My Lords, I came to this debate with a pick-and-mix text on the grounds that the debate would last a long time, there would be many theories and a great many points would be made. I find to my surprise that two of my points are left untouched. I am rather pleased about that. I was nervous that my noble friend Lord Higgins was about to demolish one of them earlier, but he nicely opened the lid on it for me when he talked about my main concern, which is the level of debt. In recent weeks, he has twice asked a question, which was not answered on either occasion, although we now understand the answer. The question was: how will the Government finance the money that they have put in to rescue the banks? The answer that we seemed to be hearing was that they would do it as they had previously done it, by borrowing the money back from the banks. That is rather self-defeating, as it would take the money that was going into the rescue back out of circulation.
We now know, because we have seen the first of the successful auctions of the bonds, that the Prime Minister is sponsoring a major series of bond placements around the world, which will have to be repaid. I am not a bond expert but, when I tried to read the small print on them, I was surprised to find that they seem to be of relatively short maturity.
My noble friend Lord Higgins said that there are only two ways out of the debt problem, but he is wrong. There are three, none of which is good. The first is taxation going up, which would just about finish us all off completely. The second is that we take cost out of our expenditure. The third, which he did not mention, is that we do what everybody does with a maxed-out credit card, which is to get another credit card to provide the money to pay off the first one. It looks as though we are likely to have to do that in the last year of the next Government, which is when, I think, the maturity date falls. I am sure that it is a coincidence that it will be the last year of the next Government, but we shall have to wait and see who is going to have to deal with it.
However, we cannot wait until then for a solution; we need a solution now. I suggest that solutions could be harnessed now that would not be destructive of anything further in the economy and that the Government should now implement them. They should take a leaf out of Sir Robert Walpole's remedy at the time of the South Sea Bubble, when he possibly had even worse problems than we have now. He created a dedicated set of assets in a sinking fund that he could realise under his own control over a period and all those funds would go directly to redemption of those debts.
The first place that we could look for that would be the Government's analysis of cost reduction from the Gershon report. According to the National Audit Office, the Government have implemented only half of that; the other half is available to do. That does not take out any services for the public benefit. Secondly, they could dust down the James report and take, say, half the value that we assigned at the time. That would not take out one hospital bed; it would not take out a single soldier; it would not take out one policeman or one schoolroom. If you put the two together—the rest of Gershon plus half of the James report—you would have enough to pay back the entire value of the bond already raised by the Government. If you do that for five years, you have effectively wiped out the entire debt to fund the whole of this exercise.
The second thing that should go into the Walpole-style sinking fund is the recognition by the Government that the shareholdings that they have taken in the banks that they have rescued should be regarded as cashable cheques in future. The Government need the banks to recover financially and for their share prices to rise; at that time, the Government need to sell their shares. The best people to buy them will be the banks themselves and their existing shareholders, who were not able to do that this time round. Get the money back from the banks by selling the shares back to them within the five-year period, when the recovery comes. You should be able to do that without fiscal calamity or reduction in public services.
I had an extraordinary meeting this morning with a personal finance adviser for one of the big clearers—not because I have any finance to invest, I hasten to add. He has been put in charge of his bank's portfolio of very rich clients, who have so much money to invest at the moment that they do not know what to do with it. I suggest that there may be some benefit in thinking on the lines of a war bond, whereby you might be able to harness the resources available on an attractive coupon that would recycle money back into the British economy from British resources. You should look to this as a possible extra dimension and as an alternative to fiscal imposition. If you swept the national balance sheet, you could get the money out in time to pay it back before you had to tax to do it.
My last point is about our old friends Northern Rock, who started this problem. I have an unanswered question on this, which I put to the Government. We have been told recently by the noble Lord, Lord Davies of Oldham, that we should be proud that more than 50 per cent of the amount put into the rescue of Northern Rock has now been repaid. If it has been repaid, could we please have a restatement of the asset cover for what has not yet been repaid? I have done enough workouts to be a deeply suspicious person, I am afraid, and I suspect that someone has given an incentive to those who can pay to pay up early, which has got back the 50-plus per cent. That means that all those who cannot pay have progressively become the bad debt rump, which is left with an ever shrinking margin of assets security to cover it. Can we please have a definitive statement on what we are owed on Northern Rock and what asset cover we now have for it?