George Osborne certain UK's banks can stand stress tests

• "First time a select committee has had a veto on an appointment" George Osborne (picture: AFP/Getty Images)

Speaking at his first hearing before the Treasury select committee, Osborne said the UK banks set to undergo the tests next Friday would not require government help.

The tests, which are designed to check whether banks have sufficient funds in reserve to cope with various potential future financial crises, will be carried out on 91 banks, including Royal Bank of Scotland, Lloyds Banking Group, Barclays and HSBC.

"There's a plan to stand behind any banks that don't meet them," Osborne said yesterday, "Although I should say we're not expecting that to be the case in the UK."

Italian central bank governor Mario Draghi made a similar comment about his country's banks earlier in the day.

Osborne - who yesterday met for the first time with banking leaders including Lloyds chief executive Eric Daniels and his RBS counterpart Stephen Hester, to discuss issues ranging from financial regulation to proposals to break up the banks - also defended the Prime Minister in the row over jobs forecasts issued by the government's new tax and spending watchdog.

He told the committee that David Cameron's use of new employment figures, issued by the Office for Budget Responsibility (OBR) minutes before Prime Minister's Questions two weeks ago, was justified.

Outgoing OBR chief Sir Alan Budd brought forward the publication of the data following a leak to a newspaper, but said this week that Cameron's use of the figures was "not appropriate".

But Osborne said: "I don't think you can fault the Prime Minister for reading out public statistics."

He added that it was a "matter of regret" that the independence of the OBR was called into question, but it had been "made absolutely clear" to officials that it was entirely up to the watchdog to decide what was published and when.

An advertisement for a replacement for Budd is to be issued today.

Osborne offered the committee a veto on his appointment of a new head of the OBR, saying he wanted to underline the organisation's independence by giving MPs a role in the selection process.

"This will be the first time that any select committee has ever had a veto on an appointment," Osborne said. "Obviously it's entirely up to you whether you want to take up that offer, and if you feel it appropriate, put it in the statute that I propose to present to Parliament."

Select committee chairman Andrew Tyrie asked if members would have the power to take action if they lost confidence in the OBR's chairman.

But Osborne, who said he would consider the suggestion, warned this could undermine the independence of the OBR.