It is essential that the taxpayer's investment is as advantageous in its terms as possible. If, or perhaps when, normal order resumes and banks return to profitability, I want to see the return on that investment at the highest possible level for the British taxpayer. Senior bankers also have to wake up and realise that their old ways are in the past. Unlike the Conservatives, I do not want the Government to micro-manage every boardroom decision. I say this with kindness to the Conservative party: running a bank is not like deciding the location of chocolate oranges in WHSmith. We are talking about the banking sector being free to make innovative decisions, but within the changed context of the different times in which we find ourselves. The City and the wider banking sector must realise that the context is now different.