Economy: Quantitative Easing

Debate between Lord Taverne and Lord Sassoon

Monday 12th November 2012 Lords Chamber

[Lord Sassoon]

My Lords, we are straying a bit from the effect of quantitative easing and on to the Government’s fiscal policy, for which the Bank of England is not responsible. However, the fiscal deficit that we inherited has been cut by over a quarter. We are on track. As to what would have happened under a Labour Government at this point, the independent research shows that the country would have been left with an additional £200 billion of debt on top of the present Government’s plans.

[Lord Taverne]

My Lords—

--- Later in debate ---

[Lord Taverne]

My Lords, there is an urgent need in British industry for long-term loans for SMEs. The trouble is that our banks are not very good at this. Banks in Germany, France, the Netherlands and Canada are much better. Will the Government seriously consider following their pattern and setting up an investment bank or institution that specialises in providing such loans, perhaps modelled on the German Kreditanstalt für Wiederaufbau?

[Lord Sassoon]

My Lords, we are putting together a British business bank in order to bring together the various schemes that SMEs and all companies have access to. I entirely agree with my noble friend that this is an ongoing and very serious issue. We will continue to use the strength of the Government’s balance sheet, which is due to the credible deficit reduction plan, to back up schemes such as the infrastructure guarantee scheme, which goes precisely to one part of the demand and need for long-term bank finance. We will, and have already, come forward with schemes, because I completely agree with my noble friend that this is a critical area.

Economy: Monetary and Fiscal Policy

Debate between Lord Taverne and Lord Sassoon

Tuesday 8th November 2011 Lords Chamber

[Lord Sassoon]

My Lords, I will let the noble Lord, Lord Eatwell, read the actual words in Hansard tomorrow. [Interruption.] No, I am not changing anything. The MPC has to take account of the prospects for growth and inflation when it is judging how to set the direction of monetary policy. Its target is an inflation target, but it needs to take account of a wealth of other factors when making its decision, so that is what it does.

[Lord Taverne]

My Lords, do the Government not agree that in the present circumstances a simultaneous policy by many countries of rigid deficit reduction and fiscal contraction carries the danger of leading to depression, which will not cure the deficit?

[Lord Sassoon]

My Lords, I certainly agree that different countries should be taking different tracks, depending on their particular deficit and debt positions. I can only quote the concluding statement of the IMF, in its recent assessment, that:

“The current policy mix of tight fiscal and loose monetary policy remains appropriate”.

EU: Financial Assistance

Debate between Lord Taverne and Lord Sassoon

Wednesday 15th December 2010 Lords Chamber

[Lord Sassoon]

My Lords, first, there will be no hypothecated borrowing by the Government to back up—as far as I am aware—the loan to Ireland. Of course, the loan to Ireland—as and when it is drawn down—is subject to approval in legislation if and when it comes to your Lordships’ House. We might return to it over the next few days. The loan has to be approved by Parliament. It is then drawn down. Of course funds have to come from somewhere, but there is no intention to back that up with a specific loan.

It will not be for the Government to determine the accounting, but the intention is that the bilateral loan will carry an interest rate that is 2.29 per cent higher than the sterling seven and a half year swap rate that applies at the time. On this week’s figures, that would be an interest rate of 5.9 per cent, which would be considerably in excess of the UK Government’s borrowing rate. My understanding—as I say, it is not the Treasury’s decision—is that the net interest margin, which would of course be a gain because the receipts from Ireland would exceed the costs to the Exchequer, would indeed be a positive contribution on the fiscal balance.

[Lord Taverne]

My Lords, is it not inevitable that to make the rescue operations effective, and at the same time to avoid a treaty amendment, the stability mechanism will increasingly become an intergovernmental eurozone mechanism? What plans do the Government have to avoid the United Kingdom being increasingly bypassed in key decisions in the European Union?

[Lord Sassoon]

My Lords, I do not think there is any question of us being bypassed on key decisions in the European Union, as our participation in recent debates about Ireland and the wider crisis have demonstrated. It will be up to Europe to decide how the permanent arrangements are put in place. The October European Council resolved that there should be a crisis resolution mechanism, and there has been a verbal commitment that the UK will not be asked to be part of it.