Darling: British economy remains strong

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The Independent Online

The British economy remains strong despite the crisis at Northern Rock, Chancellor Alistair Darling said today.

Mr Darling acknowledged that there was a "real problem" at the bank which was forced last week to seek emergency support from the Bank of England.

But he insisted that the economy as a whole was well placed to ride out the international "credit crunch" following the collapse of the sub-prime mortgage market in the United States.

"What is encouraging from our point of view here in the United Kingdom is that the fundamental positions - the strong economy, the fact that we have got low interest rates and low inflation which we haven't had in the past - do stand us in good stead and that is very, very important," he told the BBC Radio 4 Today programme.

"We have had shocks to the system in the recent past with the collapse of the Asian markets in the late 1990s, with the collapse of the American stock market earlier in this decade. Both of those instances we dealt with, our economy carried on growing when others faltered.

"So that strong economy is absolutely crucial.

Mr Darling reiterated assurances to Northern Rock depositors that their money is safe.

"If people want to get their money out of Northern Rock bank, they can do it. The money is there and it is backed by the Bank of England so they can get it," he said.

He said the Bank of England is continuing to monitor the situation in the banking sector on a daily basis.

"The problem at the moment is not that there isn't money in the system, because the banks do have a lot of money. It is the fact that they have been reluctant to lend to each other whilst they work out what the extent of their risk is following on the difficulties in the American market," he said.

Mr Darling said that in the longer term he would like to see more fixed rate mortgages to protect people from the ups and downs of the financial markets.

"I would like to move to a situation where people could fix their mortgage rate for a longer period," he said.

"In the longer term, if we had more people who had fixed rates that would benefit them because that would shield them from month-to-month interest rises."

He said he would not rule out extending insurance cover for bank depositors.

"I will consider every option," he said.