My Lords, as other noble Lords have said, the past few weeks have seen some extraordinary events, which will impact on the lives of us all. So I welcome this debate to try to understand better what needs to be done to ensure that we all get through the difficult times ahead. First, let me deal with the politics. Noble Lords opposite say that this crisis is the Government's fault because, as the Minister reminded us, we did not fix the roof when the sun was shining, or share the fruits of growth, or put something aside for a rainy day. This is sloganising; it is not a serious attempt to get to grips with a difficult situation.
This is largely a financial crisis, which was caused by mistakes and misjudgments made in the financial sector. I think that the mistake was for the financial sector to think that it no longer needed properly financed institutions to carry risk and that the market could do it. To a large extent, we all believed that. But when this was tested and carried to excess, the whole thing collapsed, which is why the Government were absolutely right to recapitalise the banks. We need institutions with capital in reserves to carry financial risk for business and for the public. We cannot leave that to the market. Someone famous said that the first responsibility of leadership is to define reality, which we did and we acted. No amount of moralising, sloganising or interventions by noble Lords opposite is a substitute for understanding the reality and acting.
Where do we go from here? Certainly, we should move towards better regulation and supervision to stop this happening again, and to save the financial sector from excess and its own inadequacies. This must be done in the open and not in the dark. Regulators will have to be able to impose heavy penalties if timely and accurate information is not provided.
If we are not to end up in the bizarre world of Sarbanes-Oxley regulation, one matter has to be resolved. For many years, we have known that there are two types of shareholder. First, there are those who treat their shares as a financial instrument to be traded, on which the right reverend Prelate spoke, and, secondly, there are shareholders who see their shares as something to be nurtured and protected over the longer term. Both are important, but they are not the same.
This conflict has been well spelt out by Tomorrow's Company in its recent paper, Tomorrow's Owners, which puts it that the financial ownership role of shareholders now far outweighs the stewardship role of shareholders and that unless it is brought back into balance, our economy will suffer in both the financial sector and the real economy. If the rights and duties of stewardship are equally balanced with the rights and duties of ownership, less regulation will be required, especially for banks, which is the concern of most noble Lords who have spoken.
Last week, in his maiden speech, the Minister spoke of the benefits of good governance and effective regulation, and how he would like to continue to promote this in his ministerial role. Recently, the Prime Minister spoke of the need to address fairness, stewardship and co-operation in our financial system. It seems that they are speaking of morality of ownership in our financial system, which needs to be addressed. I put it to the Minister that a time of crisis is the time to address it, because renewal often emerges from crisis.
Meanwhile, the Government have to do what they can to keep the economy going. I welcome the pressure that the Government are putting on banks to provide credit to small and medium-sized enterprises. I welcome the help from the European Union and I agree with the noble Lord, Lord Bilimoria, that this is not enough. But lenders have to be given some discretion. It is no use insisting that they lend to businesses that are basket cases because we are only postponing the inevitable and repeating one of the errors that got us into this mess in the first place.
The noble Baroness, Lady Noakes, said that we should nurture the economy. I would like to see nurturing that will not only retain jobs and keep businesses going, but help to transform them. So I agree with the noble Lord, Lord Newby, that it is right that we should continue to encourage skills training, and indeed enlarge on it. We know that without skilled personnel, our position in the global economy is threatened. I urge the Government to implement the Education and Skills Bill currently in your Lordships' House. We must extend education and remove barriers to further learning, encourage both new skills and upskilling. All this must help people stay in work and benefit our economy. There may be some dispute over the need for compulsion, but there is certainly no dispute over the objectives. In spite of this crisis, I hope that the Government will continue to invest in and encourage skills training and education.
The noble Lord, Lord Newby, spoke of balance. With the inevitable decline in financial services, manufacturing will have an important role to play in achieving balance in the economy—and it can do this. Manufacturing is rapidly learning how to operate in a market that demands less waste, less cost and less energy but more variety, more complexity and more technology. The same argument therefore applies: we have to continue our investment in science and technology. Fortunately, we have doubled our investment in science during the past 10 years. The Technology Strategy Board is working. Knowledge transfer networks are speeding up the process of innovation, and I declare an interest as president as the largest of them, Materials UK. We are facing up to the problems and opportunities of decarbonising our economy. The Foresight programmes have identified areas of great promise. We must be benefiting from all this investment and work, so it would be wrong to waste these efforts by cutting spending, because again it is spending that will not only keep jobs and businesses going, it will also transform them.
I hate to quote Keynes again, and I am sure that eminent economists in the Chamber will correct me, but I think it was he who said that the major barrier to developing new ideas is escaping from the old ones. Let this crisis encourage that escape. Noble Lords opposite say "don't spend"—the noble Lord, Lord Blyth, just said so—and that instead we should reduce taxes. That may help companies in the short term, but the spending I have outlined will help companies keep going while at the same time help to transform the economy. In the end, it is that transformation which we must achieve. I urge the Government to continue borrowing, but to explain why very well.