My Lords, I should like, in my turn, to welcome the Minister to the Dispatch Box. I feel sure that, coming to the House with his background, he will privately agree that this debate is already overdue, not least because of the degree of agreement among all noble Lords who have so far spoken about the urgency and seriousness of the issues facing the global economy. The situation has been described by Charlie Bean, deputy governor of the Bank of England, as a,
"once in a lifetime crisis, and possibly the largest financial crisis of its kind in human history".
There is agreement on the scale of the issue, but there may be less agreement on how we in this country are placed to withstand some of the storm after 11 years of this Government's much vaunted and so-called prudent economic boom. The Prime Minister continued to assert until quite recently that he had abolished bust and with it the need to set money aside for a rainy day. The result of this hubris is that the UK now has to face this global crisis with the largest fiscal deficit in the developed world, with the exception of Hungary, Egypt and Pakistan. Even before the scale of the global crisis hit us, we had reached in the first half of this year the highest level of public borrowing since 1946. We are entering a recession—we have the Prime Minister's word for that. We face rising unemployment and continuing falls in the housing market. The last quarter has seen the sharpest fall in manufacturing confidence in 28 years—a point touched on by the noble Lord, Lord Bilimoria—and inflation is at its highest for 16 years. This is a gloomy situation.
What confidence can we have in the Government's ability to get us through this? It is not as though there have been no warnings about the situation that we might face. One such warning came in 2005 from my noble friend Lord Griffiths of Fforestfach in a report for the Conservative Party, in which he stated that the scale of consumer debt made,
"millions of households extremely vulnerable to shocks to the economy, both from fiscal mismanagement and external factors such as oil price rises, acts of terrorism and wars ... Credit is far too easily available in the UK".
He went on to say that banks "market credit too aggressively". They also protect their own risks but not those of their customers.
That report was far from being the only concerned voice. From citizens advice bureaux and churches to economists and men and women in the streets, many were the voices that expressed concern about debt, both household and national. Then and subsequently, however, the only people who seemed not to be worried were the Government and the banks.
I have three questions for the Minister who will reply to the debate. First, as she will know, Conservatives have supported the recapitalisation of banks on the condition that regulation works efficiently and protects the taxpayer. It took, as we all know, the best part of a year for the Government and the FSA to admit that the regulation of Northern Rock had been faulty. The FSA recently had to apologise again, this time for its catastrophic failure to supervise the entire banking sector. How confident is the Minister that the Government and the FSA, which is their own creature, can provide an efficient regulatory system? How will the FSA achieve supervisory engagement—its own words—with the sector in the future and how will it prevent a repetition of its past ineptitudes?
Secondly, the taxpayer will soon own a majority stake in RBS/NatWest, a significant stake at the time of going to press in Lloyds TSB/HBOS and, of course, the whole of Northern Rock. Last month, Stephen Timms MP said:
"I don't think it would be a good idea for the Government to start managing Northern Rock or other institutions that we have taken shares in".
"the Government expect, particularly with regard to banks and the financial sector, an improvement in the relationship between performance and pay".—[Hansard, 30/10/08; col. 1684.]
As we speak, the Government are rewriting repossession rules and saying what they expect from banks: moderate charges, transparent savings rates and so on. There is some ambiguity here, so will the Minister make it clear when she winds up just how much and in what ways the Government intend, or do not intend, to manage the banks? Given that a Times survey on
Thirdly, there has been talk from Ministers in today's press of a return to Keynesian principles. We are being told that the Government will spend their way out of recession, but did not Keynes advocate spending in bad times the surpluses that Governments had built up in good times? We know that we have had good times, because the Government have told us so today. If that is so, where are the surpluses now? I hope that the Minister will be able to tell us.