My Lords, I do not suppose that it is terribly popular to declare that for six years, up to 2004, I was chairman of a bank—not only that, but a Scottish bank. Fortunately, it was the Clydesdale Bank, part of the National Australia Bank, which has a policy of prudence rooted in some terrifying experiences in the United States mortgage market 10 years ago. I am happy to say that last week's Clydesdale Bank results show good, firm cost control and strong credit management, leading to the most important thing for a bank: the confidence of its customers. In passing, let me say that I am glad that I am not the chairman of a bank in which the Government have now taken an interest, where they are demanding a 12 per cent coupon on their preference shares. That may be overkill when one considers the comparisons with Holland and France.
I shall raise three matters with a bearing on today's problems: first, the regulation of banks; secondly, pensions; and, thirdly, savings. I trust that my own party may listen to what I am saying, looking to the future. In the case of Northern Rock, I wonder whether, if the regulator had been the one that I experienced—that is, all of us joint stock banks under the cosh of the direct control of the Governor and court of the Bank of England—this sad tale would have happened. I think not. I am not a believer in the regulation changes made to the banks in 1997, although I fully approved of the introduction of the MPC. I know just how tough the regime was in my time; the experience of the noble Lord, Lord George, and his team at the Bank of England was second to none and left very little room for us to have errors. I ask my party to revisit this matter in due course.
Perhaps Lloyds TSB could have taken Northern Rock under its wing if it had been given enough notice. That might have prevented the sad sight of queues in Newcastle and a government bail-out. Personally, I do not believe that the three-legged-stool approach—the Bank of England, the FSA and the bank concerned—is the correct answer for the regulation of joint stock banks.
On pensions, my time as chairman of the Clydesdale Bank pension fund from 2000 to 2004 was not enjoyable. No doubt the Chancellor of the Exchequer of the day wished to spend much more money on health, education and other deserving causes. However, removing ACT was not the way forward, as it completely destabilised our pension funds. We ran a good final salary scheme at the bank, non-contributory as it was, where all the employees were well provided for. This was blown sky high by the changes at the end of the 1990s and we had to move at a stroke to a defined contribution scheme, which is not nearly as attractive a situation for the employees concerned.
What is the situation of pensions today, as has been mentioned earlier in the debate? The pensions industry is having a very difficult time. Recent estimates are that UK pension funds have a deficit of almost £100 billion, as one would expect when the stock market falls have been so enormous.
One thing to help that the Government might consider would be to issue more long-dated gilts to help out pension funds which need to hold on to investments that match their liabilities. Recently, the Government stated that they would issue additional gilt sales of £34.4 billion in this fiscal year, but only £5.3 billion of these bonds will be long dated. I hope that the Minister might consider what I am suggesting as a helpful suggestion in these difficult times for pension funds and pensioners.
Thirdly, on savings, the gracious Speech indicated that there would be a Bill incorporating savings gateway accounts. That is welcome, but it affects a relatively small number of people. It is not nearly enough for many people who rely on dividends and interest from their savings to see them through. Surely tax-free savings limits could be raised to help savers hit by these sharp falls in interest rates. In the case of shareholders in some banks—such as the Royal Bank of Scotland, Lloyds TSB and HBOS—no dividends will be paid in the coming year.
Living on such a reduction in savings and investments will be devastating for many people. Surely savers could be allowed to hold more money in tax-free ISAs, as has already been mentioned, where there has been no increase in limits in recent years. An announcement on this issue would be a far more welcome Christmas present for these savers than the 2.5 per cent reduction in VAT announced in the autumn Statement.
At a time when we are looking at unprecedented national indebtedness for the next few years, and a similar situation with personal debt, it is up to the Government to set an example by reining in unnecessary and unproductive government spending. The Minister gave us some hope of this in his opening address. Was it not the Prime Minister who said in 1993 that Labour must cease to be seen as the tax and spend party and, later on, that a rise in top tax rates would yield little? The inference is that it would lead to entrepreneurs being frog-marched out of the country. Yet he has allowed the Chancellor of the Exchequer to do just that: raise the top rate for certain people.
Perhaps we should remember the old Presbyterian saying that was drummed into us as children: "Pay as you go and, if you can't pay, don't go". This is as true for Governments as it is for individuals. There must be a national return to the virtue of living within our means. Being overborrowed and overspent is a dangerous cocktail.