Malcolm Chisholm: The HBOS - LLoyds TSB merger

HBOS - Lloyds TSB merger Malcolm Chisholm (Edinburgh North and Leith) (Lab):
I congratulate Margo MacDonald on lodging the motion. I always admire her tenacity and style and I often support the causes that she espouses, but I cannot support the motion this evening. There is a case for a broad-ranging inquiry that investigates the details of everything that happened in the lead-up to the general banking crisis, but there is no case for homing in on one aspect, as Margo MacDonald recommends.

The key issue for Edinburgh members and, I am sure, for all other members is the employment situation. John Park emphasised the key question, which is how we protect and preserve as many jobs as possible now. Given that employment and unemployment are probably the key aspects for everyone, it is worth saying that the main banking union, Unite, has always supported the merger.

Critics of the merger must take that into account - and perhaps explain it. It is by no means obvious that resisting the merger would have meant more jobs. Like the trade unions, my basic belief is that unemployment would have been higher without the merger and without the wider action that the UK Government took to support the banking sector.

Sandra White:
The member mentions saving jobs. In his reply to me, James Kelly said that the purpose of the Government's intervention was to save jobs, yet he said later that jobs are being lost. If the Westminster Government put in money to save jobs but we are now talking about jobs being lost, how does that correlate?

Malcolm Chisholm:
As is obvious, jobs are being lost in the banking crisis; the issue is whether we would have lost more jobs without the intervention.

Another point that should be picked up, to which Christine Grahame referred, is that shareholders voted for the merger. The Chancellor of the Exchequer made it clear that funding was not contingent on the deal going through.

Margo MacDonald rose—

Malcolm Chisholm:
I do not have time to give way; I have already taken one intervention. I know what Margo MacDonald wants to say. If I have time at the end, I will take another intervention.

We must remember the dire situation that HBOS was in last year. It developed long before the crisis of September; we have heard that internal people warned about the absence of risk controls and we know from figures from the Financial Services Authority that in June last year HBOS's funding gap was greater than that of any other UK bank, at £198 billion. That led to massive reliance on the wholesale funding markets, which seized up after the collapse of Lehman Brothers on 15 September. Within hours, HBOS shares crashed - the markets decided that the bank was going to go.

The fact of the matter is that, without the intervention of and guarantee from the UK Government, the bank would have gone under. It is clear that, without that intervention, we would have had far more job losses, not to mention the devastating effect on the rest of the economy.

We have to remember what the situation was like in that critical week in September and applaud what the Government did at the time. Even more than that, we need to acknowledge the wider action that the Government took at the beginning of October to save the banks by way of recapitalisation. Whatever their criticism of the UK Government in other areas, members of other parties should give the Government credit for the decisive action it took at that time to save the banks.

In the small amount of time that remains to me, I will focus on the present and the need to save as many jobs as possible. A City of Edinburgh Council meeting on the local economy on Monday of this week heard that Edinburgh is beginning to see beneficial flows of investment, including in the financial sector.

One very interesting piece of information is that the Lloyds Banking Group is beginning to see Edinburgh as a centre of excellence, including for its procurement arm and asset management business. We have to look at what happened in terms of swings and roundabouts. May 13th 2009, (Column 17412-3)