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Lord Barnett: My Lords, as always, I followed the noble Lord's argument with great interest. I also noted the opportunity that it gave him to refer, once again, to the high exchange rate. I thought that he was going to tell my noble friend the Minister how he would reduce that rate, but I was not too disappointed because I did not really expect him to do so. However, perhaps the noble Lord can tell us why he has restricted the disqualification in Amendment No. 8 to,


Why did he not specify Grade 2 or Grade 4; or, indeed, why not specialist Treasury advisers, like perhaps my noble friend Lord Eatwell? Can the noble Lord tell the House why he decided on this particular disqualification level? In other words, why did he stop at that point?

Lord Mackay of Ardbrecknish: My Lords, with the permission of the House, I shall try to answer the noble Lord. This refers back to the Committee stage and something that the noble Lord, Lord Newby, said about the more broadly-based amendment that I tabled at the time. The noble Lord pointed out to me that, in the course of their careers, many people spend a year or two at various levels in the Bank--but less so in the Treasury--and that it would not be very fair to exclude them. I picked Grade 3 and above, because in the departments in which I served, including the Treasury for which I was a spokesman, Grade 3 and above are the senior, serious players at the top of the scale. I am just asking whether it would be right for them and their equivalents at the Bank of England to end up as the "away team" members of the MPC.

Lord Newby: My Lords, I am grateful to the noble Lord for reminding me of what I said in Committee. We have sympathy with the view that one does not want the MPC to be too full of home players, as opposed to away players. However, in my mind at least, I believe that there is a slightly different definition as regards the group of people whose membership of the MPC one wants to limit. The phrase that comes to my mind is not so much "home and away" but rather the concept of the "charmed circle", which goes slightly beyond former employees of either the Bank or the Treasury.

It seems to us that on the MPC we should seek to achieve a rather broader membership than the normal group, comprising not just officials but also advisers and chums of officials who one might suggest to Ministers for the committee and who might equally be seen as a well-known safe pair of hands. Instead of the two amendments that have been tabled today--although we would also welcome an assurance from the Minister as requested by the noble Lord--it seems to us that there are two better methods to achieve that aim. First, there is the proposition that we sought to put forward earlier in our debates; namely, that the nations and the regions of the UK should be better represented on the MPC; and, secondly, we believe that there should be confirmation hearings of members of the MPC so that

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no Chancellor of the Exchequer would run the risk of being seen to fill the MPC with chums, whether officials or otherwise. Therefore, although we have some sympathy with the thinking behind the amendments, we doubt whether they represent the best way to achieve the noble Lord's aim.

4.15 p.m.

Lord McIntosh of Haringey: My Lords, I admire the noble Lord, Lord Mackay, for coming back with a third version of what he made clear in Committee he wanted to do. His amendment in Committee was profoundly defective in the sense that it would have excluded him, as a former Minister, from membership of the MPC. His amendment on Report was defective in the sense that it proposed a power to remove a member of the MPC rather than restricting the ability of the Chancellor of the Exchequer, or anyone else, to make appointments to the MPC.

It is with great sadness that I have to tell the noble Lord that his amendments on Third Reading are also profoundly defective. They are defective because Schedule 3 to which they relate refers not only to what he calls the "away team" but also to the home team. If the noble Lord looks again at Schedule 3, he will see that it refers back to Clause 13(2)(b) and (c)--(b) being the home team and (c) being the away team, as he would call them. Therefore, the effect would be that no person who has held office of the equivalent rank to Grade 3 in the Bank could be one of the two members appointed by the Governor of the Bank of England after consultation with the Chancellor of the Exchequer. I am afraid that it would not work in that way.

The amendments also would not work because, as the noble Lord will have realised from our previous debates on the Bill, this legislation establishes the statutory basis for the MPC for the first time. Therefore, the appointments to the committee are not simply carried over automatically from the existing appointments to the non-statutory committee: they are being made for the first time. In that case, Alan Budd and Charles Goodhart, would be excluded under the noble Lord's amendments. When I challenged the noble Lord on that point on Report, and said that these were anti-Budd and anti-Goodhart amendments, he denied the charge. However, it is as true now as it was then. Therefore, the amendments simply could not go into the Bill as presently drafted and there is little opportunity left to discuss them.

The noble Lord's intent is of course the same as it was on Report; namely, that the Chancellor of Exchequer should not appoint former senior Bank or Treasury officials to the MPC. I am afraid that my answer is the same. As I said last week, there is no basis for excluding former Treasury or Bank officials from the MPC. The important point is that such appointments should be made on merit. Clause 13(4) requires the Chancellor of the Exchequer to appoint those he is satisfied have the relevant knowledge and experience in such matters. There is no justification for further narrowing the field as regards potential candidates.

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The Government firmly believe that positions on the MPC should be filled by the best people for the job. That judgment must be made on the basis of their current knowledge and experience. If we go down the route of excluding particular types of people, the credibility of the MPC will suffer. The noble Lord's proposal would not enhance confidence in that committee; indeed, even if the amendments had been correctly drafted, they would in fact do the opposite. Therefore, I invite the noble Lord to withdraw them.

Lord Mackay of Ardbrecknish: My Lords, I am grateful to the noble Lord, Lord Newby, for what I might call his "generalised" support of the principle that I am trying to achieve by way of this amendment and, indeed, the principle that I was trying to put forward with my previous amendments. I am rather sorry that the noble Lord's generalised support did not extend to particular support as regards making one of the members of the MPC a person who would be nominated by the Chancellor of the Exchequer on the advice of the First Minister of the Scottish Parliament. However, as that is still in the legislation--and I very much trust that the other place will not try to overturn it--at least one of the members of the MPC is unlikely to come from the magic circle.

I have to say that I am not very pleased with the Minister's response. I take his point about paragraphs (b) and (c) of Clause 13(2), but I was really only looking at paragraph (c). It still seems to me that the Minister does not appreciate the kind of reaction which would occur if a future Chancellor of the Exchequer were to appoint someone who had been a very senior figure--indeed, right up to the level of the Governor of the Bank of England--to the MPC. If any future Chancellor of the Exchequer were to do so, I believe that there would be some degree of attack on the whole principle as regards whether or not the "four members" now under discussion were actually independent people drawn from outside.

Lord McIntosh of Haringey: My Lords, I am grateful to the noble Lord for giving way because it enables me to make clear a confusion which I may have introduced when I said that the Monetary Policy Committee has to be reappointed when the Bill receives Royal Assent. I should make it clear that the Chancellor has said that he will appoint the existing four outside members. Therefore when the Monetary Policy Committee is formally constituted it will contain two ex-senior officials of the Bank and Treasury, but it will not contain any ex-governors or deputy governors.

Lord Mackay of Ardbrecknish: My Lords, I suppose one has to be thankful for small mercies. As no doubt the noble Lord said to me on a number of occasions in the previous parliament, I am not considering what the present Chancellor will do; I am considering what future Chancellors can do. I cannot believe that the Minister thinks the number of people for these four posts will be drawn from such a limited field that future Chancellors will need to consider also former governors or former deputy governors, and that if we exclude governors and

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deputy governors we shall narrow the field of selection for a future Chancellor. That does not say much for the economists, business and commercial people in this country from whom I am sure the Chancellor could draw a pretty long list of nominees. However, clearly I shall not make much progress. If the Minister and I are around when a Chancellor of the Exchequer in the future says that he is not bound by anything and that he will appoint a former governor to the Bank, I shall look forward to discussing with him the fuss that will arise when one of the "away team" is just an ex-player from the "home team". I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 8 not moved.]


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