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Banking (Asset Protection Scheme)

Volume 489: debated on Monday 9 March 2009

With permission, I shall make a statement on the asset protection scheme, and the agreement in principle reached on Saturday between the Treasury and Lloyds Banking Group. My right hon. Friend the Chancellor is travelling to Brussels ahead of the meeting of European Community Finance Ministers tomorrow to discuss the G20 Finance Ministers meeting this weekend, so he has asked me to make this statement.

The asset protection scheme was announced in January. In my right hon. Friend’s statement of 26 February, he gave details of the participation by the RBS Group, and he mentioned the negotiations under way with Lloyds. The approach that we adopted with Lloyds is similar to that adopted with RBS; discussion involved a large amount of complex detail and it was important to take time to reach a satisfactory conclusion. An agreement in principle has now been reached that helps to ensure financial stability, to safeguard the interests of the taxpayer and to support the real economy by increasing lending.

Under the asset protection scheme, the Government will provide protection against certain credit losses on particular assets in exchange for a fee. A first loss, similar to the excess in insurance policies, remains with the institution. Lloyds will meet all of that. The protection provided by the Government will cover 90 per cent. of the remaining loss. The other 10 per cent. will remain with the institutions as an incentive to manage the assets prudently. The Government will accept applications to the scheme for other eligible institutions until 31 March.

Lloyds announced on Saturday its intention to place £260 billion-worth of assets in the scheme, on which it has already taken impairments of £10 billion. Through the first loss mechanism, it will retain a further exposure of £25 billion. Of any losses beyond that, 90 per cent. will be borne by the Exchequer and 10 per cent. by Lloyds. The protection will cover a range of assets including mortgages, unsecured personal loans, corporate and commercial loans and Treasury assets.

Lloyds will pay a fee of £15.6 billion in new, non-voting B shares. Those will count as core tier 1 capital. The Treasury has also agreed to replace its existing £4 billion of preference shares. Current shareholders will be able to purchase these ordinary shares as part of an open offer. The Treasury will take up its pro rata share of the open offers, maintaining its minimum voting share at 43.5 per cent., and will subscribe for any additional shares not taken up by existing shareholders. If no other shareholders take up their entitlements, the Treasury’s ownership of ordinary shares will increase to 65 per cent. Taking into account B shares paid as a fee, its economic ownership would reach 77 per cent.

As my right hon. Friend the Chancellor set out, the asset protection scheme is a key step to put banks on a stronger footing, to insure their balance sheets and to boost lending to businesses and individuals. As part of that deal, in return for access to the asset protection scheme, Lloyds has agreed to increase its lending by an additional £14 billion over the next 12 months —£3 billion for homebuyers and £11 billion for business lending—and it has made a similar commitment for 2010. Consistent with RBS, Lloyds will be required to present a detailed implementation plan to the Government, and to report monthly on compliance with the lending agreements. The Government will publish an annual report on these arrangements, which will be made available to Parliament. The agreements are binding and will be reflected in the performance-related pay of bank staff involved.

Another condition for Lloyds, as for any bank participating in the scheme, is a requirement to develop a sustainable long-term remuneration policy. That means reviewing policies and implementing new policies consistent with the Financial Services Authority’s recently published code of remuneration practice. We have agreed that no discretionary bonuses will be paid in 2009 except to junior staff earning an average of £20,000, and that there will be no annual free share award at all.

At the heart of the current financial and economic problems around the world is a crisis of confidence about bank assets. That lack of confidence is having profound effects on UK companies and on individuals who are not able to secure business loans or mortgages. The critical obstacle to expanding lending is uncertainty about the value of banks’ balance sheets, so we are acting now to enable the banks to clean up their balance sheets, making them better able to lend to individuals and businesses.

Transformation will not happen overnight, but that is the essential starting point, and it must go hand in hand with broader reform of banking supervision and regulation. Action must be taken not only here but by Governments across the world. The alternative would be a failure of the banking system here and elsewhere, which would make the recession longer and more painful and put more jobs at risk. Getting the banks to lend again is essential to economic recovery and to our fight against the global recession.

The Government are clear that British banks are best owned and managed commercially, rather than by the Government. The future of the UK as a financial centre, and the future of our economy and of many thousands of jobs, depends on being able to run banks commercially. All countries are having to deal with the same problem—how to isolate assets that are damaging confidence in the banking sector and preventing banks from lending more. Over the coming weeks, we will continue to discuss with other countries, including the United States and the European Union, how best to co-ordinate our approaches to the shared challenges that we face. As part of our presidency of the G20 this year, my right hon. Friend the Chancellor recently wrote to Finance Ministers setting out a set of shared principles for dealing with asset protection and insurance.

It is essential to restore confidence in the banks, allow them to clean up and rebuild and get lending going again. Economic recovery and thousands of jobs depend on that, and I commend this statement to the House.

I thank the right hon. Gentleman for his statement and for his courtesy in allowing me to see a copy of it in advance.

The right hon. Gentleman explained to the House that the Chancellor is travelling to Brussels for a meeting tomorrow, but I think that the House will none the less be disappointed that we have apparently reached the point where the assumption by the taxpayer of an additional £250 billion-worth of contingent liabilities is not considered a sufficient reason to reschedule one’s travel arrangements. There will also be disappointment that a Treasury Minister is before the House for the first time since the momentous decision last Thursday to begin quantitative easing, and has not taken the opportunity to update the House on that decision and its far-reaching implications for Britain.

This massive second round of banking bail-outs is proof that the Prime Minister’s first bail-out last October failed. The test of it will be whether credit actually begins to flow through our economy again, not what promises of more lending the Government say they have secured. The £14 billion of lending commitments that the Government claim to have extracted from Lloyds Banking Group is less than half of the total taxpayer investment in Lloyds, and less than 5 per cent. of the total taxpayer exposure to Lloyds HBOS. Will the Financial Secretary confirm that the additional promised lending will be subject to the group’s prevailing commercial terms and conditions, including on pricing and risk assessment, and, in relation to mortgage lending, that it will be subject to the group’s standard credit and other acceptance criteria? If that is the case, is not this pledge just more simple rhetoric?

It is now clear that the merger of Lloyds and HBOS was a bad deal, put together without full and proper understanding of the state of the HBOS book, certainly on the part of Lloyds and possibly on the part of the Government. Until last October, Lloyds had stood aloof from the chaos engulfing the banking sector, as a sound, somewhat old-fashioned bank with a reputation for caution that attracted small investors and drove to distraction those in the City who preferred riskier plays. In the space of a few weeks, that sound, solid bank, which would have been quite capable of prospering without the support of the taxpayer, has been transformed into a banking behemoth that is incapable of surviving without these huge infusions of taxpayer funding. I ask the Financial Secretary whether the Government really believe that the creation of this crippled giant at the heart of our banking system is the best outcome if the objective is to maximise the flow of credit from the banks to Britain’s recession-hit businesses and households.

Back in October we were told that the merger was a commercial deal put together by the managements of the two banks, and that all that the Government were doing was removing the competition barriers that would have prevented it from going ahead. However, there were persistent stories at the time, promoted by those close to the Prime Minister, that in fact the Prime Minister had brokered the deal and driven it through to completion.

Now that the taxpayers’ total exposure to Lloyds HBOS is approaching £300 billion, will the Financial Secretary explain why neither the Government nor the Prime Minister realised at the time that, far from rescuing HBOS, the merger would drag Lloyds down the path of taxpayer bail-out and part nationalisation? Is the Financial Secretary sure that, of all the options available to them, the route that the Government have chosen—insuring assets within the banks—is the best way to get credit flowing at the minimum long-term cost to the taxpayer? Can he look the House in the eye and tell it that the guarantee option has been chosen on the basis of the economics and long-term best value for money for the taxpayer, not simply because, alone among the alternatives, it keeps the cost to the taxpayer off the balance sheet and out of sight until the losses crystallise?

The Prime Minister’s mantra is that the crisis was made in America and blew in on the wind to afflict a blameless Britain. He paints a picture of toxic assets, which comprise US sub-prime mortgages, complex derivatives and impenetrable credit default obligations. However, will the Financial Secretary confirm that more than a quarter of the toxic assets that the Government are guaranteeing in the deal are plain, old-fashioned UK mortgages, lent by HBOS in a bout of over-exuberance, which testifies to the failure of the Prime Minister’s tripartite regulatory system? In effect, is the taxpayer not taking a £75 billion bet on future house prices not falling by more than 10 per cent. from 31 December 2008? Perhaps the Financial Secretary has not noticed that they have already fallen by 3.3 per cent. in the first two months of the year. I do not know of a single commentator who does not believe that they have further to go.

Let me consider fees. The Financial Secretary set out in his statement, and Lloyds set out in its statement to the stock exchange, the fees payable by Lloyds Banking Group to the Treasury. However, the end of the Lloyds announcement refers to “certain interim arrangements”, agreed between the Treasury and Lloyds and relating to the management of the assets in question. I imagine that the right hon. Gentleman knows that, in the deal between the Dutch Government and ING, as well as the fee payable by the bank to the Government for the guarantee, a fee is also payable by the Government to the bank for managing and financing the assets that the guarantee covers to maturity. Will he give hon. Members a categorical assurance today that no fees whatsoever are payable under the deal by the Treasury to Lloyds Banking Group? Will he confirm that the ban on cash bonuses that he announced for this year will extend to future years? Will he adopt, at least for Lloyds Banking Group, our policy of a £2,000 permanent limit on cash bonuses? Will he also tell the House what steps the Government have agreed, as part of the deal, about executive and director pensions in Lloyds Banking Group?

For the size of the British economy, we have committed more than any other country to bailing out our banks—approximately £1.2 trillion—and we have precious little to show for it so far. The first banking bail-outs failed to get lending flowing again, requiring taxpayers to stump up hundreds of billions of pounds in further guarantees and capitalisations. The temporary VAT cut has failed to stimulate consumer spending and the stamp duty holiday has failed to stop house prices nosediving. The Government have made a plethora of announcements of support for business and home owners, many of which have been shown up as hollow rhetoric, with most schemes not yet operational and none delivering measurable assistance to the front line.

Hard-pressed businesses, families and home owners throughout the country have had enough of the rhetoric, the endless announcements and the activity for activity’s sake. They want normal credit conditions to be restored—that will be the test of today’s announcement, and the very least that taxpayers should expect in exchange for the £1,200 billion that the Government have pledged on their behalf to the banking system.

I can agree with the hon. Gentleman’s final comment, but there is not much else with which I can agree. To fix the economy we have to fix the banks first. As with previous measures, capital support for banks is an investment and it will eventually be sold for the benefit of taxpayers. With the insurance scheme, the eventual cost to the taxpayer over the lifetime of the scheme will depend on economic conditions and how assets are managed.

However, the key is ending the uncertainty that has been holding Lloyds back from lending and enabling it to make a significant additional commitment on lending, which is certainly not rhetoric, as the hon. Gentleman suggested, but an additional £14 billion on top of what was planned for this year, with a similar sum envisaged for next year. I can confirm that that lending will be subject to the bank’s normal commercial considerations, but that lending will be made. It will be reported regularly to the Government and we shall report regularly to the House, as I said in my statement.

The hon. Gentleman made some comments about the merger between Lloyds TSB and HBOS. The priorities that we were concerned about were stability in the financial sector and, in particular, avoiding a catastrophic failure on the part of HBOS. Lloyds and HBOS had been talking for some time and they asked the Government whether it was possible to modify the competition rules to allow the merger to go ahead. Like others, we concluded that that was the right thing to do. The hon. Gentleman suggested that it was not the right thing to do, but he might wish to have a word about that with the shadow Chancellor, who said on “Newsnight” on 17 September, “I spoke to both of the chief executives today of the two institutions and made it clear the Conservatives support what they’re trying to put together”. The shadow Chancellor’s view is therefore somewhat different from the one that the shadow Chief Secretary has put to the House this afternoon.

The boards of both banks recommended acceptance of the agreement to their shareholders and both sets of shareholders agreed. Lloyds shareholders voted on 19 November, with more than 95 per cent. of them in favour of the merger, and HBOS shareholders voted on 12 December. There was therefore broad agreement on what was done.

Of the assets that are covered by the announcement today, rather more than 80 per cent. come from HBOS, which was largely active in the UK, but also, to an extent, in Ireland and, to a smaller extent still, in some other territories. I can confirm to the hon. Gentleman that there are no fees payable to the Treasury as part of the package announced today. The costs of setting up the scheme will be charged to the participating institutions.

Finally, the hon. Gentleman is quite wrong about the VAT cut. because there is growing evidence of its effectiveness in stimulating the economy. Let me draw his attention to information published by Goldman Sachs just over a week or two ago. As others have pointed out, the effectiveness of the VAT reduction as a stimulus to the economy will grow over the course of this year, leading up to the rise back up to a rate of 17.5 per cent. on 31 December.

There would once have been a time when a Government commitment of £260 billion of taxpayers’ money, which is just under a quarter of gross domestic product, would have merited the attention of the Prime Minister, let alone the Chancellor. It is no disrespect to the Minister, who is generally regarded as very decent and very capable, to say that on this occasion not only are we denied the attentions of the organ grinder, but we are not sent the monkey either, only the monkey’s second assistant.

I agreed with most of the questions that the hon. Member for Runnymede and Weybridge (Mr. Hammond) asked; most of his points were well made and valid. Like the Minister, however, I am a bit puzzled. The hon. Member for Runnymede and Weybridge—and, indeed, all of us—had five weeks in which to do due diligence on this merger, and to think about its implications. When the matter was put to a vote in the House, he and his colleagues voted with the Government in favour of it, leaving us to vote against it.

Let me get to the core of the statement and the Lloyds HBOS proposal. Will the Minister confirm that this is now a nationalised bank that is publicly owned and controlled? Will he also repudiate the comments of the chief executive, Mr. Daniels, who described the taxpayer—the majority owner of the bank—as

“just another name on the share register”?

How can the Government have retained as chief executive someone who treats the taxpayer with such total contempt?

When will the Government at last put their own Government directors on to the board to ensure that the bank acts in the national interest, particularly in relation to lending? The Conservative spokesman quite rightly referred to the ambiguities of the bank’s lending policy, but is it not the case that Lloyds entered into a lending agreement last October, which has not been observed? Why should we have any more confidence in this one, unless the bank is properly directed?

I want to ask the Minister about tax avoidance. Quite apart from HBOS, Lloyds is known to have undertaken large-scale tax avoidance. Will this stop, now that the bank is fully publicly owned? Mr. Daniels has been described as enjoying a £25,000 tax planning allowance from his bank, to help him to avoid paying UK taxes. Will this continue under public ownership?

As far as payments are concerned, we have had the scandal of Sir Fred Goodwin. Are we going to have a similar problem with Sir James Crosby and with Mr. Cummings, whose property dealings brought down HBOS and who I believe is entitled to a £6 million bonus? Are those arrangements going to be preserved? So that we can have clarity about who is being paid what, may we have an assurance that, if very highly paid executives in this bank and elsewhere are paid large amounts—let us say, more than the Prime Minister—those emoluments will be made fully transparent? I believe that Lloyds is today refusing to divulge the payments that are made to its senior executives. Why cannot those figures be put fully into the open?

On bonuses, I would go even further than the Conservative spokesman. I do not see any justification for paying bonuses. This is a bank that has made large losses. Why should the taxpayer pay those bonuses? It is all very well to appeal for sympathy for the relatively low-paid staff, but how would people react if it was announced that every public sector worker was to be paid a £1,000 bonus, in the present state of the public finances? There is no justification for such payments, certainly at the top end, or altogether.

My final question relates to the document, “Evidence to the Office of Fair Trading on the proposed Lloyds TSB and HBOS merger”. The private shareholders are rightly outraged about the way in which they have been treated, and they are rightly calling for the head of Sir Victor Blank. They want to know why the documentation lying behind this Treasury paper is not being made publicly available. It states that, in September, the Government considered a range of alternatives. Will they publish those alternatives, and the reasons why they rejected them? As the paper is so heavily redacted, will they also publish the full version, so that we can be sure that nothing is being hidden from the public and the House?

I am grateful to the hon. Gentleman for his description of me as “decent and capable”. I regard him as decent and capable as well, but I ought perhaps to remind him of what he said about HBOS and Lloyds on 6 October. Referring to the Chancellor, he said that

“we have no quarrel with what he did in relation to Bradford & Bingley and HBOS-Lloyds—that seemed to be the right approach.”—[Official Report, 6 October 2008; Vol. 480, c. 27.]

Perhaps he needs to be a little more cautious before he attempts to rewrite history.

The hon. Gentleman asked some questions about the board, and I can tell him that Mr. Tim Ryan and Mr. Tony Watson have been appointed to the Lloyds board, with Government agreement. That arrangement is in place for two directors now, and that opportunity has been taken up. The hon. Gentleman talked about agreements that were reached as part of the arrangements that were made before Christmas—the announcements that were made at the beginning of October—and the lending commitments. Actually, bank lending on the part of the UK banks involved has, indeed, risen but as the hon. Gentleman knows, the great problem we faced was the withdrawal of non-UK banks from the UK market, leaving a gap of perhaps some £100 billion of lending capacity. The £14 billion that Lloyds announced on Saturday is a valuable step towards making up some of that shortfall.

On tax avoidance, let me reassure the hon. Gentleman that we will continue to take a very assertive approach to it, wherever it occurs and whoever is responsible for it. Her Majesty’s Revenue and Customs will continue to be very robust and I can also say that the G20 leaders will boost the role of global co-operation to address tax avoidance at the London summit on 2 April. The Prime Minister spoke about it last week in the US. The key is transparency and exchange of information; we are confident that we can make substantial progress on that when the leaders meet at the beginning of next month.

On the question of bonuses, I do not agree with the hon. Gentleman that, as a result of these arrangements, relatively modestly paid staff who have done a perfectly good job should be prevented from receiving the rewards that they were entitled to expect. What we most certainly have put in place is the assurance that there will be no rewards for failure. The Financial Services Authority has published good practice guidelines for bank remuneration and the arrangements that Lloyds is putting in place are consistent with those guidelines: no reward for failure, minimum payments only in 2009 and the rest deferred, nothing in cash and all subject to clawback if good standards of success are not achieved. We are tying rewards to long-term sustainable success, which is the right approach.

On the chief executive’s pay and pension, I believe that they are publicly announced; certainly the chief executive’s pension pot was in the most recent Lloyds TSB annual report, so the hon. Gentleman can find the details there. As to the documentation, only commercially sensitive information has been redacted—as, of course, it must be. The arrangements announced on Saturday are an important and valuable step towards bringing back into the UK economy lending capacity that has been lost, rebuilding the economic momentum that we all want to see.

May I thank my right hon. Friend for reiterating the position on bonuses? May I tell him that a number of junior staff in my constituency have been exercised that the bonus that is part of their salary might be impaired by the present arrangements whereas in other banks, not in this particular bank, those on higher salaries have been rewarded for poor performance? May I ask him to look again more liberally at the bonus for those on an average salary of £20,000 to which he referred, as there are many in my constituency and elsewhere who actually receive less than that amount?

My hon. Friend is, of course, absolutely right that there are plenty of staff in Lloyds on £17,000 salaries or less. I understand that the average bonus of which we are speaking amounts to less than £1,000. I think it is absolutely right that much more senior staff forgo their bonuses—and they have done—but when it comes to the sort of staff my hon. Friend speaks about, I completely agree with him.

The Financial Secretary said in his statement that £11 billion-worth of loans to small businesses would be provided. Given that we are now the majority shareholder in this bank, can he reassure us that those loans will be genuinely new loans for new businesses and will not be used by the bank to service existing contractual loans?

I can reassure the hon. Gentleman that the £11 billion of business lending will be additional to what was being planned by Lloyds in the course of this year.

My right hon. Friend referred to the fact that the bank would be making monthly reports to the Government in compliance with the lending agreements. Will he make at least the headline figures in those reports available to the House so that we and the public can see that the bank is complying fully with the increased lending agreements? Probably what the public most want to see is the banks resuming lending and the money going into the economy.

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.

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?

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.

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?

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.

Whatever the intentions of the Prime Minister, will the Financial Secretary accept that the effect of his intervention to 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?

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.

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?

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.

When can the House expect a statement on the quantitative easing policy that is now being pursued by the Bank of England?

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.

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?

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 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.

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?

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

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.

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.

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?

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.

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?

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.

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?

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.

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?

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.

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?

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.

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?

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.

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?

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.