Financial Services Bill

Debate between Lord Eatwell and Lord Barnett

Wednesday 5th December 2012 Lords Chamber

[Lord Eatwell]

My Lords, I rise not with respect to the amendment but to reflect on the latter comments of the noble Lord, Lord Sassoon. As he said, the Bill began its somewhat laborious journey with its First Reading back in May. The process has been extraordinarily laborious considering that it was a politically non-contentious Bill. We should perhaps learn some lessons from this. The main lesson is that, if there is pre-legislative scrutiny, a valuable process that we introduced, more notice should be taken of the conclusions of that scrutiny than is evident in the Bill before us. I refer particularly to the advice from the Treasury Select Committee that a new Bill be drafted rather than that we rely on the complex structure of amendments to prior legislation that we have had to wade through over the past several months.

Given the weighty nature of the work that we have had to deal with, it is appropriate to thank those who have been involved with the Bill. I add my thanks to those of the noble Lord, Lord Sassoon, to my noble friends Lady Hayter, Lord Davies, Lord Stevenson and Lord Tunnicliffe. I also thank Mr Whiting and the Bill team, who have been helpful and courteous throughout, and the noble Lord, Lord Sassoon, for dealing with often complex matters and, occasionally, defending the indefensible with his usual good humour. Finally, in thanking individuals, I must thank Miss Jessica Levy, our talented and all-knowing researcher.

Effective regulation at the macro and micro level of systemic risks and the risks associated with individual firms is in the interests of households and industry and is essential for the success of the UK financial services industry. Therefore, we on this side wish this Bill well. I hope that the measures over which we have laboured will prove a success.

[Lord Barnett]

My Lords, I cannot let the Bill pass without saying a few words. I described the Bill as “shambolic” and was told by an old friend—a normally good friend who happens to be a former Conservative Cabinet Minister—that he was surprised that I was so political in using that unusual expression. I apologise to the noble Lord, Lord Sassoon, and the House. I could not think of a better word to describe what was in the Bill and what had happened.

My main concern with the Bill is the very principle of giving such huge powers to the Bank of England—and they remain. It is the principle that worries me. We have given huge powers to the Bank of England. We have added to the Bank of England Act, as I mentioned earlier today. We have given the Bank powers over the OFT, FCA, FSA and PRA, and over changes in FiSMA—so many different initials that one forgets precisely what we did do. We amended a lot because there was a lot to amend, because unfortunately these days, under both Governments, the House of Commons guillotines so much that very little gets done properly. Legislation comes to this House for amendment and we amend it well, I am happy to say, as we did on this occasion.

My worry is that we started off with an unusually large Bill: two volumes of clauses and schedules. It was so big and it has become even bigger because we put in provisions dealing with the LIBOR scandal. This should have been a Bill on its own. We on this side of the House rightly agreed with the changes resulting from the Government’s acceptance of the Wheatley report. These provisions dealt with it properly and the Opposition accepted them, but they did not just come forward in a Bill; they came forward scattered in amendments throughout the Bill. I hope that it deals with the LIBOR scandal but it is difficult to tell if it really did, because on top of all this we are now told that there will be secondary legislation as well. I regret to say that we do not understand what we have passed here, because we still do not know what is going to happen.

I hope that we have done the right thing and that everything is going to work out, but the plain fact is that, with the LIBOR scandal, there were some in the Bank of England, the FSA and many other bodies whose main concern was primarily with interest rates. They knew nothing whatever about what the noble Lord, Lord Sassoon—I nearly said “my noble friend Lord Sassoon”; I feel he is that—was talking about. He described this LIBOR scandal as a global one, affecting some $300 trillion. It affected all that, but nobody in the Bank of England or the FSA or anybody else knew the slightest thing that was going on in the LIBOR scandal. Therefore, I would like to finish by asking the noble Lord, Lord Sassoon, a question.

Financial Services Bill

Debate between Lord Eatwell and Lord Barnett

Tuesday 6th November 2012 Lords Chamber

[Lord Eatwell]

My Lords, this moves us on to a rather serious matter. Everybody in the House will be aware that there is considerable and growing disquiet about the powers heaped on the Governor of the Bank of England; he or she will chair the court, the Monetary Policy Committee, the Financial Policy Committee and the Prudential Regulatory Authority. On top of that, he or she is designated by the Bill to be the sole interlocutor between the Bank and the Treasury in the designated meetings with the Chancellor. On top of that, the governor must guide the Bank’s other activities in policy and research. And on top of that, the governor will continue to represent the Bank in international fora. I suppose that just occasionally he or she will sleep.

This is a ridiculous amount of power in the hands of an unelected official. Kate Barker, a former member of the Monetary Policy Committee, said, in August this year, said that the,

“steady erosion of democratic control over regulation of the financial system would accelerate under proposals by the coalition government”,

and that,

“Mervyn King’s successor will be appointed to an unduly powerful role for an unprecedented eight-year term”.

Kate Barker has great experience in this field and seems to have captured exactly the problem. As noble Lords will be aware, there has been considerable disquiet from serious financial commentators about the future position of the governor.

There is another inevitable downside to this agglomeration of powers. The post of the governor has become—and will become yet more—excessively politicised. That is very unfortunate. However, that is the inevitable consequence of the Government’s proposals. If that is the Government’s wish, they should face up to the consequences, and permit Parliament to debate the appointment, at least after the appointment is made. Even then, the prospect of such a debate will focus the mind, let us say, of the Chancellor in making a recommendation, in the knowledge that he will have to defend it before the House of Commons. I beg to move.

[Lord Barnett]

My Lords, I strongly agree with much of what my noble friend has said. As I have said before, I have been extremely concerned about the new governor’s huge job. As my noble friend has spelt out, we would be giving enormous powers to that new governor. That is why I have expressed my dissatisfaction, to put it mildly, with the way that this Bill has been drafted. I hope that my noble friend will accept an amendment from me to his amendment; namely, that it should be available not only to the House of Commons but to Parliament. This House has scrutinised this Bill to an enormous extent. To say now that the appointment should be deferred only to the House of Commons is something that I certainly do not like. I hope that my noble friend will rearrange his amendment to accept the word “Parliament” rather than “the House of Commons”.

We will come later to the question of “must” and “may”, but I am very pleased to see that in this amendment my noble friend has put “must” rather than “may”. It is certainly crucial that it should happen, because the appointments are extremely important. Somebody should be doing the job that the current governor is not doing, and which he is not being asked to do. Now we are asking the new governor, whoever that may be, to do such an enormous job that some potential contenders have already withdrawn from the race—and understandably, because the job that will be asked of this man or woman is enormous. I hope to have the opportunity to propose an amendment a little later to reduce some of those powers, but for now I strongly commend my noble friend’s amendment, subject to my suggested draft amendment to his amendment.

--- Later in debate ---

[Lord Sassoon]

Yes, my Lords, the court is the governing authority of the Bank, and that is, I believe, completely the right construction for this particular matter.

[Lord Barnett]

What the noble Lord said just now seems to provide a new reason to change the name of the oversight committee. We do not need one. He is saying that the governor and the board of the Bank will know better than the oversight committee. Why bother with an oversight committee at all? That would be a simple solution.

[Lord Eatwell]

My Lords, I must say that I am very happy and I will now read through the Bill with great care and presume that wherever the term “Bank” appears, it means “court”. If that is so, I will check all the various clauses as we go along to ensure that “Bank” means “court” at all stages. If it means “court”, the Bill should say so and be clear—and that is what it is not.

Financial Services Bill

Debate between Lord Eatwell and Lord Barnett

Monday 8th October 2012 Lords Chamber

[Lord Eatwell]

My Lords, I rise to raise an important issue concerning the conduct of the Committee stage of the Bill. On 3 October—last Wednesday—I wrote to the noble Lord, Lord Sassoon, in these terms:

“The Wheatley study on the future of LIBOR has produced a series of conclusions with which the Labour Party is broadly in agreement. I congratulate both Martin Wheatley and his team for their achievement, and the Government for initiating this investigation.

I note from the statements of Treasury ministers, and from the Treasury website, that it is the Government’s intention to implement the Wheatley proposals by means of amendments to the Financial Services Bill. No such amendments have been tabled as of yesterday”.

That was 2 October, and indeed no amendments have been tabled as of today.

“I presume that such amendments will involve predominantly clauses that have not yet been debated (as suggested by reference to particular FSMA clauses in the Wheatley Report itself)”.

The Wheatley report refers to the first clause that we will debate today.

“However, it is possible that you will also need to introduce amendments to clauses already debated, in which case it would be entirely inappropriate to introduce such amendments at Report. Given the importance of these issues it is imperative that the House have the opportunity to debate these matters in the freedom of Committee, rather than under the constrained rules of the Report Stage.

May I therefore have your assurance that should the Government, as a consequence of the Libor scandal and of the recommendations in the Wheatley Report, plan to introduce amendments to clauses 1 to 5, or at some later stage, amendments to clauses at that time already debated, that you will re-commit the appropriate clauses, hence ensuring that the House of Lords has the scope for full debate”.

It has since become clear that the Government intend to introduce on Report all the entirely new material presaged in the Wheatley report. The noble Lord, Lord Sassoon, wrote to me on 2 October—the day before I wrote to him which was somewhat mysterious. He said:

“I do not believe that it is necessary to recommit the Bill, and see no reason why a substantive debate on the relevant clauses at Report stage would offer insufficient opportunity for scrutiny by the House.

Re-commitment would risk unnecessarily delaying the implementation of both these important reforms to LIBOR setting processes, and of the equally urgent reform of the UK’s financial regulation regime which we have been debating through the Committee sessions to date”.

The noble Lord’s reply does not take into account what I actually asked for. First, I was not asking for total recommitment. I was asking only for the clauses which deal with entirely new material from the Wheatley report to be recommitted. Secondly, I believe very strongly that with respect to financial regulation it is not an issue of quibbling about delay but of getting it right. These enormously complex matters deserve the iterative consideration which is possible only in Committee. I remind noble Lords that on Report they can speak only once. Thirdly, it is quite wrong to deny this House the opportunity to consider entirely new and complex material within a Committee setting. I would therefore ask the noble Lord, Lord Sassoon, to reconsider his rejection of my proposal that the relevant clauses be recommitted.

If he is unwilling to do that, perhaps I may make a constructive proposal. Either he or the Chief Whip, who unfortunately is not in her place, should give an assurance that the rules of Report will be relaxed for consideration of what might be called the “Wheatley” clauses when they are introduced.

[Lord Barnett]

I warmly agree with my noble friend on the Front Bench, and it gives me an opportunity to refer to the noble Lord, Lord Sassoon, himself. In the Recess I read with regret that he proposes to retire at the end of this year. He and I have had a few exchanges across the Floor and I will miss them, but I look forward to continuing with those exchanges until the end of the year.

Not only do I agree with my noble friend in the points he has made about the Bill, what is even more important is that the whole Bill should be dropped for the moment. There is no hurry for it and much of it will cause great damage to financial services in this country. As the noble Lord, in his new position, is no longer going to be quite so subservient to the Chancellor of the Exchequer, I certainly hope that he can tell us the truth, drop the Bill for the time being and, as my noble friend has suggested, come back to the House with a new one.

--- Later in debate ---

[Lord Barnett]

My Lords, I always like to be enlightened. I agree with my noble friend and I have a tendency to agree with the noble Lord, Lord Sharkey. However on this occasion I do not. I must apologise to the Committee. This matter is no doubt explained somewhere in the huge volume of papers we received at the outset, including the two volumes of the Bill. I must have missed it. I thought I was relatively assiduous in looking at this Bill. No doubt the noble Lord, Lord Sassoon, will tell us where it is. I am sure the officials with whom the Government generally agree—although not on every subject in the world, I understand, and sometimes they even prosecute or suspend them—must have explained what the noble Lord has failed to tell us. I hope either the noble Lord himself or the noble Lord, Lord Sassoon, will explain it more fully. I for one do not understand it.

[Lord Eatwell]

My Lords, although I agree with the noble Lord, Lord Sharkey, that it is enormously important that we improve the flow of funding to small firms, particularly given the complete failure of the Government’s attempts to improve the funding through banks to small firms, I believe that we should approach this proposal with great care. The problem with crowd funding is that crowds can often be subject to hysteria. We have seen hysterical funding levels in what might be deemed to be fashionable or popular companies: lastminute.com comes to mind, as does the recent launch of Facebook. In both cases, excessive hysteria associated with the popularity of the particular company led to investors losing quite a lot of money.

However in the SME sector, the fundamental problem for small investors is the risk to which they are exposed. They will necessarily have significantly less information than they would from a listed company. Given that lack of information, and the high mortality rate of small and medium-sized companies—thankfully they have a high birth-rate as well—it is likely to lead to a lot of not-very-well-off people losing significant sums of money.

Financial Services Bill

Debate between Lord Eatwell and Lord Barnett

Tuesday 10th July 2012 Lords Chamber

[Lord Barnett]

We are talking about possible serious financial crises and stability. At the end of the day, the Chancellor will be held responsible if something goes wrong with financial stability. There could be as many teams as we liked, but the Chancellor would ultimately have to accept responsibility, even if he knew nothing about it. I am sure that any Chancellor—I am looking at one now—would know everything that was going on in his team.

I am confused about what the clause or the Bill will do to help us in this matter. My noble friend’s amendment might help, although we are told by the Minister that it could “excessively personalise”. I am blessed if I know what that is supposed to mean, but no doubt the Minister will tell us. At the moment, I am more confused than ever. I thought that I understood a few things about financial matters but, listening to the exchange between my noble friend and the Minister, I am confused more than ever.

[Lord Eatwell]

Perhaps before I sit down I can help my noble friend. We are discussing what is perceived to be an essential failure of the previous system. The failure was that the people responsible for working it did not take advantage of the tools that were provided. Here in the Bill, as the Minister pointed out, the Government have rightly insisted that the Treasury and the Bank convey information to each other, consult each other and act collectively when necessary. That is appropriate, and I commend the Government in that respect. I simply think that they have not gone far enough.

Scotland Bill

Debate between Lord Eatwell and Lord Barnett

Wednesday 28th March 2012 Lords Chamber

[Lord Barnett]

My Lords, I thank all noble Lords who have spoken in the debate. I am sorry that I cannot reply to them but, given the time, I am sure that they would not expect an overly long speech from me.

To say that I am disappointed with my own Front Bench is to put it mildly. My noble friends could not even go as far as the Government in saying that they recognise the concerns about needs. I imagine that my English noble friend who replied on behalf of the Opposition had been got at by the Scots, who did not want him to support the amendment. I do not know whether that is the case but, whatever they did, I find it incredible that he, as an academic, should have come up with the idea that this is an “unripe time”. He obviously had not read the excellent Richard report.

[Lord Eatwell]

I did.

[Lord Barnett]

If he had, he would not have come up with the kind of speech that he made today. As I said, to say that I am disappointed is to put it mildly. I think that it has been appalling.

The noble Lord, Lord Sassoon, did at least repeat his concern, and it is one that the Government recognise. As many noble Lords said—even those who disagreed with the amendments—the technical drafting is not an argument. If the noble Lord wants them redrafted, I will redraft them, or I will let him redraft them—I do not mind. However, the case for doing something, whether in this Bill or elsewhere, is clearly made, as basically every speaker has said. I understand that the noble Lord, Lord Sassoon, cannot go further, because he also has a brief and he is not able to go further than he has done.

We will inevitably return to this matter because this huge disparity in the allocation of money between the different parts of the country cannot go on. As has been said in this debate, this issue concerns the whole of the UK, not just Scotland, and it cannot be set aside by talking about technical amendments or by saying that they should not appear in this Bill, or that they are being brought forward in the wrong place or at the wrong time. Of course all those things can be said but they do not alter the fact that something needs to be done here about the whole of the UK. I have listened very carefully to what has been said and, for the moment, I beg leave to withdraw the amendment.

Budget Responsibility and National Audit Bill [HL]

Debate between Lord Eatwell and Lord Barnett

Monday 29th November 2010 Grand Committee

[Lord Barnett]

I do not agree with the noble Lord, Lord Higgins, on Amendment 21 because I do not see why the Treasury and the Bank of England should necessarily agree. Perhaps I may make one or two points about the previous replies that we have heard from the noble Lord, Lord Sassoon. He said that amendments are unnecessary because the powers are already in the Bill. Although they are unnecessary, equally one could say that accepting the amendments would do no harm to the Bill, as they would only be repeating what is in the Bill. He also made the case for reserving the power for the Commons—at least he has given us a reason for rejecting an amendment. I disagree with him. I reserve the right to consider the matter on Report because I see no reason why the House of Lords should not consider these matters.

[Lord Eatwell]

The amendments raise in different ways an important issue in relation to the draft charter. The noble Lord, Lord Turnbull, drew attention to paragraph 3.7, which states:

“The Treasury will continue to maintain the necessary analytical and macroeconomic expertise to provide on-going advice to the Government”.

That sounds perfectly sensible. However, it goes to the heart of the rather grey area of what OBR independence means that the same paragraph should declare:

“The Government intends to adopt the OBR’s fiscal and economic forecasts as the official forecast for the Budget Report”.

Indeed, according to the draft charter:

“The OBR’s forecasts are essential inputs to the Government’s ongoing policy-making”.

And yet, the Government retain the right to disagree. I can see that the Government can maintain the right to disagree with anybody, especially with an independent body—which the OBR is supposed to be—but I do not then see how they can adopt the OBR’s fiscal and economic forecasts as the official forecast for the Budget report. They cannot adopt something with which they disagree as the official forecast; it just does not work. They cannot have it both ways; it is nonsensical.

It is obvious that the OBR will need to work closely with staff at the Treasury and other government departments in developing costings. That is why we should expect consistency between the OBR’s forecasts and those used by the Treasury—after all, they have worked together to bring them to fruition. They are the crucial decision variables. In his foreword to the forecast document that we discussed in the Chamber today, Robert Chote thanks government departments for providing the decision variables which have gone into it. The OBR is in essence a rather peculiar body. It is not really a non-departmental public body; it is a Treasury non-departmental public body which plays a crucial role in the development of policy. As paragraph 3.7 of the charter precisely states, it is the “official forecast”. I do not understand how the Government can disagree with the official forecast. They can disagree with the OBR, for example, when it takes a punt in describing some scenarios, as it does in the charter, but how can they disagree with the official forecast?

I cannot see why there is a need to require consistency between forecasts put forward by the Treasury and those put forward by the Bank of England. The noble Lord, Lord Turnbull, referred to competition between forecasts. I would take a rather different view and say that to require consistency would endow forecasts with spurious precision, whereas there are number of judgments in forecasts which are worth discussing in the context of the formation of economic policy.

The underlying point is that the OBR is distanced from official policy-making to a degree that was not possible in the past. That is an achievement of which this Government should be proud. But to describe the OBR as “independent” is an exaggeration. It is useful for propaganda purposes, but it is not credible to grown-ups, because it has to be involved in policy-making. There is a degree of independent methodology but not really of judgment, which is a different dimension. The Minister has to answer the following question: how can there be an official forecast with which the Government then disagree?

Finance (No. 2) Bill

Debate between Lord Eatwell and Lord Barnett

Monday 22nd November 2010 Lords Chamber

[Lord Eatwell]

My Lords, I am grateful to the noble Lord, Lord Sassoon, for his introduction to the Bill. In the Bill we are told that its purpose is to:

“Grant certain duties … and to amend the law relating to the National Debt and the Public Revenue, and to make further provision in connection with finance”.

I intend to address those broader issues. I hope that, while the noble Viscount, Lord Trenchard, feels the debate has been dull, I might be able to liven things up a little.

I begin by referring to the comments of my noble friend Lord Desai and the noble Lord, Lord Newby. In particular, my noble friend Lord Desai referred to the difficulties in which the Government have now found themselves over their policy of removing child benefit from those families in which one member is a higher-rate taxpayer. My noble friend suggests that child benefit be treated just as a general taxable benefit, and the current structure in which it is simply paid to the woman be changed. I remind him that when the late Barbara Castle introduced child benefit in the 1970s, she was insistent that it should go to the woman for fear that men might, as she said, spend the benefit on drink and gambling.

The Chancellor has said that any woman who lives in a household in which there is a higher rate taxpayer and does not declare the fact will be fined. I suggest a credible scenario to the Minister. Let us suppose that a grandmother, who is a higher rate taxpayer, on the death of her husband moves in with her daughter and young family who are in receipt of child benefit. What will then happen? Will the grandmother be fined if she does not tell her daughter that she is a higher rate taxpayer, or will the family lose its child benefit? This is hardly a family-friendly policy and a number of similar scenarios can be constructed which demonstrate that this change in the law has not been thought through.

The noble Lord, Lord Newby, referred to the changes in the making of tax policy. I have pleasure in following him in welcoming the Government’s changes in tax-making policy. I had the privilege of serving on the sub-committee of your Lordships’ Economic Affairs Committee which examined the Finance Bill. His proposal that its role be extended and that more technical resources be made available to it is a very good one which the Government should take seriously.

As I said just now, I wish to focus my remarks on the wider issues of the national debt. In doing so, I will return to comments made by Mr Bernanke and to the speech of the noble Lord, Lord Ryder. I also want to refer to the overall fiscal stance in the June Budget, of which the measures in this Bill are part of the practical emanation. Two slogans have dominated the presentation of the Budget and of the Government’s policies by the noble Lord and his government colleagues: first, that the budget deficit is, as Mr Cameron has put it on numerous occasions, a burden on our children; and, secondly—the point often made by the noble Lord, Lord Sassoon—that when the Government took office Britain was on the brink of bankruptcy. These two propositions provide the foundation on which the case for the Government’s policies on the national debt and deficit reduction is built, so they are worth examining in detail.

First, let us consider the proposition that the deficit, and the national debt which results, are a burden on our children. While the scale of the nation’s indebtedness is a constant theme of government statements, I cannot remember a single reference by the Government as regards to whom the debt is owed. The answer, as is clear in the data published by the Debt Management Office, is that most of government borrowing is from British lenders, predominantly insurance companies and pension funds but also local authorities and some individuals. In other words, the taxes that are raised to pay the interest on the debt and to repay the premium are raised from British taxpayers predominantly to pay to British taxpayers. The accumulation of debt simply defines a pattern of income redistribution; it does not in and of itself result in a loss of income to Britain as a whole,

What of the fate of our children? If we are placing a burden on our children, the policies pursued today would result in lower GDP per head in the future. But by their own admission, it is the Government’s own policies, not the deficit, that are lowering the growth rate of the British economy; and hence lowering future GDP per head. That is the real increase in the burden placed on our children by this Government as compared with the budget reduction plans advanced by my right honourable friend Alistair Darling. Had the Government stuck to Labour’s plans, our children would enjoy a higher income per head in the future. The loss of GDP growth that is the consequence of coalition policy is the clear and present cost of this Government. Indeed, it is the Government’s lack of any growth strategy that is most disturbing. Will the Minister confirm the story in the Financial Times this morning, which stated that the expected White Paper on growth has been,

“quietly dropped after George Osborne, the chancellor, decided he needed more time to draw up a coherent strategy”?

The report continues:

“The much-awaited growth white paper, which was originally scheduled for publication last month, has been downgraded to little more than a discussion document. Aides admitted the government did not have enough serious content to warrant a white paper”.

No serious content and no coherent strategy—that sums up the Government’s approach to growth in Britain.

There is one sense in which the deficit could be a burden on our children, and that is of the taxation necessary to pay interest or reduce the debt were to reduce the GDP’s rate of growth. No argument to that effect has been advanced by this Government. Let us follow that up. Taken to extremes, it is obvious that taxation can inhibit growth. If taxes were 100 per cent of income, then nobody would be prepared to work or invest, even if those taxes were subsequently redistributed as interest payments. So has the deficit threatened to push taxes so high that growth prospects are damaged? Among the G7 economies, the US, Canada and Japan have lower shares of taxation in GDP than us, but Germany, France and Italy all have higher tax rates, and all the Scandinavian countries have tax rates that are higher than the UK deficit—they could pay it off in one year, yet they still sustain respectable rates of growth.

Of course, the transfer payments demanded by a budget deficit can be an unwanted restraint on other government spending policies. However, the core issue here is balance—which mixture of spending and taxation will secure the best long-term growth of GDP per head for our children? The Government’s slogan-driven policy does not just get the balance wrong, it does not even recognise that there is a balance to be struck.

What of the other pillar of Government sloganeering —the claim that the UK was on the “brink of bankruptcy”. The noble Lord has used this expression so many times that he must be able to tell your Lordships exactly what he means by it. Does he mean that the UK was about to run out of cash, as the Greek Government were? If so, how does he account for the ready supply of cash dispensed in the Bank of England’s programme of quantitative easing? Does he mean that the UK had difficulty funding its bond sales? If so, he should look at the Debt Management Office data which show that not a single gilts auction this year has been less than 40 per cent oversubscribed, and many were 100 per cent oversubscribed. Or is he referring to speculation about Britain being downgraded by the ratings agencies from its triple-A status? Would these ratings agencies to which the Government pay so much attention be the same clowns who told us that securitised subprime mortgages were as safe as Uncle Sam? Given their track record, are these agencies the sort of people who the Government listen to when shaping the economic future of the British people?

Before the Minister replies on the issue of being on the brink of bankruptcy—and I am sure he will reply in detail since that is a favourite expression of his—would he care to reflect on the words of Ms Rachel Lomax, who was, until recently, Deputy Governor of the Bank of England? Speaking in the City just a couple of weeks ago she said that the

“crisis conjured up by George Osborne”

was a “straw man”—a misrepresentation of the true position. She added,

“It's just not true. We weren't on the brink of bankruptcy”.

None of what I have said should be taken in any way to suggest that somehow deficits do not matter. I am arguing that they are simply part of the balance by which the Government seek to secure the best possible performance of the economy. An important part of that balance—

[Lord Barnett]

I have a Question next Monday on this specific point about bankruptcy, on which I hope we will all have an opportunity to comment. Is my noble friend aware of what the Conservative chairman of the Treasury Select Committee said regarding the exaggerated nonsense—a massive exaggeration—about bankruptcy? In a massive understatement of the real situation he defined it as being “slightly over the top”.

[Lord Eatwell]

“A massive exaggeration” is a rather balanced statement from a Conservative Member of Parliament, and is balanced nicely by Ms Lomax’s statement, “It’s just not true”.

An important part of seeking balance in the economy is to avoid the slogan-driven hysteria that has characterised economic policy-making under this Government. It is not just that basing policy on slogans can lead to seriously unbalanced policies, but that slogans themselves can seriously damage economic performance. Words used by government Ministers to describe the economy include “shattered”, “busted”, and, of course, “on the brink of bankruptcy”. They have done this over and over again, which can lead to a serious loss of confidence in fragile international financial markets. There is increasing evidence that business and investor confidence has fallen, damaging investment prospects in Britain. Has the noble Lord noticed the conclusions of the latest monitor of UK business confidence for the fourth quarter of 2010, published by the Institute of Chartered Accountants in England and Wales? It states:

“The decline in the Confidence Index has accelerated this quarter, partly reflecting ongoing uncertainty about the path of the UK economy over the coming years ... Business leaders are becoming less sure about the UK's economic prospects for 2011 and beyond”.

That is the impact of this Government's slogan-driven policies.

We on this side of the House have argued for an economic policy based on a balanced appraisal of the relative contributions of fiscal policy and growth in restoring public finances after the ravages of the recession. We support the position taken by the head of the Federal Reserve System, Mr Ben Bernanke, to whom the noble Lord, Lord Ryder, referred. Commenting last Friday on the destructive grip of austerity policies, Mr Bernanke called for,

“a fiscal programme that combines near-term measures to enhance growth with strong, confidence-inducing steps to reduce longer-term structural deficits”.

Those words describe the economic measures put in place by Alistair Darling. They were a measured and considered response to our current economic woes and the very antithesis of the Government's slogan-driven hysteria.