Economy: Credit Easing Policy

Lord Lawson of Blaby Excerpts

Thursday 26th April 2012 Lords Chamber

[Lord Sassoon]

My Lords, I fear that I will not be able to do justice to all the six questions that I thought I detected, but let me try to deal with one or two. First, we should distinguish between credit easing, which is the policy announced by the Chancellor and made manifest in the national loan guarantee scheme, and quantitative easing, which is the responsibility of the Bank of England. As to quantitative easing, if the noble Lord, Lord Barnett, had asked me I would have answered that the Bank of England’s own assessment is that under quantitative easing the economy has benefited by between 1.5 to 2 per cent. One can therefore draw inferences from that for what a more limited scheme targeted at small businesses will achieve.

As to the question of the levels of investment in the economy, that is set out in the latest report from the Office for Budget Responsibility. It is therefore its independent figures, not mine, which point out that the fall-off in levels of business investment and the expected sharp recovery very much follow the pattern seen in the recession of the early 1990s. It is territory that we have been in before and the Government believe that we should respond in the ways that we have. As to the evidence that the national loan guarantee scheme is gaining traction, Barclays has already issued a £1.5 billion bond backed by the scheme, and Lloyds has issued $1.4 billion since the scheme started on 20 March. So it is indeed, unlike some of the schemes introduced by the previous Government, up and running and having an effect.

[Lord Lawson of Blaby]

My Lords, is my noble friend aware of the very recently published unanimous report of the Economic Affairs Committee of this House on development aid which urged the Government to abandon the wholly arbitrary target of allocating 0.7 per cent of GDP for development aid? Is he further aware that if the Government were to accept this all-party recommendation there would be scope for expediting carefully chosen public investment plans, to the great benefit of the economy and without infringing the Government’s overall public expenditure plans?

[Lord Sassoon]

My Lords, I think that we are straying a little bit but my noble friend has, of course, ultimately tied it back to the Question. Of course, if lots of other things were changed in government policy then we could free up money for all sorts of other good things. The Government have no intention—notwithstanding the excellent report from your Lordships’ committee—of changing their policy on development aid.