Banking: Quantitative Easing

Lord Barnett Excerpts

Monday 10th October 2011 Lords Chamber

Asked By

[Lord Barnett]

To ask Her Majesty’s Government what recent discussions have been held by the Chancellor of the Exchequer regarding the sale of government-held shares in Royal Bank of Scotland and Lloyds TSB, and regarding the effect of additional quantitative easing on that sale.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, Treasury Ministers and officials have meetings with a wide range of organisations. It is not the Government's practice to provide details of all such meetings

UK Financial Investments—UKFI—manages the Government’s shareholdings in the banks. UKFI aims to dispose of the shares in an orderly manner and it continues to monitor market developments and to look at the range of alternatives. The ultimate decision to proceed with any transaction will rest with HM Treasury.

[Lord Barnett]

My Lords, I am glad to hear that. However, last week it was reported that the Governor of the Bank of England told the Chancellor that he would not use QE to help the banks, including presumably the Royal Bank of Scotland and Lloyds, but, in fact, the quarterly review said that the Government authorised the Bank to pursue a number of activities targeted to improve the facilities of banks. Who is making decisions here: the governor or the Chancellor?

[Lord Sassoon]

My Lords, I think we risk straying from the Question. I know that, in a masterly wheeze, words about QE were added to this Question late in the day by the noble Lord, Lord Barnett. I think that quantitative easing is one of many questions relevant to the sale of bank shares but a relatively small consideration in present circumstances. Given that the Question is about the sale of bank shares, this is one of many factors that is relevant.

Economy: Capital Expenditure

Lord Barnett Excerpts

Tuesday 4th October 2011 Lords Chamber

Asked by

[Lord Barnett]

To ask Her Majesty’s Government, following announcements by the Deputy Prime Minister on capital expenditure programmes, what consideration they are giving to increasing capital expenditure beyond the amounts included in the Chancellor’s deficit reduction plan.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, the Government are sticking to the spending plans set out in the 2010 spending review. Within this, however, we have been able to fund additional, targeted capital expenditure from otherwise unspent funds. This includes £500 million for the Growing Places initiative and £250 million on broadband access and support for world-leading computer technology.

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[Lord Barnett]

I am sure that that will not please Nick too much. My Question asks whether any money has been spent beyond the deficit plan: the answer is clearly no. In any case, the hundreds of millions of pounds which I am happy to see was found in Manchester will surely be overshadowed by the IMF results, which recently forecast that growth of our economy will be not much more than 1 per cent. That in turn will lead to a much higher rather than lower deficit. Indeed, as I am sure the Minister is aware, the Financial Times recently forecast, based on OBR methodology, that the deficit will be £12 billion higher than previously thought. In those circumstances, will the Minister tell us the Treasury's estimate of the deficit at the end of the five-year term?

[Lord Sassoon]

My Lords, as the noble Lord, Lord Barnett, knows very well, we have set up the Office of Budget Responsibility to keep track of all the forecast numbers and we will get its update later in the autumn. The critical point is, as my right honourable friend the Prime Minister said at the weekend, we are spending over £3 trillion of public money in four years and we are not going to wreck what we now have in a very low interest-rate environment for the sake of spending a few more billion. We will stick to our spending plans.

Independent Commission on Banking

Lord Barnett Excerpts

Monday 12th September 2011 Lords Chamber

[Lord Sassoon]

I am very grateful to my noble friend. We will work as hard and as fast as we can now to take forward consideration of the detail. As I have stressed, we have accepted the recommendations of the report in principle, but there is a lot of potential devil in the detail and we need to do a full cost-benefit assessment. Indeed, we need to work through what would be appropriate to introduce into the financial services Bill and what would need a stand-alone Bill. I have no idea how the committee may want to proceed, but it now has the Vickers report in front of it and we will get on with sorting out all these issues as quickly as possible. However, we should not underestimate the amount of work for officials and the amount of consultation needed to get the detail right.

[Lord Barnett]

I welcome the Statement and I note that, in its recommendations, the commission talked about the short-term report being dealt with as soon as possible, although it would take until 2019 to deal with the full action that needs to be taken. I would like to clarify this with the noble Lord. He talked about some of the points and he repeated part of the long Statement about what will happen, but could he clarify how soon he expects the banks to be in a position to do the kind of reform recommended in this report, which is so strongly supported by the Chancellor? Is not the real current danger that, if the eurozone banks collapse, as, regretfully, seems all too likely—recently the Chancellor said that that would not just be disastrous for Europe but for us as well—we could be bailing out banks long before 2019, whether we are in the eurozone or not and we may have to bail some out in the very near future? How would that fit in with the reform in the short term that will enable the actions which are strongly recommended by the report to be carried out?

[Lord Sassoon]

I am grateful to the noble Lord, Lord Barnett, for welcoming the Statement. Clearly, there is a series of different sorts of recommendations in the report. Some of them relate to ring-fencing and the adequacy of capital, where the date of 2019 fits in with the move to implementation of Basel III. So there is a clear logic for making sure that the construct that we are putting in place here is targeted at the same date as the related international recommendations in the same area. On the other hand, of course there are recommendations in areas such as competition, connected, for example, with the ongoing disposal of Lloyds branches, where the timetable is rather different and where the commission, quite rightly, is looking to see action on a shorter timescale. We need to look at the pacing of some of the reforms in relation to 2019, that being the date of Basel III implementation, and others in relation to the individual merits of the case. That is the approach we will take.

Public Expenditure: Deficit Reduction

Lord Barnett Excerpts

Tuesday 6th September 2011 Lords Chamber

Asked By

[Lord Barnett]

To ask Her Majesty’s Government how much public expenditure has changed in the Chancellor of the Exchequer’s deficit reduction plans through the use of the flexibility built into his plans.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, the Government’s fiscal mandate targets a cyclically adjusted aggregate to allow some fiscal flexibility at a time of economic uncertainty and to allow the automatic stabilisers to operate in full. Automatic stabilisers are those features of the tax and spending regime, such as unemployment benefits, that vary with the economic cycle and so act to stabilise the economy. The forecast for total managed expenditure by 2014-15 increased from £737.5 billion in Budget 2010 to £743.6 billion in Budget 2011.

[Lord Barnett]

The noble Lord forgot to mention that he apologised recently for having denied that the Chancellor had said in terms that he had flexibility built into his plan. I assume that he is now admitting, despite all the figures that he has just given us, that that is the case. Therefore, should the Chancellor not be using that flexibility in the current economic circumstances? He said recently:

“The break-up of the euro would be economically disastrous, including for Britain”.

That seems all too likely at the moment. Given the lack of growth in the United States and Europe, is this not a good time to use that flexibility, rather than all that stuff that he does not believe in himself?

[Lord Sassoon]

I do not know to which “he” the noble Lord is referring, whether it is me or my right honourable friend the Chancellor, but we all believe in it and we are sticking to it. However, as I have explained, the cyclically adjusted nature of the mandate which the Chancellor has set means that, in times of economic uncertainty, factors such as varying levels of employment and inflation feed through so that the economy benefits, for example, from increased social security benefits and we do not in some slavish way have to cut back on other expenditure. The flexibility is there for very good reasons and it is operating.

Finance: Eurozone

Lord Barnett Excerpts

Tuesday 19th July 2011 Lords Chamber

Asked By

[Lord Barnett]

To ask Her Majesty’s Government what discussions the Chancellor of the Exchequer has had with other European Union Finance Ministers about financial problems in the eurozone.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, the Chancellor of the Exchequer regularly discusses the situation in the euro area with his European Union colleagues, including in bilateral meetings and at the Economic and Financial Affairs Council. The most recent ECOFIN meeting on 12 July, which the Chancellor attended, covered the situation in the euro area, and a number of previous ECOFIN meetings have also discussed this. The Treasury continues closely to monitor financial developments in the euro area.

[Lord Barnett]

My Lords, the Chancellor was quoted as saying—I hope that the noble Lord does not mind me quoting him—that they should try to obtain a settlement whereby banks are more heavily capitalised. That was a very sensible suggestion, although it might be difficult to achieve. I hope that the noble Lord is not complacent that, if the crisis really hits the eurozone, simply because we are not in the scheme we will be all right since it will not cost us any euros. We would not have to bail out European banks, but we would have to bail out UK banks that got into serious trouble. Does he accept that it would be sensible for the Chancellor to be much more positive about trying to achieve a deal? Indeed, if he can get a sustainable deal that is recognised internationally, he should go as far providing guarantees because that would be a sensible move which would safeguard UK taxpayers from tens if not billions of euros.

[Lord Sassoon]

My Lords, the Government are not the least complacent about the very serious situation in the eurozone, as evidenced by not only the continuing discussions around the next stage of the programme for Greece but also the situation of Italy as regards the capital markets and its interest rates recently. The most constructive things we can do are, first, to make sure, as the FSA and the Bank of England are doing, that the UK banks are subjected to stringent stress tests; and secondly that they continue to build up, as they have done satisfactorily so far, their capital liquidity positions. In his discussions with the eurozone, my right honourable friend the Chancellor has made it quite clear how supportive the UK is not only of the short-term measures in which we are not directly involved—the Eurogroup discussions around Greece—but also through ensuring that Europe presses ahead with the structural adjustments that are needed to bring sustained growth to Europe. At the same time, we also make it abundantly clear that it is for the eurozone itself to finance further bailouts and that the UK, as has been agreed in the context of Greece, is not going to be a direct participant in these bailouts.

Finance (No. 3) Bill

Lord Barnett Excerpts

Monday 18th July 2011 Lords Chamber

[Lord Barnett]

My Lords, I thank the noble Lord, Lord Sassoon, for his personal apology to me for saying that I was wrong when I quoted the Chancellor as saying that flexibility was built into his plan. I am bound to tell the noble Lord, for whom I have a lot of respect, that it was wrong not to make a personal statement at an early time, apologising to the House for misleading the House, quite clearly, in his reply to me. I know what happened. He took personal advice from a leading source—I think I know the source—who must have told him that this was a major political difference of opinion so he did not need to give a personal apology. I can only advise the noble Lord that in future he should not take any advice from that particular noble friend.

I readily admit that there was a political difference between us because clearly a major political difference was at the heart of my question and there needed to be some flexibility of a kind that was not enumerated by the noble Lord. Indeed, when I asked him whether the flexibility related to the Treasury’s special reserve, he said, “Definitely not”. On the other hand, could he tell us, as he did not tell me at the time, how much of the Treasury special reserve has already been used for the MoD, for unexpected expenditure in Libya, and for other departmental budgets that have been overstepped? Could he tell us what is left in that reserve to allow any flexibility to decide what should happen to the Chancellor’s plan? There cannot be any doubt that it was misleading. To say to the House, “What I was telling them was wrong”, is misleading the House. It was a major matter, and he refused to make a personal statement, and he was wrong in that. But I leave that alone.

My question had at its centre this political disagreement, a crucial disagreement between us. I do not for a moment regret having gone into that political difference, because political difference does not mean you cannot mislead the House. What it does mean is that the Government are ignoring this central problem of whether there should be some flexibility that could amount to a plan B. I have always said that no Chancellor could ever announce that he is introducing a plan B, because it immediately kills plan A. However, there may be other means of slowing down the cuts, which would help to introduce a sort of secret plan B. But the noble Lord, Lord Sassoon, denied all of that, and said that he was not misleading the House. Indeed, he nearly went as far as maligning that distinguished business editor of the BBC, Robert Peston, the son of my even more distinguished noble friend Lord Peston, by suggesting that it might have been in his mind or in that of the interviewer that there were some special flexibility built into the plan.

While I have had to read some difficult briefs in my time, listening to the noble Lord this evening and his degree of optimism about everything in the Finance Bill and the economic situation, I cannot believe that he could have believed what was in his brief. He should have deleted it. How can there be any degree of optimism about the economy and economic prospects at the moment? I would not propose to quote many of the numerous comments from truly independent forecasters about what is likely to happen to the economy in the next few months, let alone years. However, I would not mind just quoting one, before the noble Lord encounters what my dear old friend Denis Healey—the noble Lords, Lord Healy always said: the advice that, “If you’re in a hole, stop digging”. The noble Lord—Lord Sassoon, is digging deeper and deeper. If he is not careful, he will have to apologise not only to me—which I do not mind—but also to Robert Peston and many others for pretending that one can have any degree of optimism at the present time.

The flexibility that should exist is not there. I will refer to one particular statement from an authority that may not be as independent as some, but it is certainly independent of the Labour Party. I refer to Deloitte, the well known, major accountancy firm, which audits many large companies. It stated that finance directors in Britain’s largest companies say that business optimism has fallen at a faster rate since the collapse of Lehman Brothers in 2008, and that one in three thinks there is a chance of a double-dip recession. I do not believe there is a chance of a double-dip recession; it seems unlikely, but certainly there are no grounds for optimism about what is happening in the economy. It is pretty clear that we can look forward, as my noble friend Lord Myners said, to many periods yet to come of low levels of economic growth, if not an actual downturn.

I do not doubt that there would have been some flexibility, but to compare it with the automatic stabilisers I find incredible. Surely the noble Lord, who is a very clever fellow, must have checked the Oxford English Dictionary and found that “stabilise” is somewhat different from “flexibility”, to put it mildly. I will not read the summary of the long points made about the two words in that dictionary that I received from the Library, but to say that there is no difference and that he was therefore answering my question is ludicrous.

Answering my question is not important. What is important is that the economy should truly move forward, and that we should be a little more optimistic about the likely outcome for the economy in the coming year, let alone in the coming years. If this means that the Chancellor has in mind in his plan to slow down the cuts, I am very glad to hear it. If he does not want to call it a plan B, I do not mind that either. He can call it anything he likes, as long as he has it in mind to do it, because that is the one way that he can truly make us all a little more optimistic.

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[Lord Sassoon]

My Lords, we have had an interesting debate this evening, and I thank all the noble Lords for their contributions. In particular, I congratulate my noble friend Lord Magan of Castletown on what was—to echo the words of the noble Lord, Lord Davies of Oldham—a masterly tour d’horizon of the economic scene. I have to say that it was about the one thing on which I agreed with the noble Lord, Lord Davies, but let me come back to that.

As I said in my opening remarks, the Government welcome the constructive comments of the Economic Affairs Committee, and we will take these into account as we entrench a more predictable, stable and simple tax system. This year’s Finance Bill, the third of the current Session, has come through an unprecedented degree of consultation and engagement, and implements many of the changes announced at the Budget.

As we said at the Budget, and as we said last year, we are committed to growth through investment, through private sector recovery, and not through unsustainable deficits. This Bill moves us forward on that path to stability and recovery. It promotes our international competitiveness by cutting corporation tax by a further 1 per cent and by reforming our controlled foreign company rules. These are key steps to creating the most competitive tax system in the G20.

The Bill encourages growth by supporting our entrepreneurs and SMEs, by doubling entrepreneurs’ relief, increasing R&D tax credits and cutting the small profits tax rate. It embodies fairness by lifting hundreds of thousands of people out of income tax, and by ensuring that other sectors of society make a fair contribution to cutting the deficit and restoring sustainable growth. It provides for a better environment by incentivising investment in cleaner sources of energy. I am pleased to say that these points were picked up in different ways by a number of noble Lords in this debate.

Let me first take what I might call the pessimist tendency. The debate did not get off to a cracking start given the tone set by the noble Lord, Lord Myners, and followed up by the noble Lord, Lord Barnett, so let me talk to the pessimists for a moment. This is an economy in which the private sector has generated over 500,000 new jobs in the last year. Manufacturers are talking to me about shortages of skills; about the need for more engineers; about welcoming the Government’s apprenticeship schemes; and all the noble Lord, Lord Myners, does is talk down the prospects for the economy. To be fair to him, he recognises that the economy is in the difficulty it is in because his Government did not deal with the structural deficit when they could have done. I certainly applaud his frankness, but it is a frightening challenge; and a legacy which the previous Government left.

I am, however, encouraged. On Friday, I was in Manchester, the old stamping ground of the noble Lord, Lord Barnett, an area where the rebalancing from the public to the private sector is as challenging as anywhere. The latest quarterly survey from the Greater Manchester chamber of commerce points out encouraging signs. I think that some noble Lords need to get out and about around the country more.

On the specific point which the noble Lord, Lord Barnett, raised about reserves, it is a little late at night to go into details about this. However, I know that it is a point that bothers the noble Lord considerably so I will write to him.

[Lord Barnett]

Don’t bother.

[Lord Sassoon]

The noble Lord says “Don’t bother” so I will not. I do not know whether other noble Lords heard; as he tells me not to write, I will not, but I have made the offer.

As to the extraordinary speech from the noble Lord, Lord Myners, which continually came back to praise the former Chancellor, Mr Darling, I can only think that he read in the Sunday newspapers, as I did, that Mr Darling is coming close to finalising his memoirs. I assume that this was a late play to make sure that Mr Darling looks favourably on the noble Lord, Lord Myners, and his part in the previous Government, but we shall see. We then got away from the pessimists but came back to one or two a bit towards the end. I am sorry that the noble Lord, Lord Haskel, joined in by talking about the Government transferring debt to the citizens. The trouble is that the government debt is the debt of the citizens and that attitude, I fear, underlay so much of what the previous Government did. They completely failed to recognise that it is the citizens who, at the end of the day, have to pick up the debt.

In terms of unrealistic ways to go about getting us out of the challenge we are in, I have to say to the noble Viscount, Lord Hanworth, that one way in which we will absolutely kill growth is if we raise further the top rate of income tax from a level which is not one that this Government wish to see in the medium term. We desperately need to encourage entrepreneurship and growth and the one thing we should not think of doing is further raising the top rate of tax. I am pleased to see the noble Lord, Lord Myners, nodding in approval.

I do not recognise the picture which the pessimists paint. However, I recognise that there are a lot of serious challenges out there, which noble Lords pointed to throughout the debate. I cannot deal with them in detail but my noble friend Lord Newby was the first—and virtually the last—speaker to refer to the European dimension, which is very difficult, while my noble friend Lord Higgins again pointed out the real challenges that there are in analysing the monetary situation and taking lessons from it.

The noble Lord, Lord Desai, raised the question of the savings rate and I completely agree with the challenge that that poses. I am delighted that the noble Lord appears to have lost none of his vigour even though it appears that Delilah may have got at Samson. It was a great reassurance that he is still on fine form. My noble friend Lord Ryder of Wensum was also on fine form. He raised a lot of points but, yes, regulation and employment are very challenging. I would point out to my noble friend that we are in the process of putting 21,000 regulations on the Red Tape Challenge website. We will indeed eliminate significant quantities of regulation while on employment law, another key area, we have already made moves on unfair dismissal to right the balance between employers and employees. My right honourable friend the Chancellor has identified five other areas where we are looking at employment regulation at the moment.

The noble Lord, Lord Watson of Invergowrie, talked about the protection that is important to lower-paid public sector workers. The Government have indeed made the £250 payment for all those within central government and are encouraging all other public sector bodies to abide by that.

Office for Budget Responsibility

Lord Barnett Excerpts

Wednesday 6th July 2011 Lords Chamber

Asked By

[Lord Barnett]

To ask Her Majesty’s Government what further discussions they have had with the Office for Budget Responsibility regarding their central growth forecast for 2011.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, there is a memorandum of understanding which sets out a framework for co-operation between the Office for Budgetary Responsibility and HM Treasury. It states that they are expected to meet regularly to scrutinise forecasting assumptions. The OBR will publish a list of contacts with Ministers, special advisers and their private offices shortly after each autumn and Budget forecast. All credible forecasters are clear that the UK economic recovery will continue. The OBR will publish a new economic forecast later this year.

[Lord Barnett]

My Lords, I thank the Minister. Paragraph 3.6 of the OBR’s economic and fiscal outlook states that,

“there is considerable uncertainty around all the forecast judgements we make”.

I know that the Chancellor cannot introduce a plan B because it would kill plan A. When the BBC last week gave him an alternative, the Chancellor said that “flexibility” was written into his plan. What does he mean by flexibility? Is it the Treasury’s special reserve? If so, can he remind us how much is in it and how much is left after expenditure on the MoD, Libya and other departments? Is that what he meant? If so, can he exceed it with the permission of the House of Commons? Therefore, is that a sort of plan B?

[Lord Sassoon]

I would love to be able to tell noble Lords what was in the mind of Robert Peston or whoever was being quoted, because it certainly was not the Chancellor. It was somebody interpreting the mind of the Chancellor.

Of course, there are certain ways in which there is flexibility within the numbers, because the automatic stabilisers operate as the economy fluctuates. In that sense there is flexibility, but I have no idea otherwise what that particular commentator had in mind. It certainly had nothing to do with use of the reserve.

Banking: Lloyds and RBS Shares

Lord Barnett Excerpts

Thursday 30th June 2011 Lords Chamber

Asked by

[Lord Barnett]

To ask Her Majesty’s Government whether they plan to transfer some shares of the Lloyds TSB and RBS banks to taxpayers, as suggested by the Deputy Prime Minister.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, UK Financial Investments manages the Government’s shareholding in financial institutions. UKFI’s objective is to dispose of the investments in an orderly and active manner, with an overarching objective of protecting and creating value for the taxpayer. The Treasury and UKFI continue to assess all potential options to realise value for taxpayers through the disposal of these shares.

[Lord Barnett]

My Lords, there is a well known saying by a famous American tennis player: “You cannot be serious”. Does the noble Lord himself believe what has been said, given that that would achieve nowhere near best value? If you wanted to have an administrative scheme that was absolute nonsense, you could not find a better one. Given that the Government manage potential sales, is the Minister seriously suggesting that the Chancellor is looking at that proposition? If so, what would be the eventual cost in loss of expected revenue in due course from the sale of Lloyds and RBS shares?

[Lord Sassoon]

My Lords, what I said is that we are considering all options for the disposal of the shares in RBS and Lloyds Banking Group. My right honourable friend the Deputy Prime Minister has asked the Treasury to consider a particular disposal option, and that is what UKFI and the Treasury are doing.

Oil Prices

Lord Barnett Excerpts

Wednesday 8th June 2011 Lords Chamber

Asked By

[Lord Barnett]

To ask Her Majesty’s Government what plans HM Treasury has to ensure that inflation is reduced and consumers derive benefit when there is a reduction in oil prices.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, the independent Monetary Policy Committee of the Bank of England, the MPC, is responsible for maintaining price stability. It sets policy to meet the inflation target in the medium term. The MPC continues to judge that inflation is likely to fall back through 2012 and 2013. Petrol retailing is a competitive market. It is that competition which should see reductions in oil prices passed on to consumers.

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[Lord Barnett]

I thank the noble Lord for his Answer. I am conscious of the fact that he has a propensity to quote what I said some 40 years ago. I thought of checking this time, but on reflection I realised that the Government have inherited a different policy from that of my time. In 1997, the then Chancellor Gordon Brown, as the noble Lord has pointed out, introduced a new policy involving the transfer of power from the Chancellor to the Governor of the Bank of England and the Monetary Policy Committee. The Government do not particularly like the then Chancellor but I assume that they are happy with the inheritance. Perhaps the noble Lord will confirm that. I know that he does not like talking about interest rates but will he also confirm the extreme national and international importance of interest rates and that the Chancellor still has absolute confidence in the governor and his policy for dealing with inflation?

[Lord Sassoon]

My Lords, I am very happy to confirm that this Government are entirely comfortable with the structure around the MPC and have complete confidence in the governor. I could go on. I have quotes from 40 years ago. I was going to use quotes from 30 years ago but if the noble Lord would prefer me not to use them on this occasion I will not do so. However, his words of wisdom are always my guide.

Public Expenditure: Reserve

Lord Barnett Excerpts

Monday 9th May 2011 Lords Chamber

Asked By

[Lord Barnett]

To ask Her Majesty’s Government whether the public expenditure reserve is adequate to meet any potential requirement.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, the contingency set aside in the Government’s public expenditure plans over the period 2011-12 to 2014-15 amounts to 0.6 per cent, 0.8 per cent, 0.9 per cent, and 1 per cent of each year’s total managed expenditure. The Government believe that this is a prudent level of contingency to hold against unforeseen costs during the 2010 spending review period, but it is not intended to cover all possible eventualities.

[Lord Barnett]

I thank the Minister for his Answer, but would not some flexibility be positively helpful? For example, if growth was not as good as we all hoped and unemployment continued to rise, could not additional funds for the contingency reserve be a sort of plan B? The Chancellor need not call it that but just do it, as it would be positively helpful. Indeed, that would help the deficit reduction by increasing growth and reducing unemployment.

[Lord Sassoon]

No, my Lords, that would not be the right approach at all. The words of a distinguished former Chief Secretary to the Treasury in another place on 17 March 1977 got it absolutely right:

“It is no good drawing up elaborate spending plans without the determination and means of ensuring that the planned total”,

expenditure,

“is not exceeded. We have that determination … The contingency reserve regime is strict. We do not allow additional expenditure to count against the contingency reserve until we are fully satisfied that offsetting savings are not to be had”.—[Official Report, Commons, 17/3/77; col. 641.]

That is what the noble Lord, Lord Barnett, said in 1977, and he got it absolutely right.

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[Lord Sassoon]

We are straying a bit from the subject of this Question but, as there do not seem to be many other noble Lords wanting to get in, I will say that I know how difficult it is for the ONS to produce these statistics. I am sure that it will continue to look at all ways of improving the way that it deals with the data. There was a one-off change to the way in which construction data were reported and the industry is questioning that. I am sure that the ONS is on the case.

[Lord Barnett]

My Lords, I am flattered that the Minister thought it necessary to research what I said 34 years ago when I was that much younger, but could he try to answer my supplementary Question this time?

[Lord Sassoon]

I am hearing that people seemed to think that I gave quite a sufficient answer the first time around. The noble Lord got it absolutely right when he was Chief Secretary and that is what my right honourable friend the present Chief Secretary will be doing.