Budget Deficit

Lord Peston Excerpts

Wednesday 15th February 2012 Lords Chamber

[Lord Sassoon]

I completely agree with my noble friend. The point is that we will balance the books only because doing so over the five-year period is a prudent way of doing it. By that point the debt will also have started to come down. That is the way that the Government will continue to do it.

[Lord Peston]

The noble Lord told us all to be patient. I remind him that the great economist Lord Keynes said:

“In the long run we are all dead”.

Is the Government’s problem not that, having created this air of disaster for the country, no one in the private sector believes that the economy will get going and, therefore, no one has any intention whatever of investing in new equipment while the Government’s policies are in place?

[Lord Sassoon]

No, my Lords, I do not accept that at all. The only disaster is the mountain of debt—the structural position—left by the previous Government. As I have explained, the signs from the private sector, whether rising exports or rising total employment in the economy, are very encouraging. It is very difficult but we have to do everything we can, including keeping interest rates low, to make business confident enough to invest for the future.

Individual Savings Accounts: AIM Shares

Lord Peston Excerpts

Tuesday 31st January 2012 Lords Chamber

[Lord Sassoon]

My Lords, this is a Question that we come back to on a regular basis and my answers are going to sound boringly repetitive. I see the noble Lord, Lord Myners, in his place. He answered this Question in the dying days of the previous Government. The simple fact is that the ISA is a trusted brand in which more than 23 million adults—45 per cent of the adult population—hold shares, and we need to protect that trusted brand and the suite of products within it. On the other hand, the Government have taken a range of measures to support small businesses. In relation to SIPPs, the liquidity requirements of an ISA with a 30-day withdrawal period, in particular, are very different from what might be the case when locking up shares for the long term in a pension savings product.

[Lord Peston]

My Lords, I think that I understand the noble Lord’s answer but surely the main criterion that ought to be applied to ISAs is: do we have a system that maximises people’s propensity to save using ISAs? If it can be demonstrated that the Alternative Investment Market will do that, even if it is more risky—and, incidentally, people ought to know that all investments are risky—surely it still makes sense for the Government to widen the range of assets, assuming that that encourages people to save.

[Lord Sassoon]

My Lords, I am very happy to confirm that ISAs have indeed been a very successful product. As I said, 45 per cent of the population over the age of 16 hold them. On the latest numbers that I have seen, the total value of ISAs is £350 billion. It was a successful initiative of the previous Government. It is the main savings product of a large part of the population and we should not do anything to undermine the value of that brand.

Eurozone Crisis

Lord Peston Excerpts

Tuesday 17th January 2012 Lords Chamber

[Lord Sassoon]

My Lords, there is a whole range of views about the effect of the eurozone breaking down in any way. All I can say is that 40 per cent of our trade goes to Europe, and we want to see a strengthened and healthy eurozone. That is fundamentally in the interests of the UK. A crisis in the eurozone presents the most imminent threat to growth in this country.

[Lord Peston]

My Lords—

[Lord Newby]

My Lords, if there is a collapse in the eurozone—

--- Later in debate ---

[Lord Sassoon]

I am happy to try to clarify the Government’s position. It is very clear that the Government see the IMF’s role as supporting individual countries and not currencies. That has always been its role. If the IMF puts forward a case, as it may well do, for an increase in its resources, and if there is a strong case, the UK will support the IMF in increasing resources as required, as it has always done in the past.

[Lord Peston]

My Lords, using the immortal words of the noble Lord, Lord Henley, will the Minister give me a lesson in economics and explain why the Government still do not forthrightly support the maintenance of the euro? What possible benefit is there to us in the Government seeming to drag their heels when dealing with this matter?

[Lord Sassoon]

My Lords, as I have repeatedly made clear this afternoon and on other occasions, the UK Government want to see a strong and dynamic eurozone and European economy. But it is for the eurozone countries to take the lead in supporting the euro as a currency.

Economy: Monetary and Fiscal Policy

Lord Peston Excerpts

Tuesday 8th November 2011 Lords Chamber

[Lord Barnett]

To ask Her Majesty's Government how they are co-ordinating monetary and fiscal policy in the current economic climate.

[Lord Peston]

My Lords, on behalf of my noble friend Lord Barnett, and at his request, I beg leave to ask the Question standing in his name on the Order Paper.

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

My Lords, the independent Monetary Policy Committee has operational responsibility for monetary policy. Fiscal policy is a competence of the Treasury. When making its monetary policy decisions, the MPC takes into account fiscal policy, among other factors, when judging the outlook for growth and inflation. A non-voting Treasury representative attends monthly MPC meetings and plays a key role in ensuring the appropriate co-ordination of fiscal and monetary policy. This includes, when appropriate, briefing the MPC on the Budget.

[Lord Peston]

I thank the Minister for that. Bearing in mind that the monetary policy of the Bank of England is failing in its statutory duty to hit the inflation target set by the Government and does not even seem to be trying, and that fiscal policy has got us nowhere near full employment or a sustainable rate of real growth, is it not the case that far from there being co-ordination of monetary and fiscal policy, what we see on the part of the Government is simply an utter shambles?

Banking: Quantitative Easing

Lord Peston Excerpts

Monday 10th October 2011 Lords Chamber

[Lord Sassoon]

My Lords, the downgrading by Moody's last week was long expected by the markets. It is largely a reflection of the fact that under the Vickers proposals—the independent commission's proposals—there will be a different relationship between the banks and the taxpayer: the taxpayer will not be on the hook for the banking system in the way that it was. As a result, as expected, Moody's changed the ratings on a number of banks. Equally, it made it clear that that was not a reflection on the well capitalised state of the UK banking system. The UK banks continue, as Moody's and others have said, to be in a more robust state to withstand shocks from the eurozone than banks on the continent of Europe.

[Lord Peston]

My Lords, I am not sure that I understood one of the noble Lord’s earlier answers. Does the Treasury expect to get back all the money it has put into the two banks mentioned in the Question? If so, when can we expect to see that money?

[Lord Sassoon]

My Lords, I do not think that I touched on that point in a previous answer at all. UKFI has a responsibility, on behalf of the Government, to look, over time, at ways to create value out of the shareholdings, and that is what it will do. There is no question of any particular benchmark; we need to ensure that the taxpayer gets maximum value, subject to questions of competition and financial stability, over time, from the holdings in the banks. That is the mandate that UKFI has.

Economy: Capital Expenditure

Lord Peston Excerpts

Tuesday 4th October 2011 Lords Chamber

[Lord Sassoon]

I am grateful to my noble friend because the second of our two fiscal targets—namely, to put public sector net debt on a falling trajectory by 2015-16—is extremely important. He is quite right that we have to look at the total stock of debt and its trajectory as well as the deficit.

[Lord Peston]

When will the Government recognise that the present dire state of the economy is attributable overwhelmingly to their own stupid policies?

[Noble Lords]

Oh!

[Lord Peston]

Is it not about time that the Government apologised to the British people for what they are doing and accepted responsibility for it?

[Lord Sassoon]

It will not surprise the noble Lord if I completely disagree with that. The state of the economy today is largely a result of the debt-fuelled boom with its unregulated banks that was allowed to go on for 10 years and more under the previous Government. We have inherited a dire situation and the first thing we have to do is to get the deficit under control. That we are doing but within that, as I have explained, one of things we are prioritising is infrastructure expenditure.

Finance: Eurozone

Lord Peston Excerpts

Tuesday 19th July 2011 Lords Chamber

[Lord Pearson of Rannoch]

My Lords—

[Lord Peston]

My Lords, is the Minister aware that some of us do not believe in exaggerating the problems of the eurozone or using the word “crisis”, which is immensely damaging and should not be used by Her Majesty's Government? Is he aware that, overall, the eurozone has been a great success? A vast amount of eurozone paper is held willingly throughout the world and ever more trade is being carried out in euros. Is it not about time that Her Majesty's Government took at long last a more positive attitude both to the eurozone and to Europe in general?

[Lord Sassoon]

My Lords, we take as a Government a very positive and pragmatic attitude towards Europe and the eurozone. It is after all where 40 per cent or more of the UK’s exports go. We wish the eurozone success. In the ways that I have sketched out and we have discussed on other occasions, we will be supportive, particularly on completing the single market and putting in place structural reforms. At the same time, it is right for countries to make their decision as to whether they want to be in or out, and the UK has made and continues to make the right decision about where we are.

Finance: Off-exchange Trading Venues

Lord Peston Excerpts

Monday 18th July 2011 Lords Chamber

[Lord Sassoon]

My Lords, we should distinguish—as I am sure my noble friend Lady Kramer does—between the two issues of dark pools and high-frequency trading, both of which I am sure noble Lords are very familiar with. Dark pools are akin to what used to be called “upstairs trading”—off the floor of the Stock Exchange. We need to make sure that the benefits of being able to trade in such an environment, such as competition and choice for investors, do not impinge in any way on the transparency and the price-discovery ability of markets. The FSA has done work on that and is content that the price-discovery mechanism is not being damaged.

High-frequency trading is a very new and slightly separate area, although I agree that it is related, and it is one on which the Government are doing considerable work. A research project led by the Government Office for Science is looking at the possible evolution of computer-generated trading and its implications, and will produce up to 20 papers on the subject during 2011.

[Lord Peston]

Are dark pools the same as dark matter, which the astrophysicists tell us permeates the universe but which no one can observe? Is not the problem that for a considerable period banks and other financial institutions marketed paper assets that had no real assets behind them, and that that is what led to the financial crisis? Is it not more worrying that the banks cannot wait to get up to the same tricks again, and will do so if something is not done to regulate them properly?

[Lord Sassoon]

My Lords, I am no great expert on dark matter and black holes, but I think the distinguishing point about dark pools is that they are a venue for trading that enables confidential orders to be submitted and matched using a reference point that comes from a transparent market. As soon as the trade is done, the details are reported publicly. Therefore, there is confidential trading and then full reporting, which is the critical feature of the market. Various platforms are available for the market, which accounts for something of the order of 7 per cent of UK and European equity trading. It is not a dominant part of the market by any means, but it is one that we are watching.

Office for Budget Responsibility

Lord Peston Excerpts

Wednesday 6th July 2011 Lords Chamber

[Lord Sassoon]

My Lords, I am grateful to my noble friend for pointing out the IMF’s recent assessment that endorses the deficit reduction plan, as has the Governor of the Bank of England and just about every other commentator I can think of. That is the plan to which we stick. The third Question this afternoon is on matters related to the Monetary Policy Committee and maybe it would be better to talk about monetary matters then.

[Lord Peston]

My Lords, does the noble Lord look every month as I do at an admirable document published by his own department which is a survey of all the independent forecasts made every month by the leading forecasters in this country? Is he aware that their latest figures show that the economy will grow by 1.5 per cent this year, not exactly the greatest performance ever; it is predicted to grow by 2.1 per cent next year and the medium-term forecast is approximately 2.3 per cent for the three further years? Is he aware therefore that alleged independent Office for Budget Responsibility, in the document quoted with great approval in the Budget Statement this year, predicted that for the three medium-term years the economy would grow at 2.8 to 2.9 per cent? When will he or his right honourable colleague the Chancellor go back to this alleged Office for Budget Responsibility and ask it how it managed to get the three most important numbers it was talking about wrong?

[Lord Sassoon]

My Lords, I recognise the numbers that the noble Lord, Lord Peston, quotes from the excellent monthly publication that the Treasury produces averaging out the independent forecasts. The Office for Budget Responsibility last published a forecast in March. It is obliged to put out forecasts at least twice a year. We can look forward to another one in the autumn and we will see what it has to say then. As to the extraordinary charge of the alleged independence of the Office for Budget Responsibility, I was pleased to see, only within the past couple of weeks, that the noble Lord, Lord Burns, has been appointed as one of the first two non-executive members of the office, which is a sure sign that its independence is going to be very safely guarded.

Banking: Government Shares

Lord Peston Excerpts

Monday 13th June 2011 Lords Chamber

[Lord Sassoon]

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.

[Lord Peston]

My Lords—

[Lord Newby]

My Lords—

[Noble Lords]

This side!

[Lord Peston]

No.

[Baroness Anelay of St Johns]

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.

[Lord Sassoon]

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.

[Lord Peston]

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?

[Lord Sassoon]

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.