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Financial Markets

My Lords, the Minister said that the system has worked over the past 10 years, but he did not give any example of which particular problems had been solved in that way. The reality is that when it came to the crunch, the system devised by Mr Gordon Brown 10 years ago did not work, with the consequences we are discussing today. I have three questions for the Minister. The first is on a point which has already been raised—the European directive. It is pretty clear that the reason the Governor of the Bank of England received advice that it could not provide a solution to the problem in the way he wished was that the directive prevented him in that regard. The European Union then said that the directive did not prevent him. The reality seems to be that it was the gold-plating of the directive that caused the problem. The Minister rightly says that we are not out of the woods yet, so do the Government propose that the gold-plating should be removed forthwith? Secondly, in his Statement the Chancellor said that he is proposing to change the arrangements for compensation to depositors. One can certainly agree that a system to meet an immediate problem as it arises is needed, but I do not understand why there is any need to raise the limit from £35,000. It is only people who decide that they want to deposit a sum over that amount with a particular building society who would have a problem. The Minister will correct me if I am wrong, but if they spread their funds around, there will not be a problem. There is no need to increase the potential burden on taxpayers in order to cover people who allocate their assets in an imprudent way. Thirdly, on the guarantee, there seems to be something of a mystery, and perhaps the Minister could clarify the position for us immediately. I am not clear by what authority, legislative or other, the Government gave this particular guarantee, and the contingent or possibly real charge on the taxpayer. I simply do not understand how, when a Minister decides that he will give a guarantee, that situation could arise. On the position of the directors of Northern Rock, it is quite extraordinary that the Government should give the guarantee without seeking in some way to hold the directors to account. At that point the Government are clearly in a very strong bargaining position indeed. It is extraordinary that after the guarantee had been given, the Government then decided that the company might issue a dividend. That is really quite amazing. Indeed, it continues to lend huge multiples of income. That of course is widespread across the industry, but we are going to run into a negative equity problem on a far greater scale than anything we have ever seen before if this kind of thing goes on. I should like to make a final point. The Government have said that they are seeking to improve the transparency of off-balance-sheet finance. If that is so, one would hope that the Government will be the first to do that—they certainly are not doing so now.