The Prime Minister and Chancellor have held a joint press conference following ministerial changes.
Read the transcript:
Prime Minister:
Thank you very much for joining us on a Friday afternoon.
These are not ordinary times, we are in new times. We are living through the first truly global financial crisis that started in America, but where we must in Britain now do everything we can to ensure the stability of our economic system and the security of millions of families and households who have been facing higher bills and now face the uncertainty caused by the financial failures in America and elsewhere.
Alistair Darling will take you through the latest position, the announcements that have been made today by the Bank of England and by the Financial Services Authority about the new funding that we will put into the system at a very high level, and at the same time the new arrangements for the security of depositors.
But the changes I have announced in the Cabinet and in the government today start with the changing way that we have to govern to meet these new times. I wanted to reconstruct the way we govern for these new challenges, challenges that did not exist in the same way in 1997, challenges completely different from 1997, and challenges we must now meet in a new way.
The new challenges come from a financial instability that we must contain by new measures. The oil price rises that now come to the heart of government policy on energy and the environment, the food price rises and the household bills that people face that arise from food shortages round the world, and of course all the time equipping our economy for the future with purpose and direction by making the right investments in skills, in science and technology, indeed in our infrastructure.
So all governments have to give a new priority to the financial sector and its reform. Oil prices and food prices need a new focus on how we can get them down. Enterprise now more than ever, especially business, needs representation at the highest level. We need to have a sharper focus on all these areas and the needs of housing and mortgage holders and home owners right across the country must be at the centre of everything we do.
Therefore I have created a new Economic Council to put it on a day to day footing. It will meet for the first time at 11.00 am on Monday morning. I have brought back Peter Mandelson from Brussels, where he has been a very successful Trade Commissioner, to lead our Business Department. I have brought in from the City Paul Myners, the former Chairman of Marks and Spencer. I have asked Lord Drayson to return from America and he has agreed to undertake the business brief in science. Stephen Carter will become a Minister of Technology, Telecoms and Broadcasting. And they will all be in the House of Lords. All these Ministers, plus those Cabinet Ministers with economic responsibility, will attend a twice-weekly meeting of the Economic Council.
To prepare for the new times I am also announcing a group of Business Ambassadors who will help promote exports and the reputation of Britain round the world and they will help particularly small business access global markets. We have in this group the Chairmen of Barclays, Lloyds TSB, Vodaphone, a number of other companies, Standard Chartered, the London Stock Exchange, Sainsbury’s, and we have of course the universities represented on this as well. It is the widest group of Business Ambassadors a country could ever have and they are some of the most senior and successful people and I am grateful to them for serving.
Every region in our country and every nation in it is affected by what is happening round the world. I have asked our new regional Ministers - the names will be announced in the next day - to work together in a new regional Economic Council to ensure that all the issues raised in each of the regions of our country, and the concerns, particularly of small businesses, are heard and acted upon across government.
My sense is that in a few months time all governments round the world will be taking similar action to the action we are taking today. Quite simply, the new era that we have entered requires new ways of governing. We don’t just need to change policies to deal with the new financial difficulties, but the way we take decisions and the way we govern has got to change as well.
The new Economic Council, our Business Ambassadors, the new Regional Economic Council, these are the modern ways of meeting the challenges we face, with serious people doing serious jobs in serious times. We are reinventing government to focus not on what it cannot do or what it can only do badly, but on what it can do well, and at the root of our concerns and our determination is the prosperity of every single citizen in our country.
Chancellor:
As Gordon says, the changes that he has made today are very much to meet the challenges that we face in today’s economic circumstances. And I just want to explain what further steps have been announced today to help us budget, stabilise the present uncertainty in the financial system, but also to look forward.
Firstly, as you will know, the Bank of England has made a significant announcement today, it is putting £40 billion into the markets from next Tuesday, it is accepting a wider range of security, and I believe that this will provide a great deal of help to the banking system. The central bank operations here and in different parts of the world are absolutely necessary to get through what is undoubtedly a very difficult time. We will continue to take action that helps the markets in general. You know that we have extended the special liquidity scheme which is run by the Bank of England, but backed by the government, into next year. I have already authorised in excess of £100 billion into that scheme. And in addition to that the Financial Services Authority announced 10 days ago that it would stop the practice of short selling in order to stabilise markets.
Now today the Financial Services Authority has also announced that it is increasing the compensation that is payable under the Financial Services Compensation Scheme from £35,000 to £50,000, and that is £100,000 if it is a joint account. That will make a difference, it will cover 98% of accounts, and I believe will go a long way to assuring people that their deposits are safe.
I have made it clear in addition to that on countless occasions, and again I make it clear today, that our priority is to do everything we can to stabilise the financial situation and protect depositors and I mean it when I say I will do whatever it takes to make sure that happens, just as the Governor of the Bank of England has said that in today’s extraordinary market conditions that he will take all necessary action to ensure that the banking system has access to sufficient liquidity. Both these actions today I believe demonstrate our commitment to that stability. And as Gordon said, as we look forward we are determined not only to make sure that we stabilise conditions today, but that we also steer our economy through what are undoubtedly difficult times, but we take the right action to support our economy and to ensure that if we come through this we can seize the undoubted opportunities that exist ahead.
Prime Minister:
Thank you very much. As you know, I will go to the European meeting in Paris tomorrow, I will put forward our British proposals about how a stability programme can work for each country. On Monday Alistair will make a statement to the House of Commons about recent financial events after the first meeting of the Economic Council on Monday morning.
Question:
Given that Peter Mandelson has been forced out of the Cabinet twice, given that he is a very divisive figure in your party, and given that your relations have not always been exactly easy with him, what was the question to which Peter Mandelson was the answer?
Prime Minister:
Serious people are needed for serious times. He has got unrivalled experience as the Trade Commissioner of the European Commission. Everybody has said right round the world that he has done a brilliant job. We need all those people with brilliance and expertise to help us as we meet these uncharted times and by bringing in Paul Myners, formerly of Marks and Spencer from the City, by bringing in Paul Drayson who is an expert in manufacturing and business, by bringing in other people who are Business Ambassadors for our country, we are bringing together the best team possible to deal with the difficulties that everybody knows have caused consternation in America and caused worries here in Britain. And we are going to work through these difficulties as a team because my primary aim is to get people through these difficulties fairly and to show that Britain can lead the world in coming out of the difficulties that the world has.
Question:
Can you just address the worries people have got about him Prime Minister, because you know there will be people tonight who are saying it is not right for someone to get a third chance in the Cabinet. You obviously had to weigh that very seriously in your mind. How did you come to the decision? Why did you overcome the doubts you must have had in your own mind?
Prime Minister:
You know it is incredible about how big decisions about the economy are reduced to just a question about one or two personalities. The fact of the matter is that Peter Mandelson has proved in these years as the Commissioner that he has unrivalled experience and expertise to deal with the business and trade issues that we are having to deal with. He is part of a team working together. We will deal with the conditions that this country faces only by having the best people. We have the Business Ambassadors, we have people brought in from the City today, we have people with expertise in the economic areas that will give people confidence. There will be a new focus on small business and how we can help them, and Peter Mandelson is part of that team and I am pleased that he has agreed to join it.
Question:
But I have spoken to Labour MPs today who are horrified at the return of Peter Mandelson. What do you say to those many people who will be appalled that you have brought back a man who has been forced to resign twice from the Cabinet in disgrace, once over a mortgage and once over a passport. And what does this say about your attempts that you talked about a year or so ago to clean up government and get rid of sleaze? There will be those who say sleaze is back.
Prime Minister:
Mr Mandelson has gone three years and more as the Commissioner in the European Union, he has done that with a great deal of distinction and proved himself. I think if you ask the business community in Britain and indeed in Europe he is regarded as a friend of business who can make a huge difference by the decisions he makes and the way he undertakes the job. But these decisions are made about the national interest, these decisions are made so that we, the government, can serve the people better. I want to bring into the government all the expertise that is available to help us through these difficult times. As I say, it is serious people dealing with serious changes that are happening in the world in serious times and we will together make the right decisions that will take Britain through these difficulties.
Question:
Prime Minister there are many people in your party saying today that you have taken leave of your senses. You have appointed a man who is divisive, a man who has twice been forced to resign from the Cabinet and someone you barely spoke to for the best part of a decade and a half. How can you answer that charge?
Prime Minister:
That Peter Mandelson has proved himself as Commissioner in the last few years as someone of great distinction. What I have decided is what I believe is in the national interest. It is in the national interest that we bring together all the people who can serve us to the best effect. If you have got someone with unrivalled experience in international business issues, someone who is respected by business for what he has done and who has built a reputation over these last few years as someone who can get things done, then if the British government can benefit from that it is the right decision and you set aside all the issues of the past in the national interest, and that is what we are doing today. These decisions made today about bringing in people from the outside, making changes so that we can put our full focus on sorting out the problems that arise from what has been happening round the world in our economy. I know that people round the country are worried about not just their food bills and not just their petrol prices, but they are worried also about the insecurity that has arisen from the financial crisis in America. I believe we can lead the world in dealing with these problems. I said a few minutes ago, I believe other countries will be doing exactly what we are doing to restructure government to deal with these problems and Peter Mandelson is someone who can make a difference helping us do what is right for business and for households throughout the country.
Question:
What about your personal relations, will this detract in the job of government?
Prime Minister:
Our personal relations will be very good. Thank you.
Question:
Chancellor, a year ago you gave an unlimited guarantee on all deposits in any bank affected by the credit crunch. Your aides confirm that that applied not just to Northern Rock but to any bank. I take it the FSA announcement today replaces that announcement. Now was that brought forward from next week because you are concerned about money moving to Ireland, are you worried about another possible run?
Chancellor:
You are not quite right. When Northern Rock got into difficulties last year I issued a guarantee then, which was subsequently extended, and I made it clear that if another bank got into similar difficulties we would take the same action. That is what I said. In relation to the FSA announcement, I think you know that for some time the FSA has been considering increasing the compensation limit to £50,000, it is something that I have supported and have made that clear over several weeks, the Prime Minister said exactly the same thing. So the FSA, which runs the Financial Services Compensation Scheme, it decided on the timing, it decided that it was the right thing to do to say that we were going to increase it to £50,000 and it is consulting on whether or not the limit shouldn’t be higher than that. It is statutorily obliged to consult before it can go that further step, and it is doing it. It is also looking at the differences between compensatory levels in different parts of Europe as well as different parts of the world. But as I say, the announcement they have made today covers 98% of account holders, so it goes a significant way to providing people with assurance.
I have also said, I said it this week and I said it last week and I will continue to say it, that we will do whatever it takes to stabilise the present situation in the financial markets and our priority is to protect not just the banking system but depositors as well.
Question:
Let me try one on the national Economic Council - how will a change in government structure help ordinary families across this country? They want help with petrol prices and fuel bills, I mean what will the new Cabinet Committee do?
Prime Minister:
We will be discussing day to day with a team of people brought together all the challenges that face us. Now whether these are financial challenges or whether they are other challenges that people are facing as a result of higher gas and electricity bills, or whether it is the housing market and we need to stimulate it and the things that we need to do, or whether it is the problems of individual small businesses, that is what we will be discussing in this Economic Council, it is down to earth problems that people are facing every day that need to be looked at with a fresh eye.
Look what has happened, let’s be honest, what has happened round the world is that the old economic policy was macro-economic fine tuning, whatever you call it. Now you have got to recognise that the sources of inflation round the world are oil prices or food prices, completely changed, and the ways that government have got to act cover not just what the Treasury does on economic policy and the Business Department does, but your energy policy, it covers your food policy, right across government the government has got to change. This will happen, in my view, in every country in the world in the next few weeks and months, people will wake up to the fact that we need new ways of dealing with new problems and we need these new ways in government of working together to deal with these problems. So if someone at home is asking what is the government to do about the insecurity that I feel, I say that every government department that has relevance in this is now working, every Minister is working together to deal with this, and the new system that brings in Business Ambassadors, regions of the country now represented on an Economic Council, as well as the key Ministers working closely together simply on the economic issues in what you might call the Economic Cabinet, that is what we are going to be doing over the next few months, and it is the right thing to do and I believe that other countries will do it very soon.
Question:
Prime Minister when you attend the summit in Paris tomorrow, if any of your fellow European leaders propose a European-wide banking bailout, how will you respond? Is that the right approach for Europe to take?
Prime Minister:
Well the suggestion that there is a fund about to be formed across Europe, there is no currency in that. I gather that any suggestions that have been made by different countries are not on the agenda for tomorrow. What I do think is on the agenda is how we can work together to deal with cross-border activities, how we can work together to look at how the economy can be stimulated as a whole, and how we can look together at some of the loopholes in legislation and regulation, like disclosure, that we can deal with as well. And I think one of the most important things I just signal that is now coming up that we will be acting on, is proposing a new initiative to help the funding of small businesses in Britain and across Europe. I believe that given that the banks have been unable to give small businesses the funding that is necessary, this is where government has to step in. And so I want to be there helping small businesses to get access to the funds they need, and I believe that the European Investment Bank has a major role to play, and I am talking not just about millions, I am talking about billions, to be made available to help the small businesses of our country.
Question:
When you go to Paris tomorrow, won’t you have some explaining to do about Peter Mandelson? If he had such a brilliant job as European Trade Commissioner, isn’t it in the interests of Europe and the world economy that he should stay there rather than come back here and help shore up your political position?
Prime Minister:
No, it is in the interests of our country that we use the expertise that he has built up in Europe over these last three years. Look, this is a global economy now, we are not dealing with national economies or even with just European economies, we are dealing with the global economy. We will find that over the next few months we will have to deal with the oil producing states in new ways that people have not foreseen before, we will have to deal with obviously the Asian issues that arise from the rise of China and India. No company in Britain is unchanged as a result of these events. Many companies, many of our biggest companies, now have Asian or Arab shareholders in large numbers. The world is simply changing and we need people who have that experience to help us. Now I think we have nominated for the position of European Commissioner to replace him someone who is excellent in Cathy Ashton, who is the Leader of the House of Lords, and I believe that she will prove to be a very good Commissioner indeed. But these are decisions that are in the end up to the European Union. We are going to benefit from Peter Mandelson’s experience, but we are also going to benefit from the experience of all the other people I have listed today. This is a situation where whatever the ups and downs there have been in the past, everybody - everybody - has got to come together to make sure that as a nation we come through this successfully. And I believe that we can lead the world in taking the action that is necessary, I would say action that will be followed by other countries later, but we will lead by doing the things that are necessary to make our economy move forward. And my interest remains, it is the standards of living and the security of millions of people in this country who have looked to us, rightly, for stability over the last 11 years, we have had a period of growth and stability, we must now deal with an international problem that is hitting every country, but I believe we can deal with it in an effective way with a team that is totally focused on doing that.
Question:
Could I just ask the Chancellor, I am still slightly confused following the previous question there. You are saying that there is this new £50,000 limit, but you also seem to suggest that if there is another equivalent of Northern Rock you will come in, you will do whatever is necessary to restore confidence and as it were safeguard the deposits there. So is it £50,000 or is it you will do whatever there is if there is another bank failure?
Chancellor:
The two propositions are not exclusive. Northern Rock, as you know, got into difficulty and eventually had to be nationalised, and we had to do something similar with Bradford and Bingley last weekend. And what I said at the time of Northern Rock remains the position today, that has not changed one bit. Separate to that, the FSA through the Financial Services Compensation Scheme, has run a scheme that had a maximum of £35,000 per account, that has now gone up to £50,000, and as I say £100,000 if it is a joint account. And on top of that the FSA is consulting to see whether or not they should raise it further still, and in addition to that they are looking at ways of making faster payouts, they are looking at how this compares with what is going on in different parts of Europe. But the two things should be seen together. Northern Rock clearly was a particular problem and I have made it clear, as Gordon was saying just now, that right across the world and in Europe as well governments are doing the same thing, they are trying to do everything they can to stabilise what is a difficult situation. How they do it will vary from country to country, how they react in particular circumstances will vary according to what is appropriate and what is right. But the one thing that people can be absolutely assured of, as I have said time and time again, three times today, is that we will do whatever it takes, whatever is right, whatever is appropriate to stabilise the financial position and to make sure that we safeguard depositors as well. We have made it clear that that is our priority, just as the Governor of the Bank of England also made clear that his priority is to do whatever he thinks is right and appropriate to support the banking system.
So people should be in no doubt about that. We are going through extraordinarily turbulent times and here, just as in every other country in the world where they are facing exactly the same problems, we will do whatever it needs, whatever it takes.
Prime Minister:
Nothing takes second place to taking this country through the difficulties we face. We need the right people and the right polices, and I was pleased that the opposition parties were prepared to give all-party support to the actions that we have taken in the last few days.
Question:
Are you saying, as I think you are when you are saying about new types of working, and you might not like the language of this but I wonder if this is the point that you are trying to get over to this country, are you saying that in a sense you have set up a kind of economic war cabinet, you regard this as being an hourly and daily challenge and you have set up a kind of war cabinet to deal with this that meets regularly with new people, is that the message you are trying to get across?
Prime Minister:
We are taking special action in unique circumstances. I do believe that every other country will follow us in this, but we are recognising that to deal with the elements that are causing people to face tough choices about their standards of living, we have to bring together a whole range of responsibilities and get them working in a way that can deal with people’s problems directly. So this is a new way of governing that is based on the uniqueness of the circumstances, these are new times, as I have said. The global economy will never be the same again, huge changes are taking place and we have got to deal with it in a new way, and by leading the way to have a new Economic Council, call it what you will, the important thing to say is that we are taking all the action that is necessary and will do whatever it takes to ensure not just the stability of the economy, because that is absolutely crucial, but also that we get the economy on to a path of growth where people can see that we are being fair in the way we deliver people the prosperity of the future.
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