PMQs: Brown is creating economic “confusion and uncertainty”, says Clegg

4.51.00pm GMT Wed 21st Jan 2009

Liberal Democrat leader urges PM to nationalise weakest banks

Speaking at Prime Minister's Questions, Liberal Democrat Leader, Nick Clegg, accused the Government of "announcements and half-measures" in their attempts to improve the economic situation. He called on the Prime Minister to implement a "full, if temporary, nationalisation of our weakest banks without any further delay."

Read the full exchange below

Mr. Nick Clegg (Sheffield, Hallam) (LD): I should like to add my own expressions of sympathy and condolence to the family and friends of Captain Tom Sawyer, Marine Danny Winter and Corporal Richard Robinson, all of whom tragically lost their lives in Helmand province this last week. I should also like to join in welcoming the inauguration of President Obama, and I especially welcome his early announcement of the suspension of all military tribunals at Guantanamo Bay.

The British economy is now standing at the edge of a cliff. It is clear that international markets believe that many of our banks are effectively broke, and that is pushing confidence in the pound and in the Government's finances to an all-time low. Will the Prime Minister accept that his announcements and half-measures have created confusion and uncertainty, when the country desperately needs clarity and certainty at this very dangerous time?

The Prime Minister: I shall just repeat what Richard Lambert, the head of the CBI, said. He said that these measures

"if fully implemented...should stem a further downward recessionary spiral and provide a stable economic platform on which the UK can trade through this difficult period."

The right hon. Gentleman has to understand that we have done three things. The first is that we have recapitalised the banks to stop them collapsing. We have done that not to help bankers but to ensure that people who rely on the banks, and who have their savings in them, can be secure.

The second thing that we have done is give real help to families and businesses through this difficult period, when it is right that the Government should intervene; only the Conservative party seems to oppose that. The third thing that we have done is take measures to extend lending to businesses and families. Lending to businesses now takes the form of the Bank of England being in a position to lend to non-bank institutions and to lend directly to companies through the corporate bond market. We have created the asset insurance scheme so that we can give more certainty for the future about how we will deal with the problem of assets. All those things are done so that the banks can be stronger to extend lending. I believe that that the right hon. Gentleman will find that other countries around the world are doing the same.

Mr. Clegg: I am grateful to the Prime Minister for his reply, but does he not see the extreme danger in any remaining ambiguity in the Government's response? Does he not agree with me, and the Chair of the Treasury Committee, that that must now mean the full, if temporary, nationalisation of our weakest banks without any further delay?

The Prime Minister: The issue is the extension of lending; that is the issue before us. The agreements that we have signed with the banks already are, I believe, agreements that are being honoured at the moment. I have to say to him that the problems is that when the banking crisis started, foreign banks that were operating in Britain reduced their capacity in Britain. Non-banking institutions that were lending in Britain for mortgages and companies reduced their capacity, so even if the Royal Bank of Scotland, Lloyds TSB, Barclays or those other banks increased the capacity substantially, we would have suffered a loss, just as every other country has suffered a loss of foreign capacity. That is the problem that we are trying to deal with. The problem is the resumption of lending; that is still the problem that has to be dealt with, whatever the status of the banks.