(12 years, 5 months ago)
Lords ChamberMy Lords, I fear that the noble Baroness, Lady Kramer, might not have been listening to my noble friend Lord Eatwell. He supports the inquiry to be chaired by Mr Andrew Tyrie as well as the Wheatley review. I believe that the proposal of my noble friend is complementary to and necessary as an addition to those reviews.
Yesterday the Chancellor of the Exchequer said in the other place,
“we know what has gone wrong”.—[Official Report, Commons, 2/7/12; col. 613.]
I do not think that the people of this country know what has gone wrong. With all respect to the noble Lord, Lord Kerr, this is not simply a question of LIBOR. I first tabled a Written Question for the Minister about the manipulation of the LIBOR rate in March last year and got a very backhanded response from him; I have raised it several times subsequently. But this goes well beyond LIBOR. The lying and deceit around LIBOR manipulation that we know has taken place systemically across the banking industry—it is not limited to Barclays alone—is but a symptom of a wider cancer at its heart.
You can go to your bank manager to have your passport photograph signed. Banking was a profession held in high regard. It was associated with trust, integrity and prudence. How has that changed, and why? That is why we need a commission of review. The terms of reference of the Tyrie review are, as my noble friend said, extremely limited. They are ring-fenced and precise, so they do not ask the sort of questions that should be asked. Yesterday in this House the call was made for a review that would focus on the transparency, culture and professional standards of the banking industry. The Tyrie terms of reference do not look at the transparency, culture and professional standards that were called for by the speaker in this House—and that speaker was the Minister. We need a fundamental review of what has gone wrong in banking.
How can it be that a bank built on the Quaker traditions of Barclays can find itself in a position where three of its senior board members have resigned within 24 hours and where I confidently predict more will resign by the end of this week? How can we be comfortable with that? The noble Lord, Lord Kerr, referred to Mr Marcus Agius, whom I know well and hold in extremely high regard. It seems as if Barclays has been involved in a car accident where Mr Agius was the passenger sitting in the back. Yesterday he resigned, taking the blame for the accident. Today Barclays has concluded that it is the driver who should take responsibility, and now Mr Agius has got back into the car, which he has to drive from the back seat. This is a state of complete chaos. How can a great British industry, one in which we have led the world, have got itself into such an awful mess?
To answer those questions, we probably need to go back to the 1980s to see how the transition has taken place. Tyrie and Wheatley are not going to do that. Their work should continue, but the call by my noble friend Lord Eatwell for a thorough, deep and considered evidence-based review of what has gone wrong in banking, and what we can do to ensure that it does not happen again, seems to be an undeniable case. I shall certainly support the amendment if my noble friend presses it to a vote.
My Lords, we should be grateful for the opportunity to have a debate this afternoon because it enables us to focus on what our priorities should be. We have essentially been considering two things: how wide an inquiry do we need and how urgent is it that it should produce results quickly? What has become quite apparent is that one inquiry is not going to be enough. What has happened is this: on the one hand we need a short-term inquiry, but on the other hand we need a strategic inquiry. We also need the kind of investigation which the noble Lord, Lord Carlile, has put forward, but in a sense it is a separate issue because the outcome of that inquiry will presumably be the prosecution of particular individuals. In no way would the noble Lord’s inquiry tell us how to reform the banking system. So that is something which is self-contained and separate.
We come then to the question of the best tactical answer. I fear that the position has been somewhat confused by the references to Mr Tyrie. Let me make it absolutely clear—I speak as someone who was the chairman of the Treasury Select Committee for 14 years—that I have the greatest respect for Mr Tyrie, who has been doing a magnificent job as chairman of the committee, which I understand is to take evidence from Mr Diamond this week. But the question then arises of whether Mr Tyrie should also be the chairman of the Joint Committee, the proposal put forward by the Government. I think that this confuses the matter. The shorthand around the use of the word “Tyrie” has actually become extremely confusing. Yesterday I expressed a view that I shall repeat now: to do the jobs both of chairman of the Treasury Select Committee and chairman of the Joint Committee is too much. It will distract from the normal work of the Treasury Select Committee, while the Joint Committee will need the full attention of whoever is appointed as its chairman.
I am not clear on how it suddenly became apparent that Mr Tyrie would chair the Joint Committee. My noble friend the Minister pointed out yesterday that the Joint Committee will presumably decide who its chairman should be. I would prefer Mr Tyrie to continue as chairman of the Treasury Committee because he is doing such a good job, and I believe that someone else should chair the Joint Committee. However, that will be a matter for him and the respective committees to decide. At all events, the Joint Committee is the right way to go as regards the immediate investigation and rapid conclusions on what needs to be done urgently. That leaves unanswered some of the more fundamental positions that need to be considered. The body which could most appropriately do that was suggested by the opposition Front Bench.
To summarise, leaving the separate Carlile issue on one side, the Treasury Committee should continue with its work in the normal way; the Joint Committee should consider the immediate actions that need to be taken as it unearths the problems, as no doubt it will; and there ought also to be a longer-running inquiry. There will not then be any accusation that we are kicking the matter into the long grass, and at the same time we will get rapid results on the tactical situation. In the light of your Lordships’ debate, it is becoming increasingly apparent that that structure is the right approach.
(14 years ago)
Grand CommitteePerhaps I, too, may make a comment. I took the Minister’s reply to the question asked by the noble Baroness, Lady Browning, about situations where there is a difference between HMT’s forecast and the OBR’s forecast as confirming that the Treasury will be clear about the fact that its own forecast was different and that its policy decisions were informed by its own forecast rather than by that of the OBR.
I find this rather difficult. The Minister raises his eyebrows. I simply do not understand what the purpose of this forecast is going to be. Perhaps I may expand on that for a moment. We had an official forecast and we presume that the Government will operate on that basis, but apparently there is to be an internal forecast on which Ministers will base their decisions. The noble Lord is shaking his head.
My Lords, I understand the argument of the noble Lord, Lord Burns, and I should like to think further about what has been said on this issue.
Perhaps I may raise a further point in relation to the model. Over the past 80 or 90 years, we have had a huge difference of view as to whether one should adopt a Keynesian or a monetarist approach to these problems. My impression is that the OBR now has an essentially Keynesian approach and that the monetary aspect does not appear in the discussion at all, other than to say, “Well, of course, the Bank of England is targeting inflation”, and let it go at that. However, as I have previously pointed out to the noble Lord, Lord Myners, and others, until we got into quantitative easing the Bank was concerned purely about the price of money—the rate of a single rate of interest—rather than the quantity of money.
I am not the least bit clear about the proposal as it now comes here and to what extent the OBR is taking monetary factors into account. Let me illustrate this by giving an example from many years ago. I am delighted to see that the basic approach to economic forecasting on page 28 is to decide on how much excess capacity there is and then to see to what extent aggregate demand gradually increases and absorbs that excess capacity. That was precisely the policy that we adopted in 1970 under the Heath Government. We said then, in the clearest terms, exactly what is being said now on page 28. Unfortunately, this was misinterpreted as a dash for growth and we were absolutely pilloried by those who said that the money supply had been going up very fast. In fact there was a big difference between the money supply, the money supply figures and what was happening to aggregate demand. The point that I am seeking to make is that this does not take into account the effect of quantitative easing, for example, or, if it does, I am not clear where that would appear in these forecasts, although no doubt the Minister can enlighten us.
Given that we are told that the Bank of England is going to make yet a third, quite different, forecast in addition to the, I am almost inclined to say, surreptitious one in the Treasury—I accept fully the point made by the noble Lord, Lord Burns—I am worried that the fiscal and monetary side is not sufficiently integrated in the forecasts.
Further forecasts on the economy are made in government. I believe that the Department for Business also produces its own economic forecasts. Almost as many forecasts are produced in government as are produced in the private sector.
The noble Lord, Lord Higgins, makes an important point. This might not be the right forum in which to discuss this, but the balance of intent behind the decisions currently being made by the Monetary Policy Committee is more focused on the words that come after “and subject to that” in its remit than on controlling inflation—that is to say that, in an environment in which fiscal policy is reducing demand in the economy, the onus for sustaining demand is coming from monetary policy, with considerable risk, in my judgment, of inflation.
There is no recognition in the Keynesian thinking of this document about the importance of monetary policy. We have what the Americans call a saltwater analysis of economics rather than the freshwater or Chicago school analysis associated with the monetarist view. It will be interesting to hear the Minister’s view on where monetary policy comes into the OBR’s thinking.
(14 years ago)
Grand CommitteeI do not think we can allow it to go unnoticed that the Minister, in his reference to “shoe leather”, assumed that the OBR would be called to the Treasury. I hope that the OBR will be sufficiently independent to call the Treasury to visit it at its own offices. I hope that the Minister is not conveying a subconscious message to us on that point.
My Lords, on one occasion when the Government that the late Iain Macleod was opposing accepted an amendment, his response was, “You don’t shoot Santa Claus”. Perhaps that is an appropriate reaction in this instance. I am delighted to hear what the Minister has said.
(14 years ago)
Grand CommitteeMy Lords, I support my noble friend Lord Eatwell. I think that I need do no more than cite our debate a few minutes ago in the Chamber when the Minister repeated the Statement on the OBR made earlier today in the other place by the right honourable Chancellor of the Exchequer. The central emphasis of that Statement was the economy. It would seem therefore that the Government intend to use the OBR and the charter in support of it to give confidence to their economic projections. I therefore suggest to the Minister that no harm would be done, and considerably greater precision would be achieved, if the words proposed by my noble friend were inserted in Clause 1.
My Lords, am I wrong in thinking that the amendment refers to line 6 and not line 5 of the Bill? Be that as it may, no doubt we can sort it out if it is wrong. I have great sympathy with the view put forward by the noble Lord, Lord Eatwell. We shall see what response we get from the Government. Perhaps we may also have from the Government a little clarity with regard to the charter for budget responsibility, since it is described as a draft. Are we to understand that the Government will amend it in line with the comments made by this Committee or will we be able to amend it at some later stage more formally?
An interesting point was made about “intergenerational fairness”. I understand that we must be concerned with fairness generally, but we should realise also that the sudden introduction of this expression reflects a considerable change of view in the Treasury from previous years. It is of course possible for us to consume in this generation and pass on a lesser inheritance to future generations. However, if we are to appraise intergenerational fairness, we need not simply a government balance sheet, on which we have made a little progress, but a national balance sheet, which successive Governments have hitherto failed to provide. If the relevant paragraph is to have any credibility, we need further data. It would be helpful if the OBR could take a first shot at a national balance sheet. The argument that we should widen the charter a little from relating merely to implementation of fiscal policy seems reasonable, but I look forward with interest to hearing what my noble friend the Minister has to say.