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Parties support bank rescue plan
The Tories and Lib Dems have said they broadly support the government's banking rescue package, but they also say there must be some conditions.
The Conservatives say the package must be used to boost lending and help the economy, not to pay bankers' bonuses.

Eight banks and building societies are to be given up to Ј50bn of public money in return for preferential shares, in an attempt to increase lending

The government was under pressure to act after banking share prices plunged

Chancellor Alistair Darling says the package is necessary to stop the situation becoming "worse and worse

Kick-start lending

Share prices fell as banks, unwilling to lend to each other, have struggled to access funding.

Initially Ј25bn of taxpayers' money will be used to kick-start lending between eight banks and building societies, with a further Ј25bn available if necessary for other eligible institutions

Mr Darling said that the government expected to get the money back but admitted all investments carried some risk.
He added: "If we didn't do this then the risk is this problem gets worse and worse and worse and we don't see money being available for lending to businesses, to individuals and that would compound the problems."

A further Ј200bn is also to be made available by the Bank of England for short-term borrowing, to provide liquidity to banks and building societies.

There will also be a special company set up to provide up to Ј250bn in loan guarantees to banks and building societies - banks currently remain unwilling to lend to each other and it is hoped it can help lending resume.

'Clear conditions'

The Conservatives and the Liberal Democrats have said they will work with the government to tackle the economic crisis.

Shadow chancellor George Osborne told BBC Radio 4's Today programme: "We want this to work, we hope it will work."

He said it was the "right thing" to provide for the recapitalisation of the banks but said there had to be "clear conditions" around pay and dividends.

"I want to make sure - and I hope that in detailed negotiations with the individual banks the chancellor makes sure - that this money is used to allow credit to flow through the economy again, to get that loan extended to the small businesses who need it, to get the family mortgage extended, it is not used to pay bonuses for bankers.

"People would be shocked if bonuses were being paid to the banks that take this money."

During a press conference on Wednesday, Prime Minister Gordon Brown said there would be "strings attached and conditions to be met" as part of the deal - including being satisfied about banks lending to homeowners and businesses and rewarding enterprise and responsibility not "irresponsible risk taking"."

"We must also be satisfied in the terms of our agreements with the banks about executive remuneration, about dividend payments, about improvements in supervision, " he said.

'Right place'

But when asked what level bankers' bonuses would be "capped" at, Mr Darling said it would be "frankly ridiculous" for the government to decide on bonuses but the Financial Services Authority would be drawing up a code looking particularly at incentives.

The Liberal Democrats' Treasury spokesman Vince Cable said the announcement of the rescue plan had not been handled well as "vast amounts of money" had been wiped off share values.

But he said: "They have got to the right place and I support the principles of what the chancellor is doing."

He added the rescue package meant the taxpayer had acquired a stake in the banks.

"And when the banks recover, as we trust they will, the taxpayer will make a return on their money and that seems to me a fair division of risks and responsibilities. And it had to happen, otherwise the banking system would have been in collapse".

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