MP calls for explanation of emergency loans indemnity
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The Public Accounts Committee chairman Edward Leigh has written to Chancellor Alistair Darling demanding a full explanation of why the Treasury did not inform the Committee that it had granted the Bank of England indemnity against losses it might incur in providing emergency support to RBS and HBOS.
In October 2008, the Bank of England provided emergency loans of £61.6bn to RBS and HBOS but this was not disclosed. Furthermore, the Treasury agreed to underwrite the Bank’s loans to prevent any losses it might incur in providing the loans.
Leigh says that the Chancellor’s explanation of why this was done is not sufficient and demands a full explanation.
In the letter, Leigh says: “Under established rules, which are codified in the Treasury’s own guidance for departments, “Managing Public Money”, Parliament would expect to be notified at the time an indemnity is granted. In circumstances where the existence of an indemnity needs to be kept confidential, the
rules specify that such notification should be made to the Chair of PAC and the Chair of the relevant Select Committee.
“In practice under these rules, I and former Chairs of my Committee have been notified of indemnities and other liabilities on a confidential basis and none of us have
breached the trust placed in us.
“I am greatly disturbed that the decision was taken to by-pass the rules in this case and would appreciate a full explanation from you. The rules also require Ministers to notify Parliament formally when the need for confidentiality lifts and I would like to know whether in your view this was the earliest opportunity for these matters to be brought into the open or whether it had more to do with the timing of the NAO work on the banking support measures which I understand is to be
published next week.”
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