My Lords, one problem with speaking at this stage of the debate—it must be far worse for those further down the list—is that so much of what one wanted to say has already been said. I have had to totally rewrite my speech. I agree with much of what my noble friends Lady Noakes and Lord Lawson said, but I shall not go over that ground again as I had intended to, except to make three brief points on what has gone before.
First, of course, I recognise that the blame for the current crisis does not lie only at the Government's door. The Minister referred to the American background. I share the concern that the banking and financial communities are also culpable in that so many traditional banking practices were thrown out of the window in the search for greater market share, higher returns from ever more complex instruments and, yes, higher bonuses. I could never understand why securitising dodgy mortgages in a package made them less risky, as the underlying toxic nature of the ingredients remained the same. That was fine as long as the originator could sell them on quickly to someone else. The banks' risk models proved faulty when liquidity dried up.
I also share the view expressed by the right reverend Prelate the Bishop of Chelmsford that one of the more unpleasant aspects of the whole situation is that top executives' remuneration packages allow reward for failure. I support the need for that to be addressed, as indicated by the Government and supported by the ABI recently. The role of the credit agencies, on whose ratings so many lending decisions were justified, is being reviewed. That is absolutely right and I look forward to the results.
Secondly, I agree wholeheartedly that the slogan which will go down in history as the most crass is the Prime Minister's repeated boast that his Government had brought an end to the era of boom and bust. In fact, the Government were pursuing policies, in a temporary, very benign international climate, that would bring about an almighty bust. What is more—here I agree with my noble friend Lord Lawson—the very repetition of the point led many individuals in businesses to feel that they were safe to borrow more heavily than ever before. Imprudent lending, as he said, drove out prudent lending and imprudent borrowing drove out prudent borrowing.
Thirdly, I refer to the comments of my noble friend Lord Griffiths on the measures taken by the Government to deal with bank liquidity, which I too support. They are to help not only small businesses. I support what the noble Lord, Lord Bilimoria, said. I was actually the Minister who originally introduced the loan guarantee scheme, so naturally I support what he said. However, big businesses often find it very difficult to raise short-term finance in the current situation. It has been drawn to my attention that the Federal Reserve board has recently introduced a commercial-paper funding facility to assist commercial paper in the United States. Does the Minister feel that that would be a useful addition here too?
I turn next to the regulatory regime, on which there has been less comment in this debate. I realise that there are many with more expertise on the subject than I have, so I tread warily. I note that there has been much talk that there has recently been better co-operation and co-ordination between the Bank of England and the FSA, which leads me to wonder whether it was strong enough in the years leading up to the crisis when it certainly should have been. I noted that Sir John Gieve, in his address to the BBA's annual supervision conference last week, said:
"What we have found in the last few years is that the sum of what makes sense at the level of individual institutions does not necessarily add up to what is needed for the system as a whole".
The report on Northern Rock found the FSA badly lacking in its supervision of what it regarded as one of the most high-risk firms. Was the heavy emphasis in the FSA on box-ticking for the "treating customers fairly" programme at the expense of properly assessing the financial risks of individual firms, which is just as crucial and perhaps even more so for the customers themselves? I wonder whether the FSA got that balance right.
I have often wondered why Santander seems to be so much less under media and market scrutiny than other banks. In the same lecture, Sir John Gieve referred to the "dynamic provisioning" of Spanish regulations. Are there lessons to be learnt there? I look forward to hearing whether the noble Lord, Lord Burns, has anything to say on that subject, as a director of that bank. Was sufficient attention given to systemic risk? Was the division between the FSA and the Bank of England, after all, a mistake? I look forward to the review of the noble Lord, Lord Turner, on that.
I want to say a brief word about pensions, following what my noble friend Lord Blyth said. Even if in due course markets recover, the much heavier deficits on most defined benefit schemes as a result of the crisis may well be the last straw for many companies and the last nail in the coffin after that first famous raid in 1997, to which he referred, for even more of those schemes. I am also concerned about the implications for personal pensions—I wish I could speak longer on that. The present crisis, combined with a very low savings ratio and high pressures on personal discretionary expenditure, means that the outlook for personal pensions is pretty depressing.
I was one of those who earlier strongly supported the PFI regime and I introduced one or two PFIs myself. However, I have been concerned for some time about the scale of the situation now. It is rather like off-balance-sheet financing: if it is not on too large a scale, it is very sensible. The scale of PFIs now is so large that I believe it is stoking up trouble for the future and affecting the public spending programmes because so much of the capital spending, about which the Government boast in education, health and so on, was done through PFI schemes so is not included in the borrowing-to-invest figures. I fear that the PFI schemes will make the future public spending problems even greater. It is future Governments and future generations who will pay for it.
That leads me to my final point: what happens next? Lower interest rates are fine. Will banks, in an attempt to increase margins, follow completely the downward movement in interest rates? Will that create further risks for sterling? Above all, will that last if the Government add to an already very high level of borrowing by attempting to spend their way out of a crisis, as they are apparently planning to do? Here I strongly support the view of all those who warn of the dangers of this. For this Government, spending our way out of the crisis now is dictated more by the political calendar than by economic needs, and the next Government will be left to face the bill.
I am delighted that we have had this debate today, but it is in advance of the public spending review, which will greatly add to the figures and I hope to the government policies rather more than the Mais lecture which the Chancellor delivered last week. I very much hope that we will be able to return to this subject with a full-length debate on the Queen's Speech, because that would be highly appropriate in the light of the public spending report.