Select Committee on Treasury Minutes of Evidence

Examination of Witness (Questions 40 - 59)



  40. We issued a report on accounting, just before the Parliament broke for summer recess.

  (Sir Andrew Large) I regret I have not. I look forward to doing so.

  41. Can you put it on your bedside table?

  (Sir Andrew Large) I will.


  42. I would recommend Professor Sir David Tweedie's comments to us on that.  (Sir Andrew Large) Absolutely. I have a very high opinion of him.

Mr Fallon

  43. Sir Andrew, you tell us in your questionnaire that you have "an understanding of financial trends and factors giving rise to them", which is good news. Can you tell us specifically what your particular expertise is in monetary policy?  (Sir Andrew Large) As you know from my CV, I am not a professional economist in monetary affairs. On the other hand, in the various things that I have done over the last 20 to 30 years I have needed to be mindful, both of monetary policy itself and some of the consequences of it. So as an observer of that—as a participant, perhaps, I should say, rather than observer—in the financial world I hope that—and I hope that you will feel—I have developed an understanding for many of the areas that come under the remit of the Monetary Policy Committee.

  44. As a close observer of all this, as Deputy Chairman of Barclays and a participant, I think you said, what was the last decision of the MPC that you disagreed with?  (Sir Andrew Large) If your question is addressed as "have I been an observer of the minutes of the MPC every time they have come out" the answer is no, not other than in a very general area, so I am not sure that I can answer your question.

  45. You said later on, in answer to our question 7, that "in a pragmatic sense and as an observer the inflation target of the MPC seems to be working satisfactorily". Is there no decision of the MPC in the last five years you have disagreed with?  (Sir Andrew Large) I cannot recall one, no.

  46. You think they have got it right every time?  (Sir Andrew Large) Well, it is easy to be wise in hindsight.

  47. You would not like to be wise in hindsight? What do you think the neutral rate of interest rates is in the United Kingdom?  (Sir Andrew Large) I think that the concept of a neutral rate is one which is argued about by economists who have differing points of view. I do not know that one can necessarily put a number on it. One hears different numbers being put on by different people. I want to be much more involved in the discussions with all the information at my disposal before trying to come to a view on that.

  48. You have been a very senior banker. In the last confirmation hearing Mr Tucker, who is on the MPC, put it at around 5-5.5 per cent; Professor Nickell, who has been on the MPC for a long time, put it at around 5.5. You must have some idea on this.  (Sir Andrew Large) To tell you the truth I do not know whether those numbers are right or not. I could pluck a number out of the air for you, but I do not think I can.

Mr Plaskitt

  49. In your response to us, in reply to question five where we are asking you about the MPC process, you conclude by saying "the MPC process seems to be held in good regard." What, in your view, are the features of our process that cause it to be held in good regard?  (Sir Andrew Large) I think the fact that the process is transparent, the fact that there has been a target set down as an indicator, if you like, of stability, and that that target has broadly been met. I think those are several contributory factors.

  50. Is there anything about the target in particular which you think has merit?  (Sir Andrew Large) What, the 2.5 per cent?

  51. Any other feature of the way the target is operated.  (Sir Andrew Large) As I understand it, the target is set each year by the Chancellor—the 2.5 per cent figure is set by the Chancellor each year. Of course, he would be free to change that if he deemed it necessary, but that is the target figure that has been used.

  52. There is a little bit more to it than just the target: there is the point about fluctuation by one percentage point above and below requiring the Bank and MPC members to write letters.  (Sir Andrew Large) Yes, and that, as I understand it, has not happened.

  53. So is that a good feature of it?  (Sir Andrew Large) What, that it has not happened?

  54. That the target is symmetrical.  (Sir Andrew Large) I see. I think it is important that it is symmetrical, yes, certainly—extremely important.

  55. So you would be somewhat critical of central bank systems which lack transparency and do not have symmetrical inflation targets? They are not as good as our system?  (Sir Andrew Large) There are different circumstances, no doubt, in different countries, but I think as a matter of principle both the transparency and the symmetrical nature of it is very valuable.

  56. Would you say our model of doing it is superior to that of the European Central Bank?  (Sir Andrew Large) They have come up with a different approach.

  57. I know that, but do you think ours is superior?  (Sir Andrew Large) Our system differs from theirs. All I am trying to say is that I think ours is satisfactory. It has worked well. That is what I put in my questionnaire.

  58. Can you not make a comparative judgment between their system and our system and say which, in your view, is better?  (Sir Andrew Large) Not, I think, until I have looked in much greater detail at the precise way in which they do it. I am afraid I do not have the detail of it at my fingertips. It is something I will certainly look at, and if you would like to speak further about it I would be delighted to, when I am better informed.

  59. Are you telling us you do not know the system that the ECB works on?  (Sir Andrew Large) Not in detail, no.

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