Brown ready to give banks billions more

It is the latest indication that the Government's £37bn bail-out has failed to kick-start lending.

The Prime Minister and the Chancellor both said that another direct cash injection was not their first option, but they did not rule one out.

Instead they are thought to be figuring out a multi-billion insurance scheme in which the Treasury would take on some of the risk of debts.

Banks would pay a fee to reduce the potential losses they would face on lending to companies and also possibly to households.

The Prime Minister insisted yesterday that banks should be lending even more than they did in Labour's boom years. He said he was 'urgently' talking to the banks about how to get them to start lending again.

Opposition MPs are sure to seize on further schemes that use public money as evidence that the bail-out has been an enormously expensive failure.

But Mr Brown insisted yesterday that its main aim had been to save the banks from complete collapse.

'I don't think you can judge the success of recapitalisation by what happened in one month,' he said. 'I think you've got to judge it as a necessary means in which by saving the banks - and saving is the right word - we restore the ability for them to fund businesses and mortgages, and that will happen over the next period of time.'

Mr Brown said a second round of recapitalisation, with the taxpayer taking further direct stakes in the partnationalised lenders, was 'not the first thing that anybody would think about at the moment'. Mr Darling, would not rule out a second round of recapitalisation - though he said it was 'not your first port of call'.

'When I announced our original plans in October, I said it would be necessary for us to continue to take whatever measures were necessary to ensure that we get lending in the system,' he said.

James Chapman, Daily Mail

05.01.2009