Financial Markets

My Lords, I thank the Minister for repeating yet another Statement on the financial crisis, made by the Chancellor in another place. The Minister will not expect these Benches to rejoice in the fulfilment of the Labour Party’s 1983 manifesto threat to take one or more banks into national ownership in order to control their lending and other policies. Nevertheless, we acknowledge that these are extreme times and that extreme actions are necessary, and we will continue to work constructively with the Government, including on the Banking Bill which will reach us soon. Last week, I wished the package that was announced well, but said that I wished I was confident that it would succeed. Clearly it did not, which is why we have ended up with the part nationalisation measures today. For the sake of our economy, I also wish today’s measures well, and I hope that they will succeed. Will the Minister say how the Government measure success? We believe that success cannot be scored unless the real economy is protected from recession, or at least from a prolonged one. However, the Government have continually refused to update their official growth statistics, and the lack of a growth forecast is a real problem, and this is despite the fact that all the emerging statistics and the professional consensus are in comprehensive disagreement with the Government. Will the Government now come clean on the economic prospects for the country, because we believe that Parliament and the country as a whole should be informed of the forecast and what difference this package of measures will make? Last Wednesday, the Government announced that they would invest up to £50 billion in preference shares in UK banks. There was no hint of taking equity stakes of such dimensions that the end result would be outright control of one major UK bank and a de facto controlling interest in another. Were the Government not in possession of the full facts last week? Can the Minister explain the Government’s change of mind? I hope that the Minister will also clarify the nature of the obligations that the banks which are taking the Government’s equity support will make. This morning’s announcement referred to, "““maintaining over the next three years the availability and active marketing of competitively priced lending to homeowners and small businesses at 2007 levels””." This was described as ““madness”” on FT Alphaville, while the Council of Mortgage Lenders doubted whether it would be ““either prudent or desirable””. Are the Government really saying that they want to hardwire those heady days of 2007 lending, including the house price bubble, into the system? Do the Government take a different view from most of the market; namely, that the banking system must be deleveraged? Indeed, is that not what would normally result from the significant increases in tier 1 and core capital that the banks are now embarking upon? Today’s announcements deal with the capitalisation of the largest banks, and this will cost taxpayers £37 billion. The others will take self-help measures, doubtless to avoid the interference that the Government’s shareholdings would involve. This morning’s announcement stated that the Government would stand ready to provide similar support to all eligible institutions. Can the Minister say how much taxpayers’ money the Government expect to spend on other banks? Has the FSA concluded its discussions on capital requirements with all other eligible institutions? There are obvious dangers, if only to the confidence within the banking system, if there are still unresolved issues. Can the Minister say whether the FSA is now content with the capitalisation plans of all eligible institutions and, if not, when we may expect that process to be concluded? There is anger outside the rarefied world of the City and the Treasury about the massive amount of taxpayers’ money which is being poured into the banking system. What can the Minister say about protecting taxpayers’ interests? Does the ““precisely defined remit”” that was promised for the shareholdings extend to when taxpayers can expect their money back? The Chairman of the Financial Services Authority, the noble Lord, Lord Turner of Ecchinswell, at lunchtime today on the radio said: "““Many lessons have been learned over what has gone on in the last 10 years … we probably allowed a boom to go on for too long””." We agree with that and we know who was in charge for the past 10 years. The Government are all too ready to blame the US or global conditions for our current problems, but the fact is that our economy was ill equipped to cope with the bust that inevitably followed the boom. The £300 billion package that the Government are committing to the equity plus guarantee package is roughly 19 per cent of our GDP. This is a higher percentage than any of the packages announced by any of the other countries in the EU and is nearly four times the 5 per cent that the US is committing. Can the Minister explain how it is that the crisis was nothing to do with us but is costing us the most? The Chancellor said in his Statement that we should not count the extra borrowing to fund this package as government borrowing. Does not the Minister agree that it is clear that the ONS will do just that? The Institute of Fiscal Studies estimates that adding in all the extra borrowing since the Chancellor’s last Budget, including these latest measures, will push borrowing above 50 per cent of GDP. Does the Minister recall the last time that this happened? It was in 1976, when the Labour Government went cap in hand to the IMF. Do the Government have any idea when they expect to return debt to more manageable levels? I appreciate the Minister’s difficulties—he is not a full-time Treasury Minister—in responding to detailed questions, but I am not alone in having been disappointed last week with the Minister’s rate of non-response to the questions that were put to him. I hope that today he will give a more comprehensive set of answers but, if he is unable to do so, will he commit to replying in writing to the questions that Hansard will show that I and others have put to him?