Premier condemned for saying bank had ‘bad business model’

Commons clash over HBOS merger

By David Perry

Published:

GORDON Brown came under fresh attack from the SNP last night after insisting in the Commons that the bank HBOS floundered because it had “a bad business model” which “has to be corrected”.

He said the bank would have collapsed if the UK Government had not backed a merger with Lloyds TSB.

He told MPs it was “complete nonsense” for the SNP to suggest HBOS was basically a healthy institution that came under fire because of London speculators.

He said HBOS had lost a great deal of money because of the bad business model, adding: “That is why Lloyds TSB has been given government support with the share issue for the new HBOS/Lloyds TSB.”

He urged SNP Westminster leader Angus Robertson to stop peddling myths around Scotland about the viability of HBOS in its current form.

Mr Robertson said later: “Many people in the financial sector worried about their jobs will find it distasteful and upsetting that the prime minister should choose to run down financial institutions and businesses which clearly have a viable future.”

In his question to Mr Brown, Mr Robertson asked if he was confident that the mistakes in regulation which caused the banking crisis were not going to be repeated with the abandonment of competition rules to allow the merger when tens of thousands of people in the financial sector feared for their jobs, not least in HBOS.

Earlier Jim Spowart, the financier behind the attempt to find another bidder to take over HBOS, claimed he was discouraged by the UK Government from finding an alternative and announced he has had to give up the quest.

Western Isles SNP MP Angus MacNeil said he was writing to Cabinet Secretary Sir Gus O'Donnell, demanding an investigation into how a private and confidential meeting between Mr Spowart and Scotland Secretary Jim Murphy was leaked to the press only three hours after the meeting.

Lloyds TSB shareholders can vote on its merger with HBOS tomorrow.