I realise that the narrow issue of the supplementary estimates is a peg for discussing some of the wider financing issues around it. A great attempt is being made these days to portray good news, but the idea that we are buying out the banking system for £1,000, as the Minister seemed to suggest in his introduction, stretched things a little far. None the less, there is good news as far as it goes.
This issue is important because it leads us from the complicated issues of the banking bail-out to the wider question of how that affects public finances and how the market perceives the state of public finances. At the moment, markets in Britain, the United States and elsewhere trust Government paper but not the paper of banks and other financial institutions. Perhaps that is a reflection of how we see Governments—perhaps more positively than has historically been the case. None the less, there are limits to the extent to which the markets will absorb Government paper.
Although in the current environment it is possible to float gilts at attractive terms, there will obviously be limits to that. In the spectacular case of Iceland, not only the banks, but the country—the Government—have gone bust. Its creditworthiness as a country no longer has any credibility. Of course there is a vast difference between Britain and Iceland, but equally there is a vast difference between Iceland in October and Iceland in April; its position deteriorated very rapidly, and we need to be careful that the same does not happen here. In addressing that issue, we must focus on how these vast public liabilities, of different kinds, are to be represented in terms of public presentation and the relationship to public debt.
Yesterday I read two rather obscure articles in the financial pages. They were not an attempt to talk up the drama around the public debt figure, but one of them suggested that the whole £500 billion aspect, rather than the £50 billion aspect, of the bail-out should be covered in the public debt. I do not know the statistical or financial basis for arguing that, but if the £500 billion—the contingent liabilities around underwriting inter-bank lending—were to be treated as public debt, we would be talking about 100 per cent. of GDP, not 40 or 45 per cent.
Quite independently, a separate article argued that there was a case for treating the liabilities of the Royal Bank of Scotland as public debt; that would add another staggering sum and, independently of the first point, take us up to about 100 per cent. of GDP. If we add the two together, we get up to 150 per cent. of GDP. Those are rather meaningless numbers, but somebody needs very quickly to produce a proper, accurate and transparent assessment about what the public liabilities are.
One of the lessons that we have learned—the banks certainly have—is a hatred of uncertainty, which causes panic and loss of confidence. We therefore need a completely open statement about what the various Government liabilities are, including the ones to do with public sector pension liabilities, the private finance initiative and the rest of it, which we have endlessly debated in the past. We need an open, transparent statement about the different components of the liabilities that the Government are now taking on—some are direct stakes, some are guarantees and so on—so that the markets can make their own assessment.
I do not believe for one moment that there is any imminent danger of the Government breaching their debt ratio to the extent of people calling into question the value of Government bonds, but the Government need to be careful. This is partly a presentational issue, about how we present statistics; I hope that the Government will apply themselves to that.
I have little to say on the substance of the bank bail-out; we have had plenty of opportunities to discuss it, including yesterday. However, simply because it is relevant to the specifics of the supplementary estimate, it is worth drawing attention to the fact that Bradford & Bingley shareholders are on the march. I had an altercation with one of them on the radio this morning; they clearly intend to go for litigation with the Government to find out why they have effectively been wiped out when the share prices of other banks a few days later, although badly depreciated, have had the chance to recover. I did my best to defend the Government's position but they are going to find themselves in court to offer an explanation, which will be tricky.
The other issue specifically raised by the supplementary estimates is the Icelandic banks. My hon. Friend Mr. Heath wishes to say something about that from councils' point of view. I want to raise the broader policy issue. The problem arose because the Icelandic banks could be passported through the European economic area rules. I do not think that anybody saw this coming, but there is a slightly odd arrangement in which there is a claim on the host country following that of the home country. I assume that the Icelandic banks made no contribution to the British financial services compensation scheme. Some have posed the question of whether we should now seek a change in the European Union regulations to make sure that when EEA banks act here, they are fully part of and covered under the financial services compensation scheme and therefore make full contributions to it. Does the Minister have any views on whether such a regulatory change would be helpful?
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