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Banking Bill

I have rather more sympathy for this amendment than for the noble Lord’s previous one. It has been obvious for a long time that the asset price bubble in housing was a major feature of the way in which households were viewing their purchasing and prices more generally. For a long time, the governor of the Bank—this is nothing to do with Europe—resolutely denied that the measure of inflation should take any account of asset prices. He has been before the Economic Affairs Select Committee of your Lordships' House many times and made that point very eloquently. He was totally deaf on the point. It is now obvious that the spectacular rise in house prices was unsustainable and that it had a knock-on effect on inflation more generally because people were borrowing against it. There is now a recognition, even in the Bank, that something needs to be done. The noble Lord, Lord Saatchi, said that they should get on with it. The good thing from his point of view is that they can now get on with this almost at leisure because inflation and interest rates are virtually zero, and this will not become a problem until the next irrational upswing. We probably have several years in which we can try to get a better way of valuing asset prices in terms of the inflation index before it will have any practical impact. I agree with the noble Lord there is now a recognition by the governor and the banking authorities across Europe that something needs to be done. There is a window of opportunity during which there will be virtually no cost in doing nothing immediately, and during which I hope something will be done.