Effective and efficient lending is key to avoiding serious recession

Commenting on reports that the Treasury is to announce an insurance scheme for banks to try to revive confidence in the industry, Liberal Democrat Shadow Chancellor, Vince Cable said: "It's undoubtedly the case that there is an extreme crisis in the banks as revealed by the continuing panic selling of shares and the stasis that is crippling the economy.

"Before the Government embarks on any new banking scheme, two very important questions need addressing. What has happened to the £37bn of taxpayers' money that's already been given to the banks? And why weren't the banks asked to come clean on their bad debt before being handed our money?

"At the moment, large numbers of excellent British companies are unable to raise credit. The Government must bite the bullet on the public ownership and control of the banks to ensure that lending is maintained to sound companies who can keep the economy ticking over in these turbulent times. They should not be made to suffer because the banks have had a collective stroke.

"We are in the early stages of a deep economic crisis. Getting the banks lending effectively, efficiently and quickly again is the key to avoiding a serious recession the like of which we haven't seen for a generation."