Orders of the Day — Bank of England Bill

Part of the debate – in the House of Commons at 9:35 pm on 11 November 1997.

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Photo of Mrs Helen Liddell Mrs Helen Liddell Economic Secretary, HM Treasury, The Economic Secretary to the Treasury 9:35, 11 November 1997

I think that the right hon. Gentleman is having a second wind in the wind-up. There must be an echo in here, because I have just read out the relevant clause, and he has read it out again and got it the wrong way around, as he has done repeatedly throughout the evening. Indeed—to take up another point that he made about financial stability and the role of the Bank of England, the Treasury and the Financial Services Authority—he plainly has not even bothered to consult the memorandum of understanding agreed between those organisations.

That is another example of the confusion that has marked the debate from the very beginning. Whenever the shadow Chancellor got up, he would not say yes, he would not say no. He ended up impaled on the fence of his party's divisions and indecision. He claims on the one hand that the Chancellor is giving up one of the most important tools of economic policy, yet he will not tell us whether any incoming Conservative Government—should the country be so unfortunate as to get one—would repeal this legislation.

However, the same shadow Cabinet, under the leadership of the right hon. Member for Richmond, Yorks (Mr. Hague) is prepared to commit this country, for the next 10 years, to not contemplating a single currency in Europe. He says one thing, but then says another.

Presumably the single currency is of a much lower order than independence from the Bank of England. On the one hand the right hon. Gentleman says that giving the Bank of England operational independence is wrong; then he says that we are not giving it enough independence, because the Monetary Policy Committee could be influenced by the Chancellor. I hope that, by the time the Bill is considered in Standing Committee, Opposition Members will have made up their minds whether they are coming or going.

I shall take up some of the specific points that the shadow Chancellor made. He was effusive in his compliments to the right hon. and learned Member for Rushcliffe, yet he stood against him in the leadership contest.

The right hon. Gentleman referred to issues of debt management, something that was raised a number of times during the debate. One reason why the clauses relating to debt management put distance between the Bank and the debt management agency is specifically to ensure that there is greater transparency and increased credibility, so that there is no chance of Bank actions being misinterpreted in any way as monetary policy actions. Nor can there be any charge of insider trading. Cash management operations will be set up to avoid conflict with banking operations.

The right hon. Gentleman also questioned whether there would be a deflationary bias. During the debate, we have heard that the proposals for the central bank will, on the one hand, be inflationary, while on the other they will be deflationary. Let us take the right hon. Gentleman's view, that there will be a deflationary bias. It is up to the Government and the Chancellor to set the targets for inflation. Indeed, the Government will regard undershooting as seriously as overshooting.

The right hon. and learned Member for Rushcliffe referred to discussions in which he had been involved—the famous Ken and Eddie show, where on every occasion Ken was right and Eddie wrong. That is a classic example of why we need operational independence in the setting of interest rates. Indeed, the hon. Member for Louth and Horncastle (Sir P. Tapsell) said that he had exerted political pressure on the former Chancellor in regard to his inflation performance.