Pre-Budget Report

My Lords, much has already been said, and I will be brief. When I spoke in your Lordships’ House in the debate on the economy after the Chancellor’s proposals for the economic recovery of this country had been revealed in the Pre-Budget Report, I tried to make clear quite how much of the difficulty in which we found ourselves could be laid at the door of this Government. I said that much of what was proposed would not work, and I have been very public since in declaring that the 2.5 per cent VAT cut, which has been referred to often, was a complete and utter waste of public money—£12.5 billion of it. I may have been right in my prediction. The VAT cut was made only because it could be done quickly, not because anyone thought that it would work terribly well. However, I should like to take a different tack. The huge increase in public borrowing which this Government propose has been made necessary by their utter inability to evaluate risk. It is some time since I heard the words, ““We are among the best placed countries to spend our way out of recession””. We were not; we are not; and, as my noble friend Lady Noakes has said, even the EU economic unit declares us to be among the worst placed to weather this particular storm, having kept nothing aside for the proverbial rainy day. I also predicted in my speech that the actions being taken would inevitably weaken the pound, and so it has proved. The financial world is betting that the Government’s plans will fail. Part of reason for this is that the financial world believes that the plans are inherently over-risky and conceived on the hoof without proper evaluation. It was without a doubt right to prop up the banks, but, given that the Government had a year to look at the situation at Northern Rock, which their lack of supervision caused to develop, how could they have poured so much money into the banks without a proper investigation of the loan books? That was very risky. How could the Government have poured so much money into the banks without any formal guarantee of ensuing lending patterns? That was very risky. How could the Government have proposed the VAT cut without any research as to its possible stimulus effect? That was extremely risky. On the latest bailout package, how could they, when preference shares were converted to equity, thus denying the taxpayer their much-vaunted return, have moved again without a clear understanding of the loan books and future ratios? Again, that was very risky. It is simply not the case, for example, that all of RBS’s toxic loans arrived with ABN AMRO, which had its own fair share of them. Not understanding that sort of thing reveals a lack of knowledge of the true situation, which is very risky indeed. Lastly, what bright spark decided a week ago last Friday to honour the deadline for removing the ban on the short selling of financial institutions, and nearly brought Barclays to its knees in the process? That was very risky. I have to say that, had any business leader I know, however hazardous the circumstances in which he found himself, loaded up his company with that amount of risk, he would expect and deserve to be fired.