DCSIMG

Brown: Banking crisis has proved case for the Union

GORDON Brown last night attacked Scottish nationalism by saying that the banking crisis had proven the case for the Union.

The Prime Minister said the underlying message of the rescue package announced this week for banks, including the Scottish giants Royal Bank of Scotland and HBOS, was that Britain was stronger together and weaker apart.

"We have been prepared to step in to make available 37 billion of capital for RBS, and for HBOS and to Lloyds TSB," he said.

"And that is the strength of the Union. It is the Union that makes these things possible, that we are prepared to share the risks as well as the opportunities and when things are difficult we are in a position to support each other – stronger together, weaker apart."

He praised the tradition of Scottish and British banking, adding: "I believe we can rebuild these banks. I believe they will once again become strong institutions."

The Prime Minister said Scottish banks benefited from trading in the Union.

He added: "Let's be clear. The Scottish banking system not only serves Scotland but 80 per cent of its business was with the rest of the United Kingdom. So the Scottish banks were serving English, Welsh as well as Scottish customers.

"That's really the integrated financial market that we have at the moment. We're sharing the risks together and when things go wrong we work together to sort things out. We share the opportunities as well.

"That is indeed the strength of the Union. We are stronger together and weaker apart."

Asked if the bail-out undermined the argument for independence in Scotland, he said: "This is not the time for party political points.

"The important thing is that we were able to act decisively with 37 billion. That would not have been possible with a Scottish administration.

"We've seen the problems in Iceland, we've seen the problems in Ireland.

"We were able to put the whole strength of the United Kingdom's resources behind these two banks and I think it's important because I value the Scottish banking tradition. I think everybody does."

He praised the tradition of Scottish and British banking, adding: "I believe we can rebuild these banks. I believe they will once again become strong institutions."

Meanwhile, First Minister Alex Salmond unveiled a six-point plan last night designed to help Scots avoid the worst effects of looming recession.

A special meeting of the Scottish Government's cabinet focused purely on the economy agreed a series of measures ministers hope to roll out over the next few months. They were:

• Looking at capital projects that can be brought forward from the later years of the parliament and introduced quickly, to stimulate construction and the housing industry.

• Maximising the effect of the Homecoming series of events for next year, acknowledging the importance of tourism as a driver for the Scottish economy and using that to help other sectors.

• Finding ways of improving advice to business and streamlining the planning process.

• Boosting energy efficiency, particularly in vulnerable households.

• Rolling out two pilot projects around the country to help the elderly claim maximum benefits.

• Looking for additional measures to tackle fuel poverty.

Fuller details of the proposals will be announced in the next few days and weeks, with cabinet ministers expected to take advantage of the SNP conference this week to explain some of them.

A spokesman for Mr Salmond said: "The message from cabinet was that the whole economy is going to be impacted by these economic difficulties."

And he added that the six-point plan was designed to "mitigate the impact of the downturn on the real economy".

Labour welcomed the Scottish Government's decision to tackle these issues but said action was more important than talk.

Scottish Labour leader Iain Gray said: "We welcome the fact that the First Minister and SNP have finally turned their attention to stimulating the economy.

"We need to see the detail of Alex Salmond's six-point plan and examine it properly. What is important is this is not all talk and no action."

From zero to superhero in matter of days

IT was a sycophantic question that was more likely to be posed to the regime in Beijing than Britain, but Gordon Brown was quizzed over what it felt like to be a superhero.

He was branded "Flash Gordon" at a press conference with foreign journalists after international leaders including George Bush copied his much-hailed rescue plan.

Although it has taken the near-collapse of capitalism to achieve it, experts believe Mr Brown has bought himself a 5-6 per cent credit-crunch dividend with his bail-out brainchild.

The Prime Minister has been branded a saviour of the global economy after the United States sidelined its original policy to adopt the UK's idea of buying stakes in their ailing banks and EU countries also fell into line with the British way.

Today, Mr Brown will head to Brussels for a European Council meeting with other leaders, where he will try to nail down a co-ordinated attack against financial instability. Plans are also under way for a wider economic summit in the UK in the coming weeks, trailed as a "Bretton Woods- style meeting" – a reference to the conference at the end of the Second World War, which set up a new international monetary system.

Mr Brown's stock rose at a press conference in London with foreign journalists yesterday, during which he was asked taxing questions such as whether he considered himself to be a superhero or Flash Gordon. Mr Brown replied that he was: "Just Gordon, I can assure you."

A source close to the Prime Minister said: "He is embarrassed. Gordon does not take compliments easily."

Mr Brown tried to deflect the praise yesterday by saying: "Politics, I have found, is about ups and downs."

His destiny appeared gloomy just weeks ago, after junior MPs started to openly call for a leadership contest. Since then, there has been a "bounce" but there are still fears in the government that the real impact of the credit crisis has yet to transpire.

Job losses and spending cuts are expected and the Conservatives are basing their fightback strategy on highlighting Mr Brown's inability to avert a recession.

But a Eurostar journey away, Mr Brown was being praised by the president of the European Commission, Jose Manuel Barroso, who has hailed the financial deal being across the world as "the Brown plan". And in the US, Mr Bush announced yesterday that his administration would buy a $250 billion (140 billion) stake in leading US banks.

"These measures are not intended to take over the free market, but to preserve it," the president said to allay fears that the captain of capitalism was turning into a statist.

The latest winner of the Nobel Prize for economics, Paul Krugman, has praised Mr Brown as the potential saviour of the world's financial system.

In an article entitled Gordon Does Good, the Princeton scholar said Mr Brown and Alistair Darling had "defined the character of the worldwide rescue effort, with other wealthy nations playing catch up".

Nigel Griffiths, the Edinburgh MP who has been campaigning in Glenrothes, said the reaction to Mr Brown had changed remarkably. "If you had asked me ten days ago how it (the by-election] would go, I would have said we had narrowed the gap but the SNP were still ahead. Now, I'm thinking we could win Glenrothes."

GERRI PEEV

Bush and Paulson copy British 'path to prosperity'

GEORGE BUSH yesterday announced a $250 billion (142 billion) plan to buy stocks in banks in an attempt to return the nation's economy to the "path of growth and prosperity".

In an echo of Gordon Brown's bank bail-out, the US president said the rescue plan was "an essential short-term measure".

Mr Bush also issued a temporary guarantee of "most new debt issued by insured banks" and expanded government insurance to cover most small business accounts.

The United States was taking "unprecedented and aggressive steps" to tackle the financial crisis, and international economic leaders had its "full support", Mr Bush said.

The president added that the decision of European leaders to purchase equity in major banks and provide temporary government guarantees for bank loans were "wise and timely actions."

He said the injection of American capital using money from the $700 billion (398 billion) rescue plan, seen by many as a Wall Street bail-out, "will help struggling banks fill the hole created by losses during the financial crisis, so they can resume lending and help spur job creation and economic growth".

Mr Bush added: "This is an essential short-term measure to ensure the viability of America's banking system.

"And the programme is carefully designed to encourage banks to buy these shares back from the government when the markets stabilise and they can raise capital from private investors."

Mr Bush's announcement came after the Dow Jones industrial average of blue-chip firms gained more than 11 per cent – its biggest one-day gain since 1933 – in a huge rally yesterday.

Traders reacted with relief to efforts by the US and Europe to inject capital into banks and get lending flowing again.

In the US, Hank Paulson, the Treasury secretary, said his country was buying equity stakes in a "wide variety of banks".

"The government owning a stake in any private US company is objectionable to most Americans, me included," he said.

"Yet the alternative of leaving businesses and consumers without access to financing is totally unacceptable."

He said the lack of confidence in the financial system "must be conquered because it poses an enormous threat to our economy".

"Today's actions are not what we ever wanted to do – but are what we must do to restore confidence to our financial system."

In addition, the Federal Reserve, the US central bank, said it would begin buying short-term debt to break the credit clog on 27 October.

Ben Bernanke, the Fed's chairman, welcomed all the new steps but added that policymakers would continue to take actions as needed to battle the crisis.

"Our strategy will continue to evolve and be refined as we adapt to new developments and the inevitable setbacks," he said.

"But we will not stand down until we have achieved our goals of repairing and reforming our financial system and thereby restoring prosperity to our economy."

 
 
 

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