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Economy, Pensions and Welfare

It is the only comparison we have, and it is what the bank paid, so presumably that is the alternative benchmark that we have to use. None the less, my point is a simple one. If the rate is to be cut, what will it be cut to? If there is to be a subsidy, who will pay it, and what should it be? I agree with the more fundamental point that the hon. Member for Tatton made—indeed, I have made it frequently myself in the past few weeks and months—which is that the banks are being given completely contradictory objectives. They are being told to lend more. They are being told to lend less by the Financial Services Authority, which wants them to hold more capital—perhaps too much capital, given the context. They are being told to repay the Government's loans. They also have their own objectives—to service their shareholders. Surely the one thing that the Government have to do above all else is to be absolutely clear about the priorities. If the priority is to lend more, that has to be spelled out explicitly, and it has to override the other objectives. It does not matter whether we achieve that by putting people on boards, or simply by making the objectives very clear. What is completely lacking is any clarity at all about the strategy for the banks. That really has to be sorted out. Finally on banks, the Conservatives have come up with a positive suggestion—the idea of guaranteeing new credit. That suggestion is part of the mix, and I welcome it. I should confess that when it comes to that subject, I have some form: 25 years ago, in the last banking crisis, I was invited to work with Lord Lever, whom some Labour Members may remember, on coming up with a way of getting credit going in a banking crisis—in that case, the crisis related to Latin America. Indeed, my hon. Friend the Member for Eastleigh was involved in the same exercise. The solution that we came up with was a loan guarantee scheme. It never actually worked. The problem posed was as follows: either we insist that banks take a share of the risk—that is the right and fair thing to do, but if we do that the banks do not do anything, because they do not want to take risks—or we effectively underwrite the lot and nationalise credit. It is not clear which of the two is being proposed. It seems to be a bit of each, or something between the two. A rather perceptive comment was made by the political editor of The Independent, who said:"““the National Loan Guarantee Scheme is potentially even more statist than Labour's schemes.””" That may be right. If the scheme is to work on a large scale, that is what is involved—the nationalisation of credit, and some of us are not totally repelled by the idea. None the less, we should be clear about what is involved. In conclusion, we are faced with a desperately serious and deteriorating situation. The figures that have come out in the past few weeks for some of the other developed countries are positively alarming. What is required is not a single-bullet solution, but a combination of measures: a radical approach to monetary policy, cutting interest rates, fiscal stimulus and radical action to get bank lending working. What is needed is not one of those measures, but all of them.