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On the other European matters raised by the noble Lord, Lord Pearson of Rannoch, his main questions were around the cost of this country's contribution to Europe. He makes that contribution £25 million a day. I cannot calculate things that quickly, but the fundamental difference between that £25 million a day and the £120 million a day of debt interest that I referred to earlier is that the £25-million-a-day contribution to Europe buys us value for money. Of course we believe that Europe needs to get its budget in hand, that there needs to be much greater fiscal discipline in Brussels and that the proposals for a great expansion of the

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European budget are unacceptable. Nevertheless, we have to bring ourselves back to the main point that this country gets considerable value from its membership of the European Union, and that that is fundamental to making sure that we have good strong markets for our exports. Yes, there is a burden of regulation from Brussels, and we must make sure that Brussels starts to apply the disciplines that we are applying in this country before it brings forward yet more regulation.

A number of questions were asked by my noble friends Lady Kramer and Lord Cotter and the noble Lord, Lord Harrison, about access to various domestic and European funds. All I say as a general point is that I hear very loudly what is being said. The Government's objective is to make sure that in direct lending by the banks and in other finance-the most reverend Primate reminded us that the banks are far from blameless in the situation that we are in, and my noble friend Lord Oakeshott and other noble Lords reminded us of the importance of the banks-there is a whole range of financing channels. We have the critical Merlin agreement and European funds such as the regional growth fund-

Lord Harrison: Would the noble Lord be kind enough to write to me on the regional growth fund and update the House on what has happened to it with regard to helping small businesses?

Lord Sassoon: I will take away the noble Lord's question. Forgive me, but I cannot now remember when we are committed to making regular updates, and it may be that we should wait until the next regular update. I will see whether any more can be said, but maybe we should be patient. I understand that he would like a quiet bilateral discussion, but I cannot promise him early information. The important point that he and other noble Lords make is that we have to work very hard to ensure a suitable range of channels for access to both debt and equity finance.

Incidentally, on the other point made by the noble Lord, Lord Harrison, I was taken away from some European-related reading yesterday. I had just got to the chapter in Edward Heath's biography on the first negotiations for our European entry, so I have a few years to go before I get to the latest report from your Lordships' committee. If I am allowed to go back on holiday, I will get there as quickly as I can.

The most reverend Primate the Archbishop of York raised another critically important point, which was about inflation. Clearly, inflation makes an enormous difference to the spending ability of individuals and has a significant effect on the costs for businesses. As we have discussed in this House on many occasions recently, it is critical that the Monetary Policy Committee continues to have free rein and is not constrained by the Government in any way in meeting its mandate. I commend to the most reverend Primate the words of the Governor of the Bank of England in his latest report, issued this week, in which he acknowledges that inflation may go over 5 per cent in the short term but says that he expects inflation to moderate in the medium term and to come down to slightly below the target that the Chancellor has set of 2 per cent. As

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my noble friend Lord Oakeshott will know, in the context of that discussion the governor made some interesting remarks about the possibility of quantitative easing. No doubt when the MPC's minutes next come out we will look to see what was discussed at its last meeting, but clearly this is a live topic.

My noble friend Lord Flight gave a perceptive analysis of the markets. I do not think that he asked me a question in that, but I agree with a lot of his analysis.

The noble Lord, Lord Lea of Crondall, raised questions about the UK and Germany and made reference to BMW. All that I would ask him is why BMW has announced in recent months a further massive investment, of hundreds of millions of pounds, in its car manufacturing in this country. I suggest that that is because the best of our manufacturing is at least as good as and in some cases significantly better than the best of manufacturing in Germany, fine manufacturing economy though it is. We have in this country-Mini exemplifies this absolutely-design skills that are second to none. If the noble Lord would like to fire off at me another Written Question or three, I will be happy to try to answer better next time his points on relative added value, but I do not think that we have anything to be ashamed of-far from it-in a comparison between the best of our industry and the best of German industry.

Lord Foulkes of Cumnock: My Lords, will the Minister try to answer the question-I know that it is a difficult one-that I asked about credit rating agencies, which was also raised by the noble Lord, Lord Oakeshott, and by my noble friend Lord Harrison? I know that the Minister has travelled a long way to answer the debate, but I have travelled a long way to ask just the one question, so I would appreciate an answer.

Lord Sassoon: I am happy to answer the question that the noble Lord, Lord Foulkes, asks. I do not believe that nationalised institutions of any kind, including nationalised credit rating agencies, are the best way to go. Europe and the international organisations are looking at the appropriate form of regulation for credit rating agencies. That is ongoing business and it is quite proper that it should be done. Others question whether the whole rating system should be completely liberalised and say that one should not have a small number of institutions running the show. I recognise that that is an important debate and both Europe and the G20 continue to look at the issue.

I am conscious that I should wind up. I just go back to some of the fundamental points that underlie the interesting debate that we have had this afternoon. Noble Lords are well aware that when the coalition Government came into office we inherited the UK's largest ever peacetime deficit. Tackling that deficit has been and continues to be our number one priority. The recent events that we have been discussing this afternoon vindicate that approach. It is by securing Britain's AAA rating and the very low bond yields that we now have that we underpin the prospects of recovery. As the Governor of the Bank of England highlighted

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yesterday, 500,000 UK jobs have been created by the private sector over the last year. We should not forget that.

We have always said that recovery will be choppy but both the bank and the Office for Budget Responsibility forecast growth to continue through this year and the next. The decisive action taken by the Government to

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deal with the nation's debts and restore private sector growth has meant that the UK has been in a better position to withstand the very considerable global uncertainties. Abandoning our plans would be disastrous, resulting in rising interest rates, falling international confidence and undermining the recovery.

House adjourned at 3.40 pm.

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