My Lords, it is just over a month since we last debated economic affairs in this House and I see many familiar faces on the Benches around us. The newcomer is the Secretary of State and I congratulate him on the courtesy that he is showing the House by the amount of time that he is spending on the Bench. It is good to see such a senior Minister in that position.
Since we last debated these matters the gloom has deepened, and the economic pain has got worse and the forecasts gloomier. I remember the noble Lord, Lord Burns, saying last time that we are at that point in the cycle when pessimism reigns. It may be true that brave men buy but others demand that Governments take further action. I have a good deal of sympathy with those making the demands. They are suffering real pain, fearing for their futures, their jobs, their businesses and their houses.
It behoves us to look back over the last month to see how much has been done. First, we had the recapitalisation of the banks, which of course was before our debate. Since then we have had two rounds of interest rate cuts. I was among those who criticised the Bank of England for not having acted earlier, but we certainly cannot complain about its most recent actions. Interest rates have come down to levels not seen since Harold Macmillan was Prime Minister. We have also had the autumn Budget. Other countries from Europe to the Far East have taken action, although I must say that I wish the Germans had done more. In the United States, President-elect Obama is promising a major stimulus.
We should not underestimate the scale of what has been done. The British economy at present is like a patient. It may be flat on its back but it has been given a massive resuscitation. The combination of the measures that have been taken, which I largely support, will have a substantial impact in the sense of mitigating and shortening the recession. That will take time, of course, and I suspect that there will be a further deepening of the gloom and a worsening of the forecasts before improvement begins to show. I do not criticise the Government for what they have done. Rather I regret that because of the Prime Minister's earlier profligacy when he was Chancellor, the present Chancellor has been so constrained in what he has been able to do. That, of course, is water under the bridge. We are where we are.
The priority now should be not on introducing major new measures but on reinforcing what has already been done so that the effects can work through the system as quickly as possible. Many noble Lords have made the point that the emphasis should now be on stimulating the credit markets, encouraging lending and getting the banks to do more. As Alan Duncan said in the Financial Times last week:
"We need bold steps to open channels of credit".
David Cameron has come up with a proposal for a national loans guarantee scheme to guarantee new loans to businesses for a commercial insurance fee. That is the sort of idea that needs to be worked on. It is the kind of direction in which we ought to be going. I suspect that similar incentives may well be required for the mortgage market. My noble friend Lady Noakes made some similar comments from the Front Bench earlier.
That would be a much better approach than having the Government barking out conflicting orders to the banks about what they should be doing. At one moment the emphasis is on strengthening their balance sheets and repaying the assistance they have received but, as the noble Lord, Lord Skidelsky, and my noble friend Lord Trenchard said, the terms on which the banks have been recapitalised in this country are notably harsher than in some others. That may or may not be a good thing but the banks certainly have to take it into account in formulating their own policies. As others have pointed out, they have interest to pay on the one hand, which must be borne in mind when criticising them for some of their difficulties in lending money on the other.
The Government have produced a back-of-the-envelope scheme for helping householders in trouble, which is very laudable objective, but I suspect that it will be difficult to work out a scheme that will be effective. The Government criticise the banks for not passing on interest rate cuts in such a way that takes no account of the conditions in the interbank market or of the position of savers—a point raised by my noble friends Lady O'Cathain and Lord MacGregor. It is desirable for the Government to turn their attention to this matter. I am thinking particularly of those aged 50, 55 and above whose pension funds have been—I was going to say decimated, but that would be an understatement—ravaged and whose interest payments from banks and building societies have been sharply reduced. Far from stimulating the economy, that considerable section of the community will surely be battening down the hatches. The Government should seek to do something to help them for reasons of social justice, but also because it is important that that group should be able to contribute to our recovery. I have read that the Government are considering ideas for extending ISAs. If so, I hope that they will consider them further and come up with ideas that enable ISAs to be extended and, perhaps, for similar measures to be introduced that will assist that section of the community.
The British economy has suffered a large, novel and global shock. As a result of the Prime Minister's profligacy when he was Chancellor, to which I have referred, the UK is in a less good position to confront this crisis than some other countries, but it is a world crisis, as Ministers have pointed out. It is going to be important that the measures that the Government take from now on, like those they took earlier, should as far as possible be co-ordinated with our partners in the European Union, the United States and beyond.