Barclays investment "a scandal of mammoth proportions" - Cable

2.19.42pm GMT Fri 31st Oct 2008

Vinca Cable MP: The British Government must not simply let this pass.

Barclays announcement of a proposal to raise up to £7.3bn from Arab investment in order to strengthen its balance sheet has been slammed by Liberal Democrat Shadow Chancellor Vince Cable. The money will be mainly raised from the state investment funds and royal families of Qatar and Abu Dhabi.

If the deal is completed as expected, the Middle Eastern investors will have an almost 32% stake in Barclays. Vince Cable said:

"This is a scandal of mammoth proportions. Here is a bank which relies on the taxpayer to bail it out if the going gets rough but which has offered Middle Eastern investors a much better deal than the banks are offering to the British tax payer.

"Sheikh Mansour and the Qatari Group are being offered convertible bonds at very attractive interest rates with an opportunity to convert into shares when things improve.

"We have to ask why Barclays is willing to offer a better deal to foreign investors than the British taxpayer. The answer is simple: they don't want the British Government stopping them from paying massive bonuses to their executives. More than the other banks, Barclays operate a high-risk casino operation which makes the bank particularly unstable but which gives very rich pickings to the top executives.

"The British Government must not simply let this pass. I have absolutely no objection to Arab investment in the British economy but this deal smells to high heaven.

"The Government should seriously be considering making it clear to Barclays shareholders that if they accept this deal, the bank will forfeit any future entitlement to protection from the tax payer.

"And this deal also raises the wider question as to whether the banks, which are licensed to take deposits from the public, should be allowed to continue very high risk gambling operations which have brought the financial system to the brink of disaster and which Barclays is at the very heart of."