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Lord Clinton-Davis: My Lords, I am grateful to my noble friend for that support. He is always listened to with care in this House and his suggestions are worthy of consideration. I undertake to pass them on to my right honourable friend the Chancellor of the Exchequer.

My noble friend rightly said that this is a bold step. It is one for which I wish he had given three cheers, though one must be thankful for small mercies. I was not sure where the missing cheer went. I can say that

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we will not be complacent in regard to working out the scheme relating to the Bank. We shall learn as we go along. As my right honourable friend indicated, this is a time for change, a fact which has been recognised swiftly by the Chancellor of the Exchequer.

In regard to the question relating to the term of office being longer than that proposed, I shall pass on that comment to my right honourable friend. I am sure it will be carefully heeded. In relation to the second part of the Statement, I can say immediately that the enhanced SIB will be responsible for licensing. The Bank will have no responsibility for authorising and supervising banks. That accords fully, I believe, with what my noble friend said.

My noble friend's point in regard to international communication is correct. Financial institutions conduct their business on a global scale now and it would be impossible to conceive that there could not be an enhanced role for international communication to ensure that supervision becomes more effective.

I have said many times in this House when I had some responsibility in the Opposition that the fragmentation of the supervisory roles undertaken by different institutions did not lead to a satisfactory undertaking of supervision in the general sense. What my right honourable friend has in mind will improve that position; indeed, it would not have been introduced if that were not the case. It is not a party political opinion. It is an opinion shared by many people in the financial world. I have heard it debated many times in this House and that opinion has been shared by many noble Lords.

Lord Boardman: My Lords, the noble Lord will be aware that for many years past the economic policies of this country have been settled by successive Chancellors of the Exchequer with the use of two instruments; that is, fiscal policy and the fixing of taxation and monetary policy and the fixing of interest rates. The Government now propose to throw away the operational control of monetary policy. Does the noble Lord believe that the economy can be fairly and properly balanced by throwing away one of those important arms? I ask him not to be misled by what happened in the Bundesbank in Germany, in America or in New Zealand. Those are all quite different circumstances.

Lord Clinton-Davis: My Lords, while it is true that to cite other instances is not the end of the argument, it is surely worthy to look at the experiences of other countries, which have not been wholly bad. It would be complacent for us to adopt the view that it has been tried elsewhere and fundamentally we should discard that experience. That is not the view of the Government. We can learn from this and may even be able to learn one or two things from the Opposition.

Lord Renton: My Lords, the Statement made clear that in fixing the bank rate the Bank of England will have to act within limits set by the Chancellor of the Exchequer. Perhaps I may ask two brief questions in that regard.

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Will those limits be wide or narrow? Whether they are wide or narrow, what will happen if the Bank decides, after consulting the monetary policy committee, that it would be against the national economic interest of the country to act within the limit instead of outside it? The factors which should be borne in mind are the need to control inflation internally, the fact that interest rates have an effect upon the balance of payments and our obligations within the European Union.

Lord Clinton-Davis: My Lords, the Government are very conscious of those obligations. We have spelt out our position. We have certain legal obligations which have to be fulfilled. I have set out in the Statement the remit of the Bank of England and the Chancellor respectively in this matter. Perhaps the noble Lord will look at that carefully after we have engaged in this discussion. Essentially it is giving the Bank operational responsibility for setting interest rates. I do not view the matter in the apocalyptic way in which the noble Lord does, though I always respect his views because he speaks with a good deal of authority in this place. However, I think he is wrong on this occasion.

Lord Lucas of Chilworth: My Lords, perhaps I may refer to the second part of the Statement; that to do with the SIB. The Minister will recall that together with my noble and learned friend Lord Cameron of Lochbroom we sat through the proceedings on the Bill concerning the SIB. Indeed, I was in a similar position to the Minister in putting the Bill before the House in 1986 from the DTI. I do not think we got it right then in certain respects. If there is to be a review it seems to me that with the change in circumstances over the past 11 years that matter should not be confused with the Bank of England responsibilities under the new proposals. There are enough grounds in terms of the supervisory nature of the SIB for it to stand on its own. It would be regrettable if there were a confusion--almost a constitutional confusion--between the Bank's traditional responsibilities and its new ones and the straightforward responsibility of the SIB.

The intentions in 1986 were perfectly sound. They were upset by the chairman-designate in the build-up of the SIB itself during the passage of the Bill. A good many alterations had to be made to accommodate that. In the department itself there was not total agreement. Nevertheless, it established a regime which is now in need of updating. I hope therefore that the Minister can answer the question of the noble Lord, Lord Ezra. Will Lloyd's be included? Another point follows on. In looking at the regulation of securities and banking one might at the same time have to look at the repercussions there will then be in terms of the present Insolvency Acts.

Lord Clinton-Davis: My Lords, the issue of insolvency is a separate one. I would not wish to deal with that today. On the other constructive points made by the noble Lord--he speaks with some experience in this field--it is worthy of note that the noble Lord believes that it is important to carry out this

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review of policy and to undertake legislation but after appropriate consultation. I welcome what he said in that regard.

As to whether Lloyd's will be included, this is a matter, as with other professional organisations, that we shall be discussing and consulting on. We shall not pre-empt that position. With respect, the noble Lord perhaps in a way misconceived what we are trying to do. We have announced the very definitive proposals which will be the subject of the first Bill dealing with the Bank of England and then we shift on to the other area which we have covered. But I think it was appropriate to announce today what those signposts are. They are not unrelated but they will be separate Bills. As I have indicated, there may not be time in this Session for the Bill dealing with the supervisory role. I notice that the noble Lord is shaking his head in agreement. I thank him for that and I thank him for his constructive comments.

Lord Monkswell: My Lords, I congratulate my noble friend on his new position and I am particularly thankful that he has long experience of parliamentary affairs, going back, dare I say, to the last Labour Government under the noble Lord, Lord Callaghan. Can my noble friend confirm that we will learn from the experiences this country has had under the Conservative Government, from the problems that emerged ranging from Johnson Matthey, BCCI, Barings, and the personal pensions scandal to the problems at Lloyd's and also from the fact that we have had two major recessions which generated mass unemployment on a scale unseen since before the war and the destruction in the early 1980s of one-third of British manufacturing industry? Can we have an assurance that the object of government policy now is a reduction in unemployment and inflation and not just inflation on its own, which was the policy of the previous government, and that the measures he has put before the House in the Statement are designed to ensure that twin-track policy, bearing in mind the changed world situation, with particular emphasis on unemployment and manufacturing industry in this country?

Lord Clinton-Davis: My Lords, I thank my noble friend for that intervention. As I said at the beginning of my remarks--it now seems a long time ago--our central purpose economically is high and stable levels of growth and employment. We have made that clear over and over again. We are committed to that. It is because we are seeking to learn from the experience of the past and it is because we have identified a number of deficiencies in this regard that we have come forward with these proposals. So the answer to my noble friend on both counts is yes.

Lord Hooson: My Lords, will there be any formal provision for liaison between the Chancellor and the new committee? At the moment there is a monthly meeting between the Governor of the Bank of England and the Chancellor. What will happen if the committee has it in mind to put up interest rates because of a

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deteriorating situation and the Chancellor at the same time is thinking in terms of putting up taxation? When will the liaison take place?


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