Speaking in Parliament this afternoon the Chancellor Alistair Darling outlined the Government’s three measures to restore financial stability, including the £50bn capital injection in exchange for stakes in banks, the increase in the special liquidity scheme to £200bn and the temporary guarantees on inter-bank loans.
Darling said it was important that taxpayers benefited from an “upside” to their huge investment in the banking system and that the commercial terms of the arrangements would enable taxpayers to be rewarded.
He said that in return for Government support banks would be expected to keep their executive remuneration, payments of dividends and lending practices in line with its expectations.
Conservative shadow chancellor George Osborne said his party offered its “constructive support for the package”.
But he said: “The real test will be if credit starts flowing again through the veins of the economy.”
He said it was important that families and small businesses benefit from the package by being able to access bank loans at reasonable interest rates and said it was important that no bonus was paid to the executives who took their banks “to the brink of bankruptcy”.
Liberal Democrat shadow chancellor Vince Cable also welcomed the Government’s measures but questioned how the Government would ensure there was “conditionality” attached to the support it offers banks.
He also said it was important that Government was not seen to be just bailing out banks when the effects of the financial crisis hit the real economy and urged the Government to ensure that banks returned the favour by making repossession truly an action of last resort.