Banking: Financial Stability

My Lords, I join the noble Baroness in welcoming the Statement. Like her, we give it support in principle. We believe that it offers the best balance between supporting the banking system and protecting the taxpayer. The key issues that arise now are the conditions that attach to the new arrangements—in particular, the extent to which they may be used to change some of the more unacceptable aspects of banking behaviour in recent times. The point at which the banks are coming to the Government cap in hand for their bail-out for their new capital is the one at which the Government have the maximum leverage in effecting change in this area. In his Statement the Chancellor says that the Government will be looking at executive pay, dividend payments and lending practices. That seems a very weak statement. We do not want them to look at them; we want them to be changed. Some, in particular, need to be changed quickly rather than in the medium term. I think particularly about the situation facing many small businesses, which as we speak are worrying about whether they will be able to pay wages at the end of the month. Noble Lords will be aware that many banks have summarily changed the terms facing small businesses, either by ending overdrafts altogether or by significantly increasing the rate at which they are charged and/or by charging fees of various sorts. Can the Government give us any assurance today that these practices will be brought to an end as part of the conditionality of the government bail-out? On the interest rate reductions, we welcome the reduction today, although we suspect that it is probably not large enough and that more reductions will be needed in the relatively short term. We welcome the fact that it is co-ordinated and we hope that this co-ordination on interest rate changes today will set a precedent. Will the Minister say what role the Chancellor played in co-ordinating this response? When my colleague in another place, Vince Cable, suggested that action was required by the Chancellor, the Chancellor said that this was a dangerous suggestion. Does that mean that he has had nothing to do with events today, or has he seen the wisdom of his ways and started talking to fellow Finance Ministers about it? I find it difficult to believe that this was a spontaneous decision by central bankers around the world. However, having taken this decision today and co-ordinated their actions in a way that we have called for for some time, will the Government say whether any new institutional arrangements have been established, either between central bank governors or between Chancellors and Finance Ministers, so that co-ordinated action on interest rate changes will become the norm rather than the panic exception. Finally, many millions of people are now thinking, ““The Government have bailed out the banks but we are in considerable personal difficulties. What might they be able to do to help us?””. I am thinking particularly about those who may, in the months to come, be in difficulty with their mortgage payments. Will the Minister and his colleagues in another place discuss with the Justice Secretary how to ensure, for example, that court procedures reflect the desperate circumstances in which many people are finding themselves and that repossession is treated as a last resort? With today’s decisions, the crisis may be moving from the financial sector to the real economy where we can now see the beginnings of a significant recession. Even if today’s measures are successful, this is not the beginning of the end; it is at best the end of the beginning. I trust that the Government realise that today’s measures are only the first and not the last steps towards economic recovery.