My Lords, in line with its framework document and investment mandate, UK Financial Investments will advise the Government on the timing of the disposal of these assets, in light of market conditions at the time. The Office for National Statistics will decide how to account for the proceeds in the public finances of any share sale, taking into account the precise nature of the transaction. How any proceeds will be used will be determined as part of the normal annual Budget process.
I thank the Minister for that reply. The Government have been able to tell us little about their future banking policy. Perhaps we could be enlightened more about the here and now. I do appreciate that it is difficult for the Minister, given the abject failure of Project Merlin, but how have we got ourselves into a situation where under the Government's own enterprise finance guarantee scheme we are lending to SMEs less and less each month to the degree where we are now lending half in the first quarter of this year of what we were lending in the first quarter of last year? The Government are threatening banks to lend more and more. When are they going to get banks to lend to small and medium-sized enterprises at rates they can afford?
My Lords, I could be churlish or be fair to other noble Lords who might want to ask about the subject of this Question, which is the Government's plans to sell shares in the publicly owned banks. We seem to be straying rather far from it. Project Merlin, agreed between the Government and the banks, means that the banks have put aside considerably more lending capacity this year for SMEs than last year. We have transparent reporting and a range of other initiatives to which the banks have committed to ensure that lending flows. We have also put money into a new equity fund for smaller businesses. These were things that the previous Government did not do but which have only peripheral relevance to the subject of this Question, which is about the sale of shares in the banks.
My Lords, it is a courtesy. The Question was posed from the Labour Benches. It might be helpful to hear from a different Bench, just for the moment.
My Lords, given that all UK citizens have, to a greater or lesser extent, had to bear some of the costs of the Government bailing out the banks, can the Minister confirm that the Treasury is giving serious consideration to the distribution of the state-owned shares in RBS and Lloyds Banking Group to the UK population as a whole?
My Lords, I can confirm to my noble friend that UK Financial Investments will be considering retail participation in the distribution of the shares. That does not, of course, necessarily mean quite what he said, which is some form of distribution but, yes, mass participation in some form is very much to be considered. Value for money is also one of the considerations that UKFI is required to take into account.
My Lords, particularly as the Minister used the phrase value for money, is not the Government's prime duty in determining when to sell making sure that the taxpayer gets the maximum proceeds from the sale of the shares? Is that not clear-cut? Is it not also clear-cut that the one group that should not be allowed to bid for the shares is the bankers who got us into this financial mess in the first place?
My Lords, the obligation on UK Financial Investments is to provide advice to the Government on the time and form of sale. Value for money, as widely defined, is very much a consideration. The Government do not intend to be a permanent investor in the banks, but the timing of any disposals will take account of many considerations, including market conditions at the time.
My Lords, one of the answers to getting more lending to our small firms, who are clearly not yet being well served by Project Merlin, must be to encourage more competition. Can the Minister assure me that he sees no conflict between the desire to get the maximum price for the Government's investments in banks and ensuring more competition?
My Lords, I am grateful to my noble friend as she enables me to point to the mandate which UK Financial Investments was given by the previous Government. It was that in creating and protecting value for the taxpayer it must have due regard to both financial stability and competition. At all stages, whether it is the involvement of the Independent Commission on Banking or the mandate of UKFI, competition is at the centre.
My Lords, the noble Lord has mentioned Project Merlin on a number of occasions. Will he explain to the House why the lending targets set for the banks under Project Merlin and announced to this House have now been reduced by a good 10 per cent? Why are the Government fiddling the figures?
Number one, this is a Question about the disposal of bank shares; number two, I would not believe everything that you read on the front page of the Financial Times every day.
My Lords, in saying that financial stability should be one of the considerations in the disposal, which I warmly welcome, does my noble friend agree that an element of that financial stability must be ensuring the greatest possible separation between retail banking and investment banking?
My Lords, I will wait with interest to see what the final report of the independent commission led by Sir John Vickers says on that point but, as indicated in its interim report, it is at the heart of its deliberations. The Government await with interest its final report.
My Lords, I shall have a look at the National Asset Register myself when I get back to the Treasury and, if it is not there, I shall write to the noble Lord to explain why.