North Tayside Liberal Democrats

Scott calls on Brown and Darling to explain HBOS decision

Tavish Scott, leader of the Liberal Democrats in Scotland has written to the Chancellor to invite him and the Prime Minister to explain to small businesses, unemployed financial workers and account holders why they pushed through Lloyds' takeover of HBOS.

The move follows new information revealed this week by Eric Daniels. The Chief Executive of Lloyds admitted at the Treasury Select Committee that "no, we would not have had to have taken government money had we not bought HBOS." This raises further questions about why the Chancellor and Prime Minister pushed through the merger, forcing Lloyds to accept taxpayers' bail-out money, risking banking jobs in Scotland and harming the interests of Scottish customers.

It is now clear that UK Ministers could have kept HBOS separate, under

full Government control, and able to get credit flowing to small and

medium sized businesses. Lloyds would have remained fully independent of the Government.

In his letter, Mr Scott wrote:

"You will have seen that at the Treasury Committee on Wednesday, Eric

Daniels the Chief Executive of Lloyds TSB, admitted for the first time

that Lloyds TSB would not have needed help from the Government's bail-out of banks if it had not taken over HBOS.

"Under questioning at the Committee, Eric Daniels said "No, we would not have had to have taken government money had we not bought HBOS."

"There are now a whole new set of questions for the Government.

"Every High Street in Scotland faces a loss of banking jobs.

"The take-over of HBOS by Lloyds was steam-rollered through by the

Government. Now it emerges that there was another serious option

available, to keep HBOS as a free-standing bank.

"This campaign has gone from the boardrooms of the banks to the pavements outside the SECC in Glasgow and now to the committee rooms of Westminster.

"The Government has taken a huge stake in private banks already. There is still the prospect that full nationalisation of a bank might need to be undertaken by the Government, to get credit flowing to small and medium sized businesses. This option has been mooted steadily and consistently by Vince Cable MP. The Government's action on HBOS has made the prospects for that option worse. By turning the Government's face so early against HBOS remaining separate, the options for a fully national bank are reduced.

"People will be scandalised that it is only now that the details emerge. Lloyds did not need the government bailout. They were given £17bn by the Taxpayer because they had been convinced to take over HBOS. People will reflect that represents nearly three times the value of HBOS at the time of the bailout

"This whole debacle has not been good value for the taxpayer. We deserve more for our billions of pounds.

"This is now a conscience call for you as Chancellor. Are you prepared

finally to come clean and be open about HBOS. It has been clear all along that the you and the Prime Minister were keen to pressure Lloyds to take over HBOS. The Prime Minister promised that it was "a better solution", the Treasury repeatedly said that it was "the only option". You offered access to billions of pounds of taxpayers' money to make it happen. Your Government threatened to take the money off the table if anyone questioned the idea. The Government's lawyers even threatened to bankrupt the small business members of the Merger Action Group for daring to challenge the idea at the Competition Appeals Tribunal.

"But now we know that the money would have been better used to fully

nationalise HBOS and leave Lloyds fully in the private sector. It would

have created HBOS as a public bank. That would have been a bank that would give credit to soundly based small businesses, not dither like the private banks through the Autumn. It would have protected banking jobs on the High Streets of Scotland. It would have respected the judgement of the Office of Fair Trading that Scottish customers were likely to be harmed the most from the take-over. We need stronger competition in banking when the recession ends for long term benefits to the Scottish economy.

"There is broad consensus in the Scottish Parliament that there should be an inquiry into Scottish banking. I'm sure that MSPs would welcome you and the Prime Minister to explain why, as Scottish MPs, you drove through this takeover. It would be an opportunity to explain your actions to the small businesses, unemployed financial workers and account holders paying the price for this flawed decision. You and the Prime Minister need to explain to taxpayers why we have been left with so little to show for the most expensive government excursion into private business for generations.

"I hope you will take that opportunity."

Ends.