My Lords, I beg leave to ask the Question standing in my name on the Order Paper. In doing so, I declare an interest as an adviser to a banking group.

The Question was as follows:

To ask Her Majesty’ Government what steps they will take to protect consumers in the event of a merger between Lloyds TSB and HBOS.

My Lords, decisions on mergers are generally taken by the competition authorities based on whether there is a substantial lessening of competition. This generally provides the most effective method of protecting consumers. In this particular case, and in the light of the extraordinary stress in world financial markets, the Secretary of State considered that there was urgent need for additional action. He therefore laid an order in the House on 7 October that will enable him to take the final decisions in this case and allow him to consider effects relating to the stability of the UK financial system alongside any competition issues.

My Lords, I thank my noble friend for that reply. Obviously, in these times of trouble in the banking community, stability should come first. However, does he agree that the proposed merged group will have a very dominant position in the British banking scene, holding as it will more than 30 per cent of the current accounts in the UK? What measures do the Government feel they should introduce for the longer term to protect consumers’ interests?

My Lords, I am grateful to my noble friend for her opening remarks. On consumer protection, as well as the other emergency measures we have taken in the past few days, the Government are about to introduce the Banking Bill, which will reconstitute the regulation of the banking system. The interests of consumers and taxpayers will form an important part of that Bill. As the House will recognise, the Bill has been introduced in the other place and will come before this House in the not too distant future.

My Lords, there is a saying that good judgment comes from experience and experience comes from bad judgment. What lessons have the Government learnt from the nationalisation of Northern Rock—which, after five months of indecisiveness, was nationalised in a rushed-through manner in three days? Here we are eight months later: we have no permanent major reform to the Bank of England, which is desperately needed.

My Lords, the Banking Bill has been the subject of very extensive consultation, and so it should be for a measure of such supreme importance to the British economy and the British people. I note that the noble Lord sustains his critical stance on the government action on Northern Rock. Others will think that the Government acted entirely appropriately. But all, even he, will rejoice in the fact that Northern Rock is beginning to pay back, ahead of time, its debts owed to the Government.

My Lords, I declare an interest in both these banks: I am now rather a small shareholder, and a depositor in one of them. By what principle do Her Majesty’s Government justify the guaranteeing of all British deposits in a foreign bank but not doing the same for British deposits in a British bank?

My Lords, I will shortly have the pleasure of repeating the Statement that the Chancellor made in the other place about our arrangements for British banks and strengthening the British banking system in this time of crisis. I hope the noble Lord will recognise that we have not adopted as a principle the issue with regard to foreign banks and the action that we have taken in the particular case of the Icelandic bank. That was a very specific banking failure and the Icelandic Government are in a particularly parlous state in relation to that failure. That is why, in the interests of protecting British depositors, the British Government saw fit to act.

My Lords—

My Lords—

My Lords, there is time for both questions if we start quickly.

My Lords, will my noble friend consider asking the Office of Fair Trading to investigate in, say, 12 months’ time whether the merger between Lloyds bank and HBOS, if it takes place, has adversely affected the consumer interest through the restriction on competition, which, as my noble friend suggested, inevitably takes place as a result of such a merger between major banks?

My Lords, the Office of Fair Trading will produce its report to the Secretary of State before he takes any action, and he anticipates that that report will be before him by the end of this month. Of course the OFT retains an interest in competition issues, and what my noble friend has suggested is bound to be an issue for it when a bank has such a significant stake in the market.

My Lords, I am sure that the Minister will accept that today’s events mean that things have rather moved on since the HBOS/Lloyds proposed merger. Does he accept that we are looking to the Government for a clear statement on two fundamental issues of policy? First, what conditions will the Government impose on banks that receive capital from the taxpayer to ensure that the money is spent for the benefit of customers and consumers? Secondly, does he accept that the wider government announcement today will inevitably lead to some suspension of competitive protection for consumers? Without wishing to press the Minister for the detail of government policy on this topic, will he undertake to make a statement to the House shortly?

My Lords, the Chancellor’s Statement, made earlier in the other place, answers a great number of these questions. The noble Lord will have a chance to question that Statement very shortly. The issues that he raised were exactly those which have exercised the Government.