Banking Reform

Debate between Lord Sassoon and Lord Jones of Birmingham

Thursday 14th June 2012 Lords Chamber

[Lord Sassoon]

I am grateful to my noble friend for pointing out the extraordinary cost of the banking crisis. He cites one figure; I think that the estimates ranged from £140 billion upwards. They are extraordinary figures, which, as I said at the outset, the then Government did not seem to think required any response. I completely agree with my noble friend Lord Bates that something needed to be done, and that is what we have brought forward.

As for the effect on the Government’s holdings in RBS and Lloyds, I am sure that your Lordships like reading, as I do, the fine detail of impact assessments. At the back of the White Paper, the impact assessment contains several paragraphs analysing the effect. It gives a number on a rather theoretical comparison of what the effect might be, but then points out that this is probably already priced into the market so that the price of the holdings today takes account of what is proposed.

[Lord Jones of Birmingham]

My Lords, I declare an interest, and refer noble Lords to the register of interests, advising both providers of finance and also those who consume it. I remember my Yorkshire grandmother when I was about 12 saying that it was a condition of my Christmas present that an account was opened at the Halifax Building Society, and it went in there. Little did Grandma Jones ever believe that that money and its successor funds would be used to be gambled by the Bank of Scotland on commercial folly, so I congratulate the Minister on a good start.

However, of course we have one or two problems. First—and I would welcome the Minister’s comments on this—I notice that the Statement includes SMEs inside this ring-fence as well as private individuals, the provision of retail, the taking of deposits and the provision of finance. The problem is: how do we get capital and liquidity back into the small business sector? Bigger businesses have balance sheets awash with cash but lack the confidence to invest it. At this moment, smaller businesses do not. One of the biggest reasons for this is that they have lost trust in the banking sector. If you had a good credit record in 2008 and 2009 but had your credit facility taken away and had to borrow from friends and mortgage your house, you are hardly likely to trust the bank the next time around. Today does nothing to help that unless you make a virtue of necessity and prove to small business that this will in some way free up capital towards the provision of liquidity. I am not sure that this measure in any way does that and would welcome the Minister’s comments.

Secondly, there is the enormous problem of how you get the balance right so that we are seen as a well regulated, safely executed and prosecuted banking environment, without encouraging the most successful of our globally competitive sectors not to leave these shores. It would not go elsewhere because of all the problems with salaries and bonuses and the vilification of banking but because it will just become too difficult to lend here and easier to lend in other markets. I ask the Minister, and I include his coalition partners in this—it would be nice to have a Secretary of State for Business who supported business for once—whether, just for once, some positive words might come from the Government about the financial services sector in this country, rather than constant smacking instead of encouragement.

[Lord Sassoon]

My Lords, the noble Lord, Lord Jones of Birmingham, is always rightly concerned about the financing of British business, which is very important. Today’s measures are not principally about that. I could talk about the £21 billion national loan guarantee scheme or the fact that our 10-year sterling sovereign rate has been in the 1.5% to 1.7% range for the past few weeks, which is an unprecedented level. That all flows through. Here, we are significantly reducing the risk of another banking crisis. It was that crisis—the disruption and its aftermath—that caused such difficulty in the flow of loans to our businesses. Whatever we do here to minimise the chances of it happening again must be good for our businesses.

As for the UK being a competitive centre of banking, the Government are working incredibly hard. For example, only this morning I was at a very important meeting with businesses and authorities from the UK and Hong Kong, talking about how we would build the offshore RMB centre in London. That is an example of the forward-looking approach that we take to making sure that the UK and London continue to be the global financial centres of choice.

Office for Budget Responsibility

Debate between Lord Sassoon and Lord Jones of Birmingham

Wednesday 6th July 2011 Lords Chamber

[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.

[Lord Jones of Birmingham]

How on earth do this Government intend to meet their growth forecast if they do not rebalance the economy through a quality manufacturing strategy and if at the first whiff of gunshot they still buy German trains and not those made in Derby?

[Lord Sassoon]

My Lords, first, it is not our forecast. These are the forecasts of the independent Office for Budget Responsibility. Secondly, what is very heartening in the economy is the growth of manufacturing output and the growth of exports. Since last May, manufacturing output has been 4.2 per cent higher than in the same period in the previous year. Since last May, volumes of exports to the rest of the world have been nearly 13 per cent higher than in the same period a year earlier. The private sector has created 520,000 extra jobs in the past year and that is three-and-a-half times the number of jobs by which the public sector has contracted. I really do not think that noble Lords should get pessimistic. We always said that the recovery was going to be choppy but the manufacturing side of the economy is doing very well to rebalance, which is what the economy needs.

Public Expenditure: Value for Money

Debate between Lord Sassoon and Lord Jones of Birmingham

Tuesday 26th October 2010 Lords Chamber

[Lord Sassoon]

I completely agree with my noble friend that the overlay of unnecessary, wasteful targetry that the last Government imposed absolutely detracted from the fundamental consideration of value for money. To emphasise the point, it was not just over 4,000 but 4,700 targets that were swept away from local authorities, enabling them to get on better and do what really matters for citizens.

[Lord Jones of Birmingham]

Could the Minister please explain where the value for money exists in public expenditure when we constantly untie our overseas aid? Japan, America, Germany and France do not. This is a time when we could have a win-win of increasing the overseas aid budget and helping nations that need our wealth while creating jobs at home and tax from profits at home, rather than doing what we are doing, which is to give taxpayers’ money without any custodianship and keeping no control, therefore creating jobs in Japan, France and America.

[Lord Sassoon]

My Lords, the first thing to re-emphasise is that we have maintained overseas aid expenditure to meet our commitment of 0.7 per cent of GNI from 2013, but in that context we must make sure that the money is well spent. A new independent commission on aid impact will assess all ODA spending, and DfID in particular will protect all UK aid from corruption by assessing risks and using safeguards to prevent the misuse of funds.

Office for Budget Responsibility

Debate between Lord Sassoon and Lord Jones of Birmingham

Monday 14th June 2010 Lords Chamber

[Lord Sassoon]

The forecasts are transparent; people have been able to see how it has formed its views on all its forecasts. As for Treasury Ministers in the past, they have plucked numbers out and it has been non-transparent. Here we have a degree of transparency by which you can hold the Treasury to account, going forward. The noble Lord also asked whether the five-year forecasts will be amended very regularly. Certainly, the OBR will be publishing in conjunction with the Budget again, and, as it said in its document and terms of reference, it will be publishing its forecasts regularly.

[Lord Jones of Birmingham]

My Lords, we have just witnessed a great display of who said what to whom, and of “Oh yes he did” and “Oh no he didn’t”, that would frustrate every businessman and woman in this country, because—I hope that the Minister will comment on this—without doubt, whoever is right or wrong, this country is in the economic dippy-doo. The only way out of this is to trade our way out, to generate the wealth that will create the jobs in the private sector and generate the taxation to pay down the deficit.

When the Minister was repeating what the Chancellor of the Exchequer had said in another place, at the end I heard that next week we are going to hear what he intends to do about it. I urge the Minister to go back to his colleagues and, whatever they do next week and however or whenever they cut—when we hear so much about public spending, of how much or how little we are going to spend and, at the end of the day, of ring-fencing it or cutting it more quickly—to ask whether anybody has ever thought about earning the stuff, because without earning it you cannot cut it. I would welcome a comment on what we are going to do about generating the business growth that will render all of this at least relevant.

[Lord Sassoon]

My Lords, the noble Lord, Lord Jones of Birmingham, raises a critical point: how are we going to get growth going again, as none of this public expenditure gets paid for unless we get the private sector economy growing strongly? While my right honourable friend the Chancellor will be setting out in his Budget next week the important strands of our growth strategy, I stress that what is so critical about the creation of the OBR and the early action that was taken on the initial £6 billion of cuts is the credibility that gives to the new Government’s plans to grip the appalling economic situation we have inherited. That has already started to give confidence to the markets, as has been seen in the low interest rates. The critical importance of keeping interest rates low has to be one of the first foundations on which we can rebuild sustainable growth in the private sector.