Darling defends Rock response as Tories back administration
Monday, 28 January 2008 12:00 AM
The government had been "right" to protect savers when Northern Rock ran into financial difficulties, the chancellor has insisted.
After MPs criticised the government's handling of the Northern Rock crisis, Alistair Darling defended his response.
Writing in the News of the World, he promised to strengthen the Financial Services Authority and Bank of England but rejected claims the regulatory system is "fundamentally flawed".
He said the events leading to the run on Northern Bank had been "quite exceptional".
Mr Darling wrote: "We need to tighten up the system and fill in any gaps, but the reforms I announce need to build on the reforms made ten years ago, not reverse them."
A three-month consultation on banking supervision is set to be launched this week.
The chancellor has set a deadline of February 4th for Northern Rock to find a private buyer. If this is not achieved, the Bank of England's £25 billion emergency loans will be turned into government-backed bonds.
The Conservatives yesterday attacked the government's response.
Shadow chancellor George Osborne said "given where we are" the best response to Northern Rock's difficulties would be a "form of administration".
This should be reconstruction led by the Bank of England, he told the BBC's Andrew Marr programme.
Labour responded that this amounts to nationalisation and accused the Tories of further inconsistency over Northern Rock.
Chief secretary to the Treasury Yvette Cooper said: "This isn't a new form of administration. It's nationalisation. Something they opposed as recently as last week."
Ms Cooper said the Conservatives have "no credible proposals" and are "more interested in playing politics than protecting depositor, taxpayers and financial stability".
Mr Osborne's latest intervention came a week after the Liberal Democrats accused Labour of refusing to nationalise the troubled lender out of fear of the Conservatives.
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