PM says banks want rescue merger

The prime minister says the bank merger is 'the best option'

Merging Lloyds TSB and HBOS is the best option and still the only way forward, according to the prime minister.

Gordon Brown told the BBC's Politics Show both institutions now want the proposed merger, which has been brought about by the crisis in banking.

Under the plan, £17bn would be put into HBOS and Lloyds TSB, meaning taxpayers would own about 40% of the merged institutions.

The SNP and Liberal Democrats have questioned if the deal should go ahead.

They have called for clarification over the bail-out, arguing that it may still be possible to preserve HBOS, while the Conservatives have branded the deal "necessary but expensive".

But Mr Brown said: "We have one offer, which is the Lloyds TSB, it protects the maintenance of the Halifax Bank of Scotland, in merger with Lloyds TSB and if people have another offer then obviously we'll look at it.

"But that's the only offer on the table."

The merger is not in the interests of high street competition, jobs or the broader Scottish economy Lib Dem spokesman

"I think you'll find that the merger between Lloyds TSB and HBOS is wanted by both institutions now and I think people know that there are issues that have got to be resolved and are better resolved by the merger."

He added: "The better solution is for them to go with what is a very strong bank - Lloyds TSB."

It comes as the Liberal Democrats are to lead a debate in the Scottish Parliament calling for HBOS to remain an independent Scottish bank.

A spokesman said: "Gordon Brown's comments sound like he doesn't want there to be an alternative.

"If the prime minister was interested in HBOS having a future as an independent bank he should make it clear that the support which has been offered to RBS and the newly merged bank would be available to HBOS if the merger did not go ahead.

"The merger is not in the interests of high street competition, jobs or the broader Scottish economy."

Scottish First Minister Alex Salmond has sought to clarify whether the bail-out funding was dependent on the merger going ahead.

The UK Government has said the problem for HBOS was not capitalisation but liquidity, and that it would continue to struggle in current market conditions.

But SNP MSP Alex Neil said: "This failure of the UK Government, shareholders in both banks, to act in Scotland's interests underlines the dangers of sleepwalking into a takeover without proper consideration of the full implications for Scottish jobs and decision making."