Banking Bill

Today's debate is a little surreal. Although we are still in the middle of an enormous crisis, the Bill deals only with certain parts of it, albeit in a sensible and helpful way. I think we have exhausted ““burning house”” analogies, so let me produce another analogy: we are still experiencing the shock of a major tsunami wave. Bodies are still being fished from the waters and people are still being rescued, yet here we are debating how to set up a tsunami detection scheme and rebuild developments. That sense of reality was captured, to an extent, in the closing paragraph of the House of Commons note, in which someone beavering away in the House's research department wrote, rather sadly, ““It is a measure of the pace of events that reaction to the Bill's publication has been virtually drowned by other events.”” It merited not a single mention in any of the serious newspapers. We are dealing with something which, although important, is in a sense not directly connected with the massive events that have been unfolding. Many of the important issues that are tied up with the banking rescue scheme and all that swills around it are not touched on here, directly or indirectly. The Bill clearly not does affect the principle of the lender-of-last-resort facility, although, as the Chancellor pointed out, it extends that principle to building societies. The key provisions of the rescue in terms of inter-bank lending guarantees are enormously important, but I understand that they are not directly affected by the Bill either. It does not deal with the way in which nationalised banks will operate, with the issue of the shadow banking system—which is the source of many of our difficulties—and how it should be regulated in future, or with the issues of competition policy and the role of the clearing system, raised several years ago in the Cruickshank report. Although I do not dispute the importance of the Bill's provisions, they deal only partially with the problems that we are experiencing. Arguably the most important, or second most important, part of the Bill relates to deposit protection, but over the last few weeks the deposit protection system has been overwhelmed and, in practice, it has become largely irrelevant to the restoring of confidence and stability. I had intended to discuss what are tricky and important issues in a non-partisan way, but I was provoked by the hon. Member for Tatton (Mr. Osborne). I do not propose to respond to his comments on the Bank of England, although I am perfectly happy to defend my position, and will continue to do so for as long as the crisis continues. I also acknowledge that he made some sensible comments, with many of which I agreed, particularly his comments about Equitable Life. However, it is a bit childish for those who aspire to be shadow Chancellor merely to rewrite history in such a blatant way. I was especially fascinated by the hon. Gentleman's account of how the Conservatives warned the Labour Government for years about the problems of personal debt. We are living through what I suppose is the economic equivalent of the Iraq war. I am sure that dossiers will be produced recording who said what when—and Conservative warnings about the emerging household debt problem are very thin on the ground. I remember having exchanges on the subject with the then Chancellor, now the Prime Minister, back in 2003-04. It became quite a hot issue, although I do not recall the Conservatives' contributing to the debate in any way. What they did do, although the shadow Chancellor may have forgotten, was set up a commission to examine debt problems, led by someone called—I think—Lord Griffiths. Its report, which I read, made it clear that there was no such thing as a general household debt problem. There was a debt problem relating to a relatively small number of high and low-income individuals with credit cards, and its recommendations were confined to that very narrow issue. There were no policy prescriptions relating to what was an emerging problem. At the risk of being immodest, I recall that, at the same time, my colleagues and I produced a 10-point debt plan, which dealt with the problem exhaustively and in some detail. It has clearly been raided for ideas, particularly in what the shadow Chancellor has called Conservative ideas about how to improve regulation of the banking system. He mentioned two quite distinct ideas, which merged into one somehow, that it was important for future Governments to take on board. One related to asset prices. The Chancellor may recall exchanges between Members on our Benches and his, back in 2003-04, about the genuinely tricky problems of dealing with those prices, and the possibility of incorporating house prices in the Bank of England's remit in measuring inflation. Again, I do not recall the Conservatives making any contribution whatever to the debate until today; the issue simply disappeared. More importantly, there is the very good idea—which I am delighted the Conservatives have taken up, despite the fact that they have called it a Conservative idea—of counter-cyclical management of the capital adequacy of banks. That idea has been in circulation for some time; it has been well written up by Persaud and Charles Goodhart and others. If the hon. Member for Tatton re-reads my 2004 debt plan, he will see it all described in there, four years before it became a Conservative idea. I think we might now have had enough of putting all this on the record.