Bank of England: Economic Forecast

Lord Carlile of Berriew Excerpts

Wednesday 6th October 2010 Lords Chamber

[Lord Sassoon]

I am not sure I agree with much of the noble Lord’s analysis of the situation, other than that a very necessary rebalancing of the economy has to take place. Within 50 days, my right honourable friend the Chancellor came forward with a radical, necessary and tough Budget. There will be painful adjustments as the private sector takes up the slack from the overbloated public sector. That is fully built into the Budget forecasts and the details of the spending cuts will be revealed on 20 October. The great range of forecasters, including the independent Office for Budget Responsibility, expect growth to continue quarter by quarter, with unemployment falling and employment going up.

[Lord Carlile of Berriew]

Does the noble Lord agree that there is an unhappy contrast to be drawn between, on the one hand, the reluctance of the banks to lend money to small and medium-sized businesses and, on the other, their enthusiasm for paying bonuses for profits? Would the situation not be far more acceptable if bonuses were paid for actions that bring stimulus to the economy and not merely profit to the banks?

[Lord Sassoon]

The critical question is about how we can see credit continue to flow to UK business, particularly small and medium-sized enterprises which cannot access the bond markets. Therefore it is encouraging that in the latest September data for August, credit conditions continue to improve modestly. That is critical. When it comes to bankers’ bonuses, there is unfinished business by both the Financial Services Authority and the Government to see what further action—whether that is disclosure or other measures—is appropriate to make sure that we get a proper balance in this area.