Darling sets out banking reform plans

Chancellor Alistair Darling has told the Commons that a fresh state of investment in Lloyds would make it a "stronger bank and provides better value for the taxpayer". Skip related content

He told MPs this afternoon that overall government support to RBS would remain "broadly the same" and the new deal would provide "better risk sharing and greater incentives to exit".

Cost to the public purse would be "reduced markedly" under the new deals that were "better for the taxpayer, better for the banks and better for the economy".

Shadow chancellor George Osborne said the measure would cost the equivalent of £2,000 per family and had been a "new world record" as the single biggest bail-out of any bank anywhere in the world.

He accused the chancellor of not being prepared to even put the full figure of £39.2bn before the Commons.

Osborne called on the chancellor to confirm that the latest evidence had shown the flow of lending to business had fallen for the seventh consecutive month.

But the shadow chancellor did welcome measures to split the two banks and to curb bonuses.

Osborne said it had been the Conservatives "setting the agenda", with ministers having previously opposed the measures when proposed by the opposition.

And he suggested the real reason for today's move was that the EU Commission had forced the chancellor to announce the reforms..

Under the new plans, RBS is selling its branded branches in England and Wales, NatWest branches in Scotland and parts of its investment banking area due to the cost of state support.

The chancellor informed the Commons that the changes could see the creation of three new banks on the high street in the next five years.

And he said fears of a global recession had reduced with "market confidence" beginning to return.

"As a result we are now able to achieve our objectives on financial stability and banking reform at a lower overall cost to the taxpayer," he said.

"Today's decisions make Lloyds a stronger bank and provide better value for the taxpayer."

Both Lloyds and RBS will be placed in a stronger position to continue lending, with no discretionary cash bonuses except for staff earning under £39,000, he said.