No. 10 Morning Press Briefing From 18 Dec 2007
Briefing from the British Prime Minister's Spokesman on: Northern Rock and Donations.
Morning Press Briefing from Tuesday 18 December 2007
Asked for a running total of the amount of state assistance given to Northern Rock, the Prime Minister's Spokesman told the assembled press that it was assistance given by the Bank of England, so it would be best to ask them. Put that it was a Government issue and why not nationalise Northern Rock instead of waiting for a private sale, the PMS replied that as the Chancellor had said many times, it was the Government's preferred option to have a private sale, but obviously all options were open and the Government had to do what was right for the taxpayer as well as protect financial stability and the interests of depositors. Those were the principles that would guide the Government's approach.
Asked why the Government had extended financial guarantees today, as opposed to any other day, the PMS said that a decision was taken today by the Treasury and the Bank of England that this was the necessary thing to do in order to give the company some breathing space and support it's efforts to find a private buyer. Asked if there were payments due today, the PMS replied that for detailed technical questions it would be best to talk to the Bank of England.
Put that the taxpayer had become increasingly involved and was the Government confident of getting all the money back that had been lent to Northern Rock, the PMS made clear that the decision being taken was an example of the system working and operating in order to prevent contagion from an isolated incident affecting one particular financial institution. It was the right thing to do and prevented the problems that arose at Northern Rock, spreading to other financial institutions. As the Chancellor had said on many occasions, we had to protect the interests of the taxpayers, the interests of depositors and of the wider financial system and that was what we were doing.
Asked what the position was on making changes in the Tripartite system and was it more a question of when the changes were made rather than if they were made, the PMS replied that what the Chancellor had previously said was that we were looking at the operation of the Tripartite structure but the Chancellor had also made clear, that we would want to take into account the findings of the Treasury Select Committee review on the matter, which was not due to report until early in the New Year.
Put that if future events meant that Government had to nationalise Northern Rock during recess, would it have the means to do that, the PMS replied that it was a hypothetical question. Obviously, the Treasury and the Bank of England prepared for all sorts of contingencies, as people would expect. On the detail of that, it would be best to speak to them.
Put that if the system currently in place worked, why would the Government be looking at the operation, the PMS said that any system or procedures in place had to be looked at. The Government acted in order to ensure the problems faced by Northern Rock did not lead to contagion to the rest of the financial system. The action that was taken was effective. Put that the action had not helped Northern Rock and that because of the delay by the Treasury in imposing a guarantee on deposits, the bank run had worsened, the PMS said that it had helped Northern Rock depositors, who had a 100% guarantee. The Government was protecting the interests of depositors in Northern Rock and the action was taken in order to ensure that the problems faced by Northern Rock did not spread to other financial institutions. The Government would take the right decisions for the country, the economy and the taxpayer when it came to Northern Rock.
Asked why the Government was waiting for a Select Committee report, the PMS said the Treasury had made it clear that if changes were made to the system, these had to be properly thought through, evidence based and the views of the people with an interest in this area needed to be taken into account.
Put that the Government quite often passed such plans without a Select Committee report and did so in the Home Office last week, the PMS said that the Government had in fact published proposals for further consultation in advance of the Home Affairs Select Committee report. The Government had not published its final decisions as yet in relation to that matter; that would happen when the Counter Terrorism Bill was published.
Asked for guidance on the level of the nationalisation option, the PMS said the Government's preferred option was a private sale and the Treasury and the Bank of England were working hard to secure that. However, all options had to be considered.
Asked which of the taxpayer's interests, the depositors interests and the financial system as a whole took priority, the PMS replied that action had to be taken to protect the interests of all three and he would not get into the business of ranking them.
Asked what the Prime Minister's response was to the Capability Reviews for the Treasury and HMRC, the PMS said that these were matters for the Permanent Secretaries in the departments. We welcomed the reviews, which pointed out a number of positive features of both the Treasury and HMRC, but as with all institutions, there was always scope for continuous improvement. The Permanent Secretary to the Treasury had given quite a thorough and lengthy response to the Capability review and that was the best place to look in terms of the Government's reaction.
Asked if the Prime Minister had full confidence in Mervyn King, the PMS replied that the Prime Minister had full confidence in him. The Prime Minister believed he was and has been a first rate Governor of the Bank of England. The normal process for reappointing the Governor would run it's normal course.
Asked if the police had contacted the Prime Minister, the PMS reiterated that he was prepared to tell the press when the Prime Minister had been interviewed. The Prime Minister in his letter to the police had said that the Government would not be providing a running commentary on the investigation. This would apply during the holiday period as well.