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Financial Services Bill

The first point I make to the right hon. Gentleman is that the Bank Governor does not come to the Government when he thinks public funds should be used; he does so when—this is set out in the legislation— there is a material risk that public funds may be required. Of course the decision to use public funds would be one for the Chancellor of the day. The second point that I make is that the problem with the tripartite committee was one set out in my predecessor's book: in autumn 2007 there were three different views and there was no way of reconciling them—and there was no clarity about who had power and responsibility. What we are talking about here, and what I am explaining, is a new power of direction. Of course any Chancellor would think very carefully before using it, but this power makes it absolutely clear that once there is a material risk to public funds, the Chancellor of the Exchequer has not only a power, as the current person doing the Chancellor's job has, to authorise the use of public funds—that is what my predecessor did in respect of the Royal Bank of Scotland—but a power of direction to provide liquidity to an individual firm and liquidity to the system. Those were not powers that my predecessor had. Of course, as I will come on to discuss, there are certain constraints and things that have to be done to inform people before they are used, but these are new powers that we are giving so that the Chancellor of the day does have powers, provided that he or she is prepared to use the Government's own balance sheet.