My Lords, we on this side of the House were delighted to hear the noble Lord, Lord Myners, say this afternoon that he agreed that there should be a public inquiry into the banks, including on the leaking of information. This must include the behaviour of everyone: the bankers, the regulators and, of course, Ministers, both past and present. We hope that the Minister will be able to tell the House that this will be taken in hand as soon as possible.
The Minister must be grateful for the intelligent and sensible comment she has heard during the debate, particularly from such distinguished Members of the House as my noble friends Lord Lawson and Lord Lamont, and my noble and learned friend Lord Howe. With their present confusion, Her Majesty's Government need all the help that they can get.
The Government say that they do not want to control banks in which they are taking shares. With the next breath, however, they are telling banks what and what not to do. Mortgage lending must be increased to 2007 levels, as referred to by my noble friend Lord Blyth, but this level of lending was one of the elements that precipitated the present crisis. No dividends are to be paid. I hope that the Minister will reply to the comments made and questions asked by my noble friend Lord Forsyth on dividends. I warn Her Majesty's Government of the dangers of government interference, referred to by the noble Lord, Lord Powell, and my noble friend Lord Forsyth.
I remind the Minister that President Clinton's instruction to Fannie Mae and Freddie Mac to ignore the ability to repay when making loans was one of the major creators of toxic debt. The Government want small businesses to have access to banking facilities at reasonable prices, but if the Government are asking for a 12 per cent coupon on their preference shares, what interest rate should the banks then charge small businesses? The noble Lord, Lord Bilimoria, and my noble friends Lord Courtown, Lord Naseby and Lord Forsyth, all spoke eloquently on behalf of small businesses. I hope that the Minister will listen to what they said.
The Government are talking of borrowing to spend their way out of a crisis, but they are already borrowing imprudently and excessively. As my noble friends Lady Shephard and Lord Ryder pointed out, we are seeing the highest public borrowing since 1946, and this just to cover existing liabilities—liabilities which will inevitably increase with the decline in tax receipts and inevitable increase in social costs. Already, every month, every man, woman and child in this country is being saddled with a further £100 of government debt to add to existing liabilities. Do the Government want to burden the people of this country with even greater increases of debt? I urge the Minister to listen to, and answer, the comments and questions of my noble friend Lord Higgins. Do not hide behind the late Lord Keynes and his economic theories. As my noble friend Lady Shephard pointed out, they were for fiscally responsible Governments, not ones with massive, out-of-control borrowings. I hope that the Minister will respond to my noble friend's comments. A comment by the Minister on the remarks of my noble friend Lord Saatchi on his banking Bill would also be welcome.
We are having this debate because of loss of confidence caused by the collapse in wholesale money markets, leading to a banking crisis. I warn the Minister to take care that there is not a similar loss of confidence in United Kingdom sovereign debt. Between 2005 and the middle of this year, three-quarters of total net UK gilts sold were purchased by overseas investors. What would happen if those investors were to disappear? Will the Government then listen to the suggestions of my noble friend Lord James?
A clear sign that confidence is already eroding is that credit default insurance for UK government debt is now 50 per cent more expensive than that for French debt and twice as expensive as that for German debt. That is the market's independent judgment of the appalling management of this country's economy—a judgment emphasised by the performance of sterling referred to by my noble friend Lady Noakes. The world does not share the Government's view of the UK economy. With the erosion of confidence, what interest rates will have to be offered to tempt investors to buy UK government securities, and what impact will this have on UK interest rates? We must return to fiscal responsibility before there is a worse crisis and the sort of dangers mentioned by the noble Lord, Lord Burns, come to pass. That will rule out tax cuts for the time being. With government finances in the mess that they are, even one of the keenest exponents in recent times of low taxation, the late Enoch Powell, would not have recommended an unfunded reduction.
I recommend the Minister to follow the suggestion made by my right honourable friend the shadow Chancellor for alterations within the present tax framework to assist in alleviating economic suffering. Ultimately, if fiscal responsibility is to be achieved, borrowing must be reduced. That inevitably means that spending must also be reduced. That, in turn, will create the ability to reduce taxes as a proportion of the economy, thereby increasing the resources available to the wealth-producing sector of the economy.