Global Economy

Baroness O'Cathain Excerpts

Thursday 11th August 2011 Lords Chamber

[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?

[Baroness O'Cathain]

My Lords, I thank my noble friend for repeating the Chancellor’s Statement. I have a copy of it here. One of the things that stands out is:

“We need an international framework that allows creditor countries like China to increase demand and debtor countries to make the difficult adjustments necessary to repay them”.

I should like to ask: what are the chances of this happening? What is the mechanism? Is it the autumn meeting of the IMF and the G20? I come back to my point about what the chances are. There is no question that if we could stimulate China to increase its demand for products from our country and Europe, we would be well on the way to restoring the confidence of our small and medium-sized enterprises to get more involved in that market. Leading directly on from that, my noble friend said that more supporting measures will be produced in the autumn. Can I make a plea on behalf of small and medium-sized enterprises for something to be done to limit the huge burden of regulation, which disproportionately falls on small and medium-sized enterprises? They wish to carry on but find international trade really difficult.

[Lord Knight of Weymouth]

My Lords, the Chancellor’s Statement sustained the spin around the safe haven notion. I wondered whether the Minister has seen the comments of Jonathan Portes, the director of the National Institute of Economic and Social Research. Last week, he said that if you thought that what was driving low gilt yields was us being perceived as a safe haven, you would see a significant rise in the pound and we just have not seen that. He added:

“The reason people are marking down gilt yields is because the economy is weak”.

Is not the problem, as my noble friend Lord Eatwell has said, a lack of growth? Is it not true that, as a result of the decisions that this Government have made, we will see an additional £46 billion-worth of borrowing than was predicted a few months ago, and is it not important that the Government decided to slow down the rate of deficit reduction so that there is room, for example, to spend money on sustaining police numbers and keeping prisons open so that we can deal with the public disorder which we have been debating today?