Bail-out was essential,’ say MPs

PUBLISHED: 16:54 15 October 2008 | UPDATED: 15:30 25 August 2010

POLITICIANS are in unison in claiming the £37 billion bail-out was essential to avoid a banking collapse which would affect all residents, writes Marina Soteriou.

POLITICIANS are in unison in claiming the £37 billion bail-out was essential to avoid a banking collapse which would affect all residents, writes Marina Soteriou.

Some MPs place the heart of the blame for the banking mess with the so-called 'Masters of the Universe' City bankers for excessively gambling with their banks' money whilst taking home huge bonuses year upon year. But these MPs, along with the Prime Minister, claim the measures the government announced on Monday were to help 'ordinary people'.

The news of the rescue package broke as both Bexley and Greenwich council announced they were one of the few authorities who did not invest in the collapsed Icelandic banking system.

Eltham MP Clive Efford said: "From day one it has been about helping ordinary people and trying to get banks back to what they do, which is provide the life blood of our economy. This is not money the government are using instead of building hospitals or providing public services as it is coming from the government's reserves."

Erith and Thamesmead MP John Austin said the bailout was something that needed to be done.

He said: "If the financial crisis continued and banking collapsed we would all suffer."

Even former Tory MP Derek Conway agreed with the announcement which Gordon Brown referred to as 'the stuff of everyday life'. Mr Conway said: "The public cash injection into banking is not to save the banks but to oil the wheels of the economy so it must not be used to increase bank profitability." Mr Efford echoed this by saying: "This money has not just been given to the banks. It has been lent with securities and the taxpayers will get their money back."

Mr Efford placed most of the blame with the way the banking sector operated. He said: "Banks were not fully disclosing the risks so it made it hard to regulate. We are going to have to prevent this happening again." Although politicians and economists are warning of harder economic times to come, Mr Efford thinks we are better equipped to handle it than some of our European counterparts.

He said: "Employment is high, as well as wages and our Gross Domestic Product borrowing is low, having reduced to 36 per cent from 43 per cent in 1997."

l TWO of the capital's essential services are pleading with the government to recoup the £70 million they invested in Icelandic banks. The Metropolitan Police Authority (MPA) has potentially lost £30 million which it deposited with an Icelandic bank. And Mayor of London Boris Johnson confirmed that Transport for London (TfL) had £40 million invested with failed Icelandic bank Kaupthing Singer and Friedlander. The MPA has now called on the government to protect it against any potential losses. But the Bank of England made £100million loan available to just one of the troubled Icelandic banks on Tuesday - Landsbanki.

It was unclear at the time of going to press if either TfL or the MPA would recoup their investments. A spokesman for the police authority said front line policing services would not be affected.

l COUNCIL bosses say they are not 'smug' about not having any money invested in Icelandic banks.

Bexley and Greenwich council did not have any money invested in Icelandic banks or their British subsidiaries, unlike nearby Bromley and Kent County Council.

The Assistant Director of Finance for Bexley council Mike Ellsmore said that after the collapse of Northern Rock last year, the council focused on investing tax payers' money in British and European Union banks and building societies. He said: "We tried to reduce the risks. We always try and maximise the interest because that off-sets council tax. I am not smug over it as I am sure that the councils that had money in Icelandic banks took proper advice and at one time those banks did have good credit ratings."

The council now has money in Abbey National, NatWest and Clydesdale Bank.

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