Global Economy

Debate between Lord Oakeshott of Seagrove Bay and Lord Foulkes of Cumnock

Thursday 11th August 2011 Lords Chamber

[Lord Oakeshott of Seagrove Bay]

My Lords, I thank my noble friend Lord McNally for that and for this invitation back to the Front Bench for one day only.

I declare my interest as a pension fund manager for the past 35 years and an active investor in British shares and property. The noble Lord, Lord Eatwell, mentioned rating agencies. I have never taken a blind bit of notice of them in my life, which is probably why I still have a job. I well remember how wrong they were when I was warning about the dangers of Iceland.

We on these Benches believe that the Chancellor is right to stress the need for Britain to stick to a determined deficit-reduction plan and keep interest rates low while we have to keep borrowing so much because of—let us be frank about this—Labour’s legacy. However, I agree with the noble Lord, Lord Eatwell, that low government bond yields are not a guarantee of a strong economy. They can be a sign of weakness, as they were in Japan. I would be interested if the noble Lord, Lord Sassoon, could comment on that. Are we not now in danger of keeping the confidence of foreign investors but losing the confidence of British consumers? Some noble Lords will, like me, be old enough to remember Harold Wilson complaining that his economic recovery plan had been blown off course. That has clearly been happening in this country since the Budget. Even looking through—I am bound to say—the Minister’s rather rose-tinted spectacles at the GDP forecast, does he agree with the Governor of the Bank of England, who said:

“Headwinds to world and domestic growth … are becoming stronger by the day”?

I thought that was a striking comment from him yesterday. I agree with it; does the noble Lord?

Does the Minister also agree with the Business Secretary, the Chief Secretary to the Treasury and all Liberal Democrats that the priority, if and when there is room for tax cuts, is not to help the 1 per cent of taxpayers who pay the 50p top rate, but the millions of ordinary people who will spend any tax cut they get—and desperately need—to boost demand and jobs? Does he also agree with our calls, from Vince Cable and others, for more quantitative easing from the Bank of England to boost growth, so that we do not risk slipping into the Japanese morass, and much more bank lending to small businesses? Royal Bank of Scotland, the bank that we own, has just missed even its own soft Project Merlin target for gross lending to small and medium-sized enterprises by £1.5 million over the first six months. Is it not now time that we seriously considered imposing a net lending target on the nationalised banks, as was flagged up in the coalition agreement, so that they take their foot off the throat of small business?

[Lord Foulkes of Cumnock]

My Lords, the Minister and the Chancellor have prayed in aid of their argument the credit rating agencies. Is it not strange that these credit rating agencies, which downgraded the economy of the United States of America, are private companies—private sector institutions such as Standard and Poor, Fitch, Moody and all the other credit rating agencies. Does the Minister not agree that they have, by their actions, exacerbated the economic crisis and that, as a result, some of their friends and interests have benefited? Would it not be better if our Government and those of other countries, particularly members of the European Union, were to get together and look at ways in which credit rating can be done on a public sector basis in the public interest, and not on a private sector basis in the private interest?