My Lords, since the present Government came to power in 1997, I have consistently described their presentation of economic news as somewhat disingenuous. I spoke in your Lordships' House on
I could go on, but I would like to highlight two particular pieces of presentation that should not go unchallenged. We are told that the present economic crisis—it is indeed a crisis—is international in nature and that therefore the UK had no opportunity to escape any of it. The implication is that it is no worse for us than for any other country. That is not the case; it is worse for us. The US and the UK will prove to be the greatest sufferers from the housing market bubble. I put it to your Lordships that the UK will suffer more than the US; that is precisely why the pound is falling against the dollar.
The huge amount of churn or remortgaging in the market, coupled with the availability of 120 per cent self-certified mortgages, is already causing hardship and will cause hardship on a scale that will not be seen in other European markets. Consider a simple sum. If you took out a 120 per cent mortgage, spent the 20 per cent a year ago and the value of your house has dropped by 20 per cent in that year, you are not in a 20 per cent negative equity trap; you are in a 40 per cent trap. There is no economic bounce around the corner that will rescue you from that any time soon.
Why were those pernicious lending practices allowed to go unchecked by regulation? Much has been said on that already: partly because no one appears to have been quite sure whose job it was to check them; but partly because it suited the Government very well to have people believe that their house represented of itself a pension of sorts. The whole problem has been compounded, again unchecked, by the growth in the buy-to-let market. In the relatively prosperous city of Leeds alone, I am told that of 5,000 new-build apartments, 1,000 are either unlet or unsold.
Let me lead your Lordships across the water to the great state of Texas. Your Lordships will remember that Texas suffered horribly from the savings and loan crisis of the 1990s. What did it do? It passed a law that said that you had to have 25 per cent of the equity in a property even to get a mortgage. Texas will come out of this relatively unscathed, and so could we have done.
The last piece of disingenuousness that I would like to expose is the Government's plan to borrow and to spend our way out of recession, instead of dramatically cutting interest rates and costs. The first thing to say, which, again, has been much commented on, is that that is a return to 70 year-old Keynesian economics. The second is that the Government have not a clue whether it will work. I suspect that it will not, for several reasons. First, our national debt is already at record levels and the decreasing value of the pound against other key currencies is set to cause the cost of increased borrowing to rise significantly. Secondly, as has been said, time is not on the Government's side. Infrastructure projects such as those described by Mr Darling take years to plan and, with our completely unimproved planning system, even longer to plan and much longer to implement.
If I sound like a prophet of doom, I apologise to your Lordships, but Britain has already slipped to sixth in the GDP league table behind the USA, Japan, Germany, China and France. I suspect that that plan will drop us below Italy.
The Chancellor said on television last week that a precondition of the rescue package for the banks was that they should lend at the same rate as they did in 2007. The use of the word "rate" gives him some wiggle room, but not a lot. The economic conditions of 2007 are no longer with us. Businesses—builders, for example—which may have been perfectly good lending risks then no longer are. Had the noble Lord, Lord Myners, still been with us, I should have asked him, because I know him to have been an extremely prudent banker, whether he would agree that it would be imprudent to lend to such businesses and that it is therefore impossible for the Chancellor to fulfil his promise.