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9 Mar 2009 : Column 41

Mr. Timms: My hon. Friend is absolutely right to highlight the importance of that. We will be reporting annually on the delivery of the lending commitments—we are not proposing to publish information every month, but we will do so annually. We also committed during the passage of the Banking Bill to report every six months on financial commitments we have entered into relative to the financial crisis, and we shall of course report to Parliament on contingent liabilities in the usual way.

Mr. John Redwood (Wokingham) (Con): Is not the truth that the taxpayer is not just being asked to stand behind £585 billion of especially toxic assets in the two big banks, but in practice is standing behind £3 trillion of assets and liabilities in the two banks? There is presumably no circumstance in which the Government would bring down one of those banks now they have bought a majority shareholding in it, so will the Minister come clean and say how the taxpayer can be expected to take a £50,000 risk for every man, woman and child and how much money the Government will lose on the scheme before they realise what a disaster it is? What does the business plan say about the losses at Lloyds in 2009?

Mr. Timms: Of course, there is some uncertainty about what the arrangement will cost over time. The uncertainty is the reason why the arrangement is necessary, because that is what has been preventing Lloyds from lending until now. However, not wholly dissimilar arrangements have been in place in Sweden and Japan and, more recently, in the Netherlands and the US, and experience shows that the ultimate price is a small proportion of the value of the assets insured. The insured figure for Lloyds is £260 billion; the cost to the taxpayer, however, will be a great deal less. We do not know exactly what the figure will ultimately work out to be, but the cost of doing nothing would be very significantly more because of the loss to the economy of momentum and lending capacity. We need that capacity in the economy to navigate a way out of the recession—the downturn—we are in at the moment.

Mr. James Plaskitt (Warwick and Leamington) (Lab): The asset protection scheme is clearly playing a vital role in helping to resolve the problems in the banking sector, but as my right hon. Friend says, it is just a start. Can he say more about the process whereby the assets that now secure that protection first receive a robust valuation and then leave the underwriting and return to the bank?

Mr. Timms: Yes, a good deal more work has to be done before the final details are absolutely pinned down and signed off. I envisage all that work being done between now and the summer. Of course, there is no immediate payment to be made; there will be a payment only when, for example, there is a default on a loan and the insurance is triggered. A great deal of detailed work needs to be done over the next few months, but the shape of the package is clear. We have a list of assets that are covered, although that may change a little over the next few months, but the benefit in terms of additional lending will start immediately.

Mr. Andrew Tyrie (Chichester) (Con): Whatever the intentions of the Prime Minister, will the Financial Secretary accept that the effect of his intervention to
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railroad through the deal has been not to save a poor bank but to destroy a strong one? What message does the Financial Secretary have for the tens of thousands of small Lloyds shareholders who have now seen their shareholdings wiped out?

Mr. Timms: The hon. Gentleman is quite wrong to characterise what happened between Lloyds and HBOS in that way. As I have already pointed out to the House, the shadow Chancellor strongly supported the arrangement at the time, and indeed spoke to the chief executives of both banks to reassure them that he supported their merger. In addition, when Lloyds shareholders voted on 19 November, more than 95 per cent. of them voted in favour of the merger. That does not look like railroading to me.

Mr. Dennis Skinner (Bolsover) (Lab): Is it not worth while to make the point that we should use the right language in relation to saving the banks? In reality, this step, and subsequent steps, had to be taken because more than 70 per cent. of voters have bank accounts. We had to save one bank in particular, and then others, because if one had been allowed to fail, there would have been a domino effect, with them all failing. That is why all parties agreed on the rescue at the beginning—they knew that their voters would not want to see a bank finish up in the gutter. We should use that language, and not give the impression that somehow we are saving bankers, bonuses and all the rest. While I am on the subject, in the absence of full-scale nationalisation, when thinking about future legislation, has my right hon. Friend looked at the idea that I put forward the other week—to pay Fred Goodwin and all the top executives’ bonuses out of the toxic debt, so that they would then get nowt?

Mr. Timms: My hon. Friend is absolutely right to point out that we all depend on the banking system—businesses, people with mortgages and savers. It was absolutely clear from the start that we needed to save the banking system from the collapse that was on the cards at the beginning of October. As a result of our measures, as he rightly points out, no saver in a UK bank has lost a penny. We are absolutely determined that that should continue to be the case.

Justine Greening (Putney) (Con): When can the House expect a statement on the quantitative easing policy that is now being pursued by the Bank of England?

Mr. Timms: I refer the hon. Lady to what the Bank of England said last week: monetary policy is a matter for the Monetary Policy Committee of the Bank of England.

Mark Durkan (Foyle) (SDLP): Does the £11 billion figure for business lending include private finance initiative lending, which will be repaid by the taxpayer in the long term anyway? Do the Government have any tests for approving the detailed implementation plan? Who do the monthly compliance reports go to, and how will they know the truth of what they are being told? Will Parliament get the annual report only, whenever it comes? Should we not have oversight that matches the scale of the underwrite?

Mr. Timms: My hon. Friend is right, and that is why we will scrutinise very closely, through United Kingdom Financial Investments, what happens over the next few
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months. I would not envisage excluding PFI advances from the £11 billion figure. We will monitor closely and actively what happens over the next few months, because it is vital that the commitments that have been made are delivered, and they will be.

Sir George Young (North-West Hampshire) (Con): Further to the Financial Secretary’s reply to the hon. Member for Foyle (Mark Durkan), he has consistently referred to Lloyds’ agreement to increase lending by an additional £14 billion and has said that that agreement is binding. Can he tell the House what sanctions are available to the Government if Lloyds does not so increase lending?

Mr. Timms: Ultimately, it would be possible for the Government to withdraw access to the scheme. That will not arise. The lending will be delivered.

Andrew Mackinlay (Thurrock) (Lab): I would like to put it to the Financial Secretary that some of us feel that we are involved in the banking and financial equivalent of mission creep. His statement relates to the Lloyds settlement, but since the Chancellor last made a statement on the RBS, a contingent liability report has been placed on the Table of the House. Why will the Government not publish all the details of the announcement today and of the RBS ongoing negotiations, which have not been concluded, instead of producing only two copies—one, technically, on the Table, and one in the Library—of such key and critical decisions? I confess that, like many other Members, I find it difficult to comprehend the scale, let alone the details, of what I am signing up to and, through my silence, acquiescing to. We need full disclosure. We need Command Papers that are numbered and printed, rather than just those two copies that have been supplied to the House.

This is a failure, and it is time for it to be addressed. We need proper, full disclosure to the House, proper debate, and a vote subject to the affirmative procedure if necessary.

Mr. Timms: My hon. Friend is right about the size of the numbers with which we are dealing. As I have said, we will continue to report on contingent liabilities as we are always required to. As for RBS, there is—as I made clear in the context of Lloyds—continuing work to be done before the final details are signed off.

I repeat that we will report to the House regularly. If my hon. Friend feels that there is some lack in that regard, I shall be happy to look into it, but we have no intention of withholding from the House the information that it needs in order to exercise its oversight.

Julia Goldsworthy (Falmouth and Camborne) (LD): In his statement and in his subsequent answers, the Minister reiterated that the Government would report only annually on the extent to which banks had complied with their lending agreements. Given that the situation is changing all the time, given the desperate need for businesses and individuals to receive that money now, and given the lack of clarity on the extent to which previous agreements have been upheld, do we not need to know more often than annually that the position may again have entirely changed?

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Mr. Timms: As I said earlier, we shall be receiving more regular information, and it will be possible for us to update the House from time to time. I agree with the hon. Lady about the essential nature of the commitments to lend more, but I can assure her that they will be delivered, and we shall be happy to keep the House updated on progress.

David Taylor (North-West Leicestershire) (Lab/Co-op): A moment or two ago, the Financial Secretary said that the Treasury would take robust action against tax avoidance in Lloyds and elsewhere. During the most recent Treasury questions, when the nation did not quite own Lloyds—it does now—I pointed out that Lloyds had been not only promoting but personally utilising complex and dubious tax avoidance schemes, including double dipping. Does the Financial Secretary agree that allowing such schemes to continue when the bank is publicly owned would be the equivalent of not just biting the hand that feeds you, but biting it off somewhere above the elbow?

Mr. Timms: I do not think that anyone should be allowed to continue double dipping or any of the other avoidance bad practices that we have seen. As I have said, tax evasion and avoidance will be on the agenda when the G20 Finance Ministers meet on Saturday, and when the G20 leaders meet on 2 April. There is widespread support across the G20 for the countries to do more together. We require international co-operation in order to be effective, and I am confident that the G20 will allow us to make a good deal of progress.

Mr. Andrew Mackay (Bracknell) (Con): May I return the Financial Secretary to his answer to my hon. Friend the Member for Putney (Justine Greening)? Surely he is not really saying—notwithstanding the independence of the Bank of England—that the House should not discuss, debate and question quantitative easing when it has led to the biggest printing of money in our lifetime. Will he give an assurance that that will happen?

Mr. Timms: My right hon. Friend the Chancellor of the Exchequer has already commented on the issue in the House. The announcement was made last week by the Bank of England, which is responsible for monetary policy, and it is consistent with the inflation target of 2 per cent. plus or minus 1 per cent. that the Government have set for the Bank. There will be plenty of opportunities for Members to question the Chancellor and other Treasury Ministers on this topic.

John Mason (Glasgow, East) (SNP): The Financial Secretary has said on a number of occasions that the shareholders voted for this merger, but I am not sure if they were aware that perhaps only one third of the normal due diligence had been carried out. In the light of both that and the apparent Government pressure for the merger, do the Government not accept some responsibility for what has turned out to be a bad merger?

Mr. Timms: The initiative for the merger came from the banks themselves; I understand they were talking about it some time before they approached the Government. The board then recommended merger to the shareholders, and the shareholders voted in favour of it. The hon. Gentleman may well want to ask some questions of board members, but this was clearly an initiative that came from the banks.

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Anne Main (St. Albans) (Con): May I join the hon. Member for Thurrock (Andrew Mackinlay) in saying that I am feeling somewhat bemused by the enormously large figures, to which we are not giving a lot of scrutiny? On Thursday, I asked for a statement on quantitative easing. May I ask where the figure of £75 billion was plucked from, and what scrutiny has been given to the effects of this on pension pots and annuities?

Mr. Timms: As the hon. Lady knows, the Monetary Policy Committee is the responsibility of the Bank of England, which operates independently. It chose the figure it wanted to adopt. My right hon. Friend the Chancellor commented on this topic back in January, because the Bank of England MPC has indicated for a number of weeks that it thought it would wish to go down that road. There was an exchange of letters last week between the Bank and my right hon. Friend, and he will, of course, be happy to comment on this topic when he is back in the House.

Mr. Andrew Pelling (Croydon, Central) (Ind): The Financial Secretary referred earlier to what happened in Sweden, which had the advantage of completely cleaning up private sector banks, which were fully nationalised. Why have we not pursued that policy option? What is superior about the Government’s approach, which essentially means bad banks operating while remaining within the current commercial banking system?

Mr. Timms: Of course, it is an option for banks to set up, effectively, a bad bank or divide themselves into a bad bank and a good bank; that is a matter for the banks themselves. Our view is that banks are best managed under private ownership in the commercial sector. That has guided us through this process, so the establishment of a bad bank would be a matter for the board of that particular bank.

Mr. William Cash (Stone) (Con): The Financial Secretary may know that I have been having a running battle with the Chancellor and the Government since 7 October regarding the percentage of GDP commitments they have been entering into, particularly as they have escalated. We have now discovered that the original figure given by the Financial Secretary of 37.3 per cent. has increased considerably. What might the impact be of the percentage increase he has currently announced in respect of GDP, and what implications will that have for taxation and public spending by the Government?

Mr. Timms: I am having some difficulty in recognising the figures to which the hon. Gentleman has referred. Let me just say once again that the announcement covers, effectively, an insurance for £260 billion-worth of assets, but the cost to the taxpayer in due course will be a great deal less than that. As I have said, Lloyds is paying £16 billion for access to this facility, and we will have to see whether the cost is more or less than the fee being paid. Clearly, there is at this stage a great deal of uncertainty about what the ultimate cost will be; if there were not uncertainty, it would not be necessary to put this scheme in place. We need the scheme in order to end the uncertainty about the value of assets on the Lloyds balance sheet, and so to enable Lloyds to lend, which the economy needs.

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Estimates Day

2nd( )Allotted Day

Supplementary Estimates 2008-09

Department for Business, Enterprise and Regulatory Reform

Economic Situation

[Relevant Documents: The Fourteenth Report from the Business and Enterprise Committee, Session 2007-08, HC 1116, on the Departmental Annual Report and Scrutiny of the Department for Business, Enterprise and Regulatory Reform, and the Government response, Cm 7559; oral and written evidence taken by the Committee on 16 December 2008, HC 90-i, on Financial support for small and medium-sized enterprises; oral evidence taken by the Committee on 14 January 2009, HC 143-i,on The work of BERR in the current crisis; and uncorrected oral evidence taken by the Committee on 23 February 2009, HC 199-i, on Exporting out of recession.]

Motion made, and Question proposed,

5.4 pm

Peter Luff (Mid-Worcestershire) (Con): I am grateful for the opportunity to debate this important subject. My speech will fall into three main sections: first, an assessment of the structure of the Department for Business, Enterprise and Regulatory Reform and of the need for a business Department at all; secondly, an assessment of how well BERR is coping with the consequences of the recession; and finally, drawing on the Select Committee on Business and Enterprise’s 14th report and the Government’s response to it, an assessment of the accountability of the Department to this House.

It is somewhat ironic that a Department that the Prime Minister was apparently once set on abolishing is now at the eye of the biggest economic storm to hit this country for at least a generation. It is a much-shrunken Department; as these estimates remind us, it has lost responsibility for energy to the new Department of Energy and Climate Change and before that it lost responsibility for science to the new Department for Innovation, Universities and Skills. However, it is still the business Department—the Department for commerce— and it faces some of the most important questions that our nation faces.

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