Page last updated at 21:57 GMT, Tuesday, 14 October 2008 22:57 UK

Bail-out 'shows Union's strength'

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Prime minister says bail-out shows the need for the UK

Prime Minister Gordon Brown has said the multi-billion pound bail-out of two of Scotland's leading banks was testament to the strength of the Union.

Mr Brown said the 37bn rescue of Royal Bank of Scotland, HBOS and Lloyds TSB showed the UK was "stronger together".

He said the current economic crisis demonstrated smaller countries, such as Iceland, were ill-equipped to cope.

Scotland's First Minister Alex Salmond accused Mr Brown of shattering the cross-party consensus on the bail-out.

Smaller countries

Speaking to BBC Scotland, Mr Brown took issue with the SNP's previous claims that an independent Scotland could emulate the success of Ireland, Norway and Iceland - the so-called "Arc of Prosperity".

He said recent events had shown these countries had not been adequately placed to deal with the turbulence in the financial markets.

While maintaining it was not the time for party politics, Mr Brown said: "We were able to act decisively with 37bn. That would not have been possible for a Scottish administration.

"We've seen the problems in Iceland, we've seen the problems in Ireland, we were able to put the whole strength of the United Kingdom's resources behind these two banks and I think it's important because I value the Scottish banking tradition, I think that everybody does."

The prime minister said that those running RBS and HBOS had made serious mistakes but the government was now working to stabilise the situation.

He said it was important that the institutions increased lending to businesses and those seeking mortgages.

Mr Brown said: "We know that mistakes have been made, we know that there are failings that have to be addressed, we know that people have had to take responsibility for them. Equally however, we know the great strength of the values that were spread around the world by British banks, and particularly Scottish banks, over many, many years. And I believe we can rebuild these banks."

Norway looks frankly like a sea of stability in a world of trouble at the moment
Alex Salmond
Scotland's first minister
The prime minister's comments came as the Scottish Government held a special cabinet meeting on the economy.

Mr Salmond said: "It is very unfortunate that the prime minister, who has had a lot of cross-party support over the past couple of weeks for his stabilisation plan, in the national interest, should resort at the first opportunity to an attack on Scottish independence."

Referring to the forthcoming Glenrothes by-election, Mr Salmond added: "He sounded less to me like a prime minister and more like a guy who was worried about losing a by-election in the adjacent seat to his own."

Mr Salmond said smaller countries such as Ireland and Norway had shown skill, resilience and success in surmounting their problems.

He said: "Ireland took substantial and early action to stabilise its financial sector.

"It is moving in to recession certainly but it is moving in 40% per head more prosperous than the United Kingdom and I suspect it will emerge from recession 40% per head more prosperous than the UK.

"Norway looks frankly like a sea of stability in a world of trouble at the moment, which is presumably why Gordon Brown did not want to mention Norway in his thesis that only small countries get into trouble.

"The country where this started, the country where 17 banks have failed, is the United States of America - the largest economy in the world."





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