Support for savers

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'We are doing everything we can' to recover money in Icelandic banks, says the Treasury minister Yvette Cooper.

ANDREW MARR: I'm going to turn now to Yvette Cooper, Chief Secretary.

Yvette Cooper MP - Chief Secretary to the Treasury

YVETTE COOPER: Good morning, Andrew.

ANDREW MARR: Good morning. Let's start with the current talks, both with the banks and with other governments.

There's been a lot of generalities about "something needs to be done", "this is roughly what we think needs to be done", but nothing specific; and clearly by the time the markets open, they're going to be looking for some specifics. Are they going to get anything specific, do you think?

YVETTE COOPER: Well, as you know, we've set out very specific proposals for this country and for supporting the banking system here, and it's the right thing to do. What Alistair Darling's been talking to the G7, to the IMF about, and what Gordon Brown will be talking about in Paris today is about how we get that as a global response, not simply individual countries acting alone.

When you've got a global problem like this, you know when the decisions made, dodgy decisions made in the US mortgage market can end up affecting British local councils who happen to have their money in Iceland, this is very much a global phenomenon and the kinds of solutions we're talking about will only in the end have a real impact if we have a global coordinated approach as well.

ANDREW MARR: You are talking, whether it's money lent or money spent, about a huge amount of taxpayers' money at this stage.

Assuming that some kind of rescue plan is agreed in the next twelve hours or so and that we are part of it, and that we put large amounts of money into the banks, there can be no doubt now that taxation is going to have to rise under whatever government, under whatever timescale.

YVETTE COOPER: Well I think you made an important distinction there when you talked about the difference basically between lending and spending.

This is about putting investment into banks in return for something - in return for, for dividends or in return for assets that we owe - and it's important...

ANDREW MARR: Which we get back eventually perhaps, but not in the short-term.

YVETTE COOPER: But that's why we've said it's the right thing to do to use debt, use public sector debt in order to do this. What's basically happening...

ANDREW MARR: So you're ...Sorry, can I just stop you on that? You'll break the old rules because they no longer apply to the new situation rather than raise taxes?

YVETTE COOPER: Well we've always said that there is a big difference between the way in which you look at you know things like spending for you know teachers' salaries or drugs for hospitals - those kinds of things. That's the kind of normal business of government has to be done in the normal way.

There's a separate issue about what we do when we've got this kind of global crisis. Banks are not lending to each other.

There's a serious danger of the entire money system freezing up with huge impact for you know borrowers, for savers and so on. In those circumstances, it is right for government to step in. And basically what government is doing is filling that confidence gap and actually doing the lending that markets are not prepared to do. But that's all about...

ANDREW MARR: I understand your thinking on that. I just want to be absolutely clear that you will let borrowing rise above the old 40% limit and so on, possibly considerably above it, rather than plug that gap with extra taxes?

YVETTE COOPER: Well we have said that we'll set out the position in terms of the fiscal forecasts, as we call it - you know what we expect borrowing to be and so on - at the time of the pre-Budget report. That's what we normally do. What we've also said, of course - it's right to increase borrowing to support the economy anyway this year.

That's what you do. When economies slow down, it's the right thing to do - to support things, to get things through. But this is a separate programme, this work, to support the banking system. You're getting assets in return that we will then sell back again in future. That's a very different situation from the kind of ongoing you know normal business of government, so it should be treated in a different way.

ANDREW MARR: Okay.

YVETTE COOPER: And you know of course it's right to make sure the taxpayer is protected as part of that and that's the way in which we've set up the programme.

ANDREW MARR: Right, I think that's a fairly clear 'yes', but I'll take it for now. How will the part nationalisation of the banks actually work because the taxpayer, government puts in large amounts of money to support the system. Will there be politicians or political nominees on the boards of those banks?

YVETTE COOPER: Well we'll set out the case by case approach as we implement the programme and it's right that we should do.

ANDREW MARR: But some banks it might be the case and others not?

YVETTE COOPER It's right that we should do so as we complete those discussions and those negotiations. So what we're doing now is talking with all of the banks about how we implement the programme and that's the right thing to do. Now what we don't want...

ANDREW MARR: But sorry, as a politician you know representing the taxpayer, do you think there needs to be a voice for the taxpayer, for you know the world of politics as it were on the boards of these banks?

YVETTE COOPER: Well what you don't want to do is to have government running banks. That's not what we're interested in at all and that's very clear...

ANDREW MARR: No, I'm talking about a voice rather than an overall control.

YVETTE COOPER: Well so that's a very clear principle. It's right that you know banks should be, they should be getting on with that business.

However, given that we also have unusual circumstances where effectively the government, backed by the taxpayer, is having to step in to sort out a lot of the problems that the bank has created, it is also right that we have some strings attached. The kinds of things that we're looking at - that means looking at the way in which they're lending to small businesses or to households, looking at the approach that they take to remuneration, executive remuneration.

Those are the kinds of things we're looking at. We'll set out the sorts of strings that will be attached on a case-by-case basis. So it's too early to say what that will be, but it is right. I think you know the public would expect there to be conditions...

ANDREW MARR: I'm sure they do.

YVETTE COOPER: ...but we also think you know this is not the business of government to be you know taking the decisions that the banks themselves ought to be taking.

ANDREW MARR: I absolutely understand the principle. What I don't quite understand is in practical terms how you're going to do that because if you don't have control of the banks, you've handed them over this money; but if you don't have control, if you don't have a strong voice on the boards and so on, how do you affect the way that they're going to remunerate their executives? Who gets punished? You know how many of the people who made the wrong decisions in the first place lose their jobs? How do you make sure that they lend to this high street business rather than deciding not to? These are very, very ...I mean you know if they're running their businesses, they're running their businesses.

YVETTE COOPER: Well that's right and what you wouldn't expect is for government to set down conditions for every individual decision banks make or anything like that.

ANDREW COOPER: Okay.

YVETTE COOPER: That would clearly by completely inappropriate. We do however think that there are ways of being able to put conditions on the way in which things should operate when people are involved in this recapitalisation scheme that we've set out. But we will have to...

ANDREW MARR: But how?

YVETTE COOPER: Well we will have to set that out on a case-by-case basis. You know I know obviously...

ANDREW MARR: Yeah.

YVETTE COOPER: ...you want to ask me about it today, but you know we will set that out...

ANDREW MARR: But there will be a mechanism. There will...

YVETTE COOPER: ...we will set that out.

ANDREW MARR: So, for instance, Gordon Brown and many other ministers have inveighed against a culture of big bonuses. Everyone says big bonuses - a bad thing. Are you as a government going to be able to stop big bonuses?

YVETTE COOPER: Well, again, I don't think you should have a situation where government sets individual pay amounts for individual staff working in an organisation.

ANDREW MARR: So no! Actually you won't...

YVETTE COOPER: Clearly that would be wrong. On the other hand, I do think that you can look at the overall approach to bonuses.

So, for example, one of the things that the Financial Services Authority has been looking at is if you've got an institution where they're not rewarding hard work, they're not rewarding really good performance over the long-term; what they're rewarding is short-term risk taking.

If everybody in an organisation, if everybody in the BBC - you know you included - were all taking huge risks and getting high bonuses as a result, the BBC as an institution would also be taking some pretty high risks.

ANDREW MARR: Yes.

YVETTE COOPER: So, therefore, you can look at how you regulate the organisation as a whole - if it's taking too many risks by the way it's setting out its bonuses.

ANDREW MARR: So the FSA as it were working for the government could say to the Bank of Whatever, "We don't like the way that you've been remunerating your senior executives." Then what would they do?

YVETTE COOPER: Well, for example, if that meant the organisation as a whole was taking much higher risks, then it may be regulated much more intensively as a result, so there may be regulatory issues there.

But the Financial Services Authority is going to consult on some proposals, so they're going to set out more detail here. We've also said we will look at executive remuneration as part of the individual deals that are being done.

And I think ...I mean what Gordon Brown said on this is you know people, people recognise that you know hard work and you know people who are putting their talents to good use should be rewarded. What they don't think should be rewarded is people taking massive risks with other people's money or not turning out to be quite as talented...

ANDREW MARR: Okay.

YVETTE COOPER: ...as everybody thought they were.

ANDREW MARR: I still don't quite understand ...I understand that there have to be strings attached. I don't quite understand where the strings are going to be stuck to and how you're going to pull them.

YVETTE COOPER: Well that's because, that is partly because we will set those out in due course.

ANDREW MARR: And you can't tell me that. Alright. Let me turn to the question of the Icelandic savers. Huge political row with the Icelandic government. You've used anti-terror laws which deeply offend them. First of all, what chances there for local authorities, public institutions who have put their money into Icelandic accounts getting that money back?

YVETTE COOPER: Well that's what we're working with them on right now because we do want to work hard to recover the assets. It's their money, money that was put into Icelandic banks, and I think the priority at this stage should be to do everything that we can to recover those assets at this stage.

ANDREW MARR: And is it true that we have frozen assets owned by Icelandic companies worth 4 billion and, therefore, worth more than the money sitting in those accounts - or that was sitting in those accounts?

YVETTE COOPER: Well we've had to take action both in terms of the Icelandic assets, in terms of Landsbanki, but also in terms of other subsidiaries, Icelandic bank subsidiaries based in the UK. So we have had to take action in terms of freezing assets. But what we want to do...

ANDREW MARR: So sorry...

YVETTE COOPER: ...is to try and get this ...Well we want to get this resolved.

ANDREW MARR: You could, you could just take those assets, sell them and hand the money back to the local authorities, couldn't you?

YVETTE COOPER: Well I think we need to have a proper process for doing this and that's why we sent a team over to Iceland on Friday in order to talk to the Icelandic authorities about the way in which money can get back to the people whose, you know whose money it really is.

ANDREW MARR: And you are confident that...

YVETTE COOPER: Those discussions are underway at the moment and you know that's why we've frozen assets in the meantime, until those discussions are concluded and we know what's going on and how people are going to get their money back.

ANDREW MARR: So one way or the other - either the discussions work or you've got those frozen assets - those local authorities and others will get their money back?

YVETTE COOPER: Well that's what we're working for at the moment because we think it's important. You know this is money that's been built up over a long period of time.

ANDREW MARR: Can you give them any kind of guarantee?

YVETTE COOPER: We've got to work very closely with local authorities, but also with the Icelandic authorities and the banks to try and do that.

ANDREW MARR: 2 million unemployed and a recession. It's not avoidable now, is it?

YVETTE COOPER: I think you know this is going to be tougher times. You know we've seen ...There's two big things happening in the UK economy.

There's been everything that we've seen in the last few weeks in terms of the global credit crunch really spreading, taking hold of economies right across the world; but also of course we saw earlier the big increase in oil prices. And I think Simon was talking earlier about the impact on the retail sector of higher oil prices. That's actually now coming down. We've got to see that feeding through to you know lower prices at the petrol pumps.

I also want to see the gas and electric companies pulling their prices down as well because that obviously makes life easier for consumers just at a time we still know we've got the global problems in the banking system.

ANDREW MARR: Alright. Well don't go away, but for now, Yvette Cooper, thank you very much indeed.

INTERVIEW ENDS

Please note "The Andrew Marr Show" must be credited if any part of this transcript is used.

NB: This transcript was typed from a recording and not copied from an original script.

Because of the possibility of mis-hearing and the difficulty, in some cases, of identifying individual speakers, the BBC cannot vouch for its accuracy

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