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Queen’s Speech

My Lords, it is my very great pleasure to congratulate the noble Lord on his maiden speech. I had the honour a couple of years ago of awarding the noble Lord an honorary doctorate at Brunel University where I am chancellor. On that occasion, he was very popular with the students. He made a forthright and blunt speech, which they appreciated. They also appreciated that he had been a great success in his business career and I think most of them hoped that one day they might be able to emulate him in his success. I am sure that he will find in this House that there is no difficulty in being forthright and speaking his mind. In fact, the House appreciates noble Lords who speak their minds. I might add that, as a former Chief Whip, I am not entirely sure that Governments always appreciate noble Lords who speak their minds too bluntly. Nevertheless, I am sure that the noble Lord will know from the reception that he got that he was well received in the House today and we congratulate him on making his maiden speech. We hope that he will speak on many other occasions in the House when we shall enjoy listening to him. I have had a hand in drafting as many Queen’s Speeches as, I suspect, anybody in the House. I do not think I was ever accused of using the Queen’s Speech as an election manifesto. I do not think that that is a reasonable criticism of the Government. If that is what they were doing, it was a pretty daft idea. I do not do it. It seems that the return of confidence in our economy is still the most urgent task facing us. I am not sure that either the Fiscal Responsibility Bill or the Financial Services Bill are adequate to that task. As one distinguished commentator put it: ""Will the Great Recession be followed by the New Caution"," much as happened in the 1930s, following the great depression? Has the damage of recent years so shaken confidence that the effects will bug us for a good many years ahead? The blunt truth is that people have discovered that the stock market is not a one-way street. Depositors and savers do not have the confidence that they once had in the banks, and feel the need to spread their money around more, rather than keep it in one bank. Also, what people thought was an adequate provision for their retirement has proved to be woefully inadequate. If you look back at the great depression, you will see that it took considerably longer for confidence to return. Indeed, 1929 was by no means the worst part of that depression. There were many speeches by distinguished people in late 1929 and the early 1930s about how the recovery was coming, but it was a false dawn. The Dow reached the real bottom of the market in 1932 and did not recover its levels until 1954, some 22 years later. The precedents for making a recovery now are not all that good. The Minister who is replying to this debate, whom I have known and respected for many years, reminded me the other day that I gave him his first big job. I had forgotten that, but he told me. He was a great success at it, if I may say so. He will no doubt defend the Government’s record loyally and with vigour, but I do not envy him the mess that he must have found in the Treasury. I think his memoirs will be much more interesting than the speech that he will make this evening. If we are going to get out of this mess and see a return to confidence in the economy, of one thing I am absolutely certain: government forecasts have to be believed. The promise of a Fiscal Responsibility Act may well be a move in the right direction, but if it is no more effective than the 1998 code for fiscal stability, it will not be. In any case, it misses the essential point. It is the failure in recent years to make reasonable forecasts of our public finances that has been especially damaging. For instance, a Government who forecast in 2009 that the net borrowing requirement would be first £30 billion, then £118 billion, then £175 billion—and I read the other day that it will be even higher than that—have a lot to do to get credibility back. The Fiscal Responsibility Bill is presumably to reassure potential purchasers of government bonds that the government finances will be run responsibly. My understanding is that no one with responsibility for investing in government bonds uses the Chancellor’s forecasts as a guide. They prefer to use their own non-government forecasts. As far as I can make out, virtually every forecast from the Treasury in recent years has been overoptimistic. This has been accompanied by a moving of the goalposts when it suited the Government. To help our recovery, the urgent need is to return some sort of credibility to the Government’s forecasts for the economy. We have debated in this House at considerable length the difficulties we have had with dodgy statistics. That has been put on a more satisfactory basis although it should not have been necessary in the first place. I would be the last person to say that resolving some of the banks’ problems is easy, even if a substantial part of the lack of confidence arises from the Government’s own earlier mismanagement. Bank supervision has been the creature of this Government for the past 10 years or so and has proved inadequate. I wait with interest to see how the proposed Financial Services Bill will help. The Government are right to take a close interest in how the banks are run as the taxpayer keeps them in business. The Government fully realise that confidence in the banking system is there only because depositors have assumed that the Government have no option but to bail them out if necessary. This, of course, applies to all banks, whether or not they have actually needed a government bail-out. Despite the massive support the Government have given the banks—I suspect that there is more to come—confidence has still not returned. We still do not know the extent of bank losses. My message to the Government is that the first prerequisite for a return of confidence and the ability of the banks to stand on their own feet is transparency. We will then be able to judge whether the Government have done enough. I fully understand the Government’s reluctance to divide up the banking system into utility banks and casino banks—certainly without obtaining international agreement—but we must have clear indications that they will take other steps to secure the banking system and avoid a return to the chaos of recent months. What concerns me is whether the Government and the banks have learnt the lessons. A return to business as usual would be unacceptable.