My Lords, I thank the noble Viscount, Lord Eccles, for his kindly reference to the Grand Hotel in Hartlepool. He will be interested to know that it has undergone a tasteful refurbishment since he last visited, and I am sure that there will be a welcome there for him.
Let me say to the noble Lord, Lord Razzall, that I am only too well aware that my reputation precedes me. Should I ever forget it, I know that my friends in the press will be there to remind me. And to the noble Lord, Lord Hunt, I say that I am very well aware that I am here to toil, not to spin. In that context, I will take very seriously the accountability that I have to Parliament through this House. I will extend that accountability in ways to the other place, but at this Dispatch Box, I know where my duty lies.
I commend to the noble Lord, Lord Bilimoria, the article I presciently wrote for the Guardian, before I realised that I was going to be standing at this Dispatch Box, on the need for a new Bretton Woods. I stand by every word of that article which, I am glad to say, coincides with the views of the Prime Minister.
I say to my noble friend Lord Whitty that it is true that the relationship between a director of campaigns and communications and a general secretary in a fraught general election campaign can be a little fraught. The campaign to which he was referring was the famous "Red Rose" campaign of 1987, which was subsequently described by Private Eye magazine as "Labour's brilliant election defeat". Funnily enough, I turned up a note that my noble friend left me at the end of that campaign in which he wrote, if I recall it correctly, that, "If at times it might have appeared otherwise, I would like to place on record my appreciation of your role and contribution to the result of this election". It could have been interpreted as a little double-edged, given that the result was a Tory majority of well over 100. I think we gained a princely 28 per cent of the poll on that occasion. But, as history records, we lived to fight again.
I thank noble Lords for their consideration of this very urgent and necessary measure and for today's frank and useful debate. I should like to offer one wider observation arising from something that the noble Lord, Lord Hunt, said, and also offer an important caveat. The wider observation is about the general economic situation that we face. I believe very strongly that we should neither exaggerate nor downplay the wider economic consequences of what has happened internationally in the banking system. It will be a struggle for us, there is no doubt at all about that, and there are no overnight quick fixes to the challenges that we face. Equally, the UK economy has some innate strengths, many very strong companies—as I know, because in my previous job I was championing them as well as those across the European Union—and we have among those companies some excellent positions in overseas markets. I hope that no one, whatever their political affiliation, will be tempted to play politics with the banking crisis in order to make out that things are worse than they are, because that will help no one. So I welcome the noble Lord's remarks in that context.
The caveat is this: the order that we considering is brought forward to allow for the careful consideration of financial stability as part of our assessment of the proposed merger between Lloyds TSB Group and HBOS. This debate, therefore, is not about the assessment, which I have yet to undertake. I will do so following receipt by me of the OFT's recommendations on the competition and public interest issues which are due by
The noble Lord, Lord Hunt, asked two specific questions. The first concerned the regulatory cost of the order. There are no direct costs on business as a result of the amendment, because it simply introduces a fresh public interest consideration. Secondly, the European Commission has approved the Santander takeover of Alliance & Leicester. That arises because two-thirds of its turnover is outside the UK and the competition issue is dealt with by the Commission, which is not the case with Lloyds/HBOS.
The failure of a bank or building society could leave individuals and businesses unable to access savings, raise finance or meet their day-to-day financial obligations. That reality places on us as a Government the real and urgent obligation to take the actions that we have. Such failure has the potential to spread to other parts of the financial system, threatening the jobs of employees and wider communities, the trust and confidence of global investors, and the future success of our country. That much is at stake, which is why we have had to take the actions, supported by all parties on both sides of this House, that we have taken.
Financial services account for all but 9.5 per cent of UK GDP, while HBOS plc alone manages around one-fifth of residential mortgages in this country, holds one-fifth of all UK current accounts and employs tens of thousands of people. In such circumstances, the Government have a responsibility to act. This Government are committed to do all they can to ensure that our banking system functions effectively for the stability of our economy and good of our society.
A dynamic economy needs open, flexible markets. This Government remain absolutely committed to ensuring a regulatory framework that promotes competition, improves productivity, drives innovation and protects the vital interests of businesses but also, I say to my noble friend Lord Whitty, of consumers as well.
It is critical now that Governments work together across the international system to assure stability and responsible risk-taking in their own economies and the global financial system as a whole. Therefore, the actions that the Government have taken and measures that we have put forward are the end of the beginning; they are not yet the beginning of the end. There is plenty more that Governments have to do, but plenty more in particular that Governments have to do together to put in place the international regulatory systems that we have learnt from this crisis are essential to be created.
In addition to the measures currently being implemented at an international and national level, the powers set out in this order will enable quick and comprehensive action to be taken in the assessment of proposed mergers that could bolster financial stability in the UK economy. The order will allow the Secretary of State for Business to base final decisions on the vital public interest of financial stability, alongside competition issues. There is no question of putting aside or disregarding competition issues. They will continue to be monitored, and any abuse carefully assessed and acted upon. I emphasise, and do so in particular to my noble friends Lady Kingsmill and Lord Borrie, that all normal powers remain available to the competition authorities to protect consumers now and in the future. I understand the concerns that have been expressed and we will be vigilant. I do not, however, want to anticipate any time limit on that vigilance. Therefore, I do not envisage a one-, a two- or a three-year review following whatever decision I take on the merger in due course. I will not be drawn on conditionality in advance of my decision, but I assure your Lordships that, should a decision be taken for the merger to go ahead, we will not relax our vigilance at any time when it comes to the proper protection of consumers. I am sure that the prospective management of this potentially merged bank will have heard the suggestion of my noble friend Lord Whitty of the creation of a consumer panel.
The powers contained in this statutory instrument will be reserved for these exceptional circumstances where vital public interest issues are at stake. Now is such a time and we must take the action that we are proposing. I commend the order.