Clause 19
Statistics and Registration Service Bill
5:45 pm
Theresa Villiers (Shadow Chief Secretary To the Treasury, Treasury; Chipping Barnet, Conservative)
I beg to move amendment No. 150, in clause 19, page 8, line 37, leave out ‘the consent’ and insert ‘consulting’.
I tabled this probing amendment to explore the transfer of further power over the retail prices index from the Chancellor to the board. The progress in the direction of transferring power is welcome, but it would be useful for the Committee to consider whether the powers that are retained by the Chancellor under clause 19 are necessary. We want to probe the Government’s reasons for retaining the Chancellor’s power to veto measures that constitute a fundamental change in the RPI, which would be materially detrimental to the interests of the relevant index-linked gilt-edged securities.
Clearly, one has to approach the matter with great caution. The Library note on the Bill tells us that the eight gilts relevant to our discussion have an outstanding value of some £90.8 billion. Of course, the Opposition would not wish any measure to be put in place that would require the Government suddenly and unexpectedly to have to repay £90.8 billion, because that would cause significant problems in terms of the public finances and market volatility, but the question arises whether the retention of the Chancellor’s veto in this context is necessary to prevent the risk from materialising. That is why I tabled the amendment, which would essentially transform the Chancellor’s power to veto a proposed change into a right merely to be consulted about the change after a decision has been made by the Bank of England and the board.
The thrust of the reform that the Government say that they wish to make involves trusting the board and the National Statistician to make hugely important, sensitive decisions that determine the flow of millions of pounds in capital markets every day. If they can be trusted to make other key decisions about the definition of crucial economic indices, we are interested to hear more from the Government about why they feel that those people cannot be trusted in total to make the decisions on the retail prices index. The Royal Statistical Society, for example, has said that given the importance of the RPI it is crucial to remove it from political control. We have at least to consider the arguments to see whether the transfer of power from the Chancellor to the board should be total.
If the amendment were made, there would still be a triple safeguard to prevent an irresponsible decision that would trigger automatic redemption from being made. Not only would the board have to be convinced that the change was needed, but the Bank of England would have to give its view of whether the proposal would constitute a fundamental change. Of course, the Chancellor would also have to be consulted.
The Treasury Committee has considered the matter over a number of years and it could find no other country in the world where the Executive retained control over definitional matters in relation to the inflation index. We should like the Government to give further justification for why they wish to make an exception, albeit one that is now more limited than in the past, because the Chancellor’s continuing role involves an exception—albeit one more limited in scope than previously. The concern is particularly significant in a month when inflation has climbed to its highest level for 15 years. At a time of rising inflation it is more important than ever to take measures to rebuild the credibility of inflation indices, which many now worry do not reflect the real cost of living. Given the pivotal importance of inflation for economic stability and policy and for families, there is surely an argument that the independent structures being set up in the Bill should take over full responsibility for the definition of the RPI and its derivatives.