From Editorial Comment

Read this article on TheHerald.co.uk

A lack of confidence has undermined the Government's efforts to kickstart the ailing economy and has perhaps manifested itself most corrosively in the failure of the banks to fill the lending void left by the withdrawal of foreign financial institutions.

The latest government initiative to free the flow of money involves the establishment of the asset protection scheme, under which the banks can, for a fee, "park" their toxic debt in a vehicle underwritten by the taxpayer.  Royal Bank of Scotland (RBS) has signed up to the scheme but Lloyds Banking Group is still on the outside, having failed to agree terms with ministers.

The stand-off has raised anew concerns about the wisdom of the Lloyds TSB takeover of HBOS, a bank on the brink of collapse, and the role of ministers in removing obstacles to a prompt deal. Billions of pounds of taxpayer's money are involved but the true extent of the HBOS debt and the failure to date to put it in the government "haven" have further damaged public confidence in the ability of ministers to manage the banking crisis. Could it ebb any lower after the controversy over Sir Fred Goodwin's pension?

If the tide is to flow in a positive direction for ministers, and inject a measure of confidence in the economy as a consequence, the government needs to be more open and transparent about its role in the RBS pension deal and the Lloyds TSB/HBOS takeover. It is all very well for Harriet Harman, the deputy Labour leader, to issue a veiled warning that Sir Fred cannot count on keeping his £693,000 annual pension. She seemed to accept yesterday that the pension might be enforceable in law but what did she mean, and what will be the implications, when she insists it is not enforceable in the court of public opinion?

Sir Fred has already made clear what he thinks of public opinion in his letter to Lord Myners, the Treasury Minister, declining in the face of widespread opprobium the opportunity to return all or part of his pension. Ms Harman's remarks are not substantive and amount to a (perhaps intentional) diversion from the meaningful questions. There is a lack of clarity about the contractual status of the pension when approved. What was the role of Lord Myners in the negotiations? Who authorised the deal?

While there appeared no alternative to the Lloyds TSB deal with HBOS, Vince Cable, the Liberal Democrat deputy leader, among others, wants to know the detail in a confidential Treasury dossier setting out the case for a takeover. Publication has been resisted on grounds of financial security. Now that the taxpayer has a 43% stake in Lloyds Banking Group, potentially rising to 74% should the bank join the asset protection scheme, there appears to be an overriding case, on grounds of the public's right to know, for the government to come clean on both the dossier and the pension deal (the taxpayer stake in RBS is 68% ). Did ministers have an inkling of what they were letting Lloyds TSB and the country in for when successfully seeking a competition waiver on the takeover? The dossier might provide answers. There is only one way to find out. Playing fast and loose with the taxpayer's interests can have a detrimental effect in the court of public opinion, as ministers might find out to their cost.