Speaking at the North East Economic Forum today, Osborne said the fact the UK’s largest mortgage lender, Halifax, has not passed on the interest rate cut in full to borrowers is evidence that the recapitalisation package may have helped the banking sector but not the wider economy.
He said Gordon Brown and Alistair Darling should “swallow their pride” and admit that the package needs “radical surgery”.
Osborne said: “The cost of government capital is too high.
“It’s clear now that the 12 per cent the banks are paying for the preference shares is stopping them lending out money to homeowners and businesses at the low rates our economy needs.
“The interbank guarantees are too expensive as well.
“The Government tell us their plan is being copied around the world, but that’s not true.
“In America and Germany and France, their banks are being charged far less. No one is following the British model.”