Previous Section Back to Table of Contents Lords Hansard Home Page



("( ) Of the four members appointed under subsection (2)(c) one shall be appointed on the advice of the First Minister of the Scottish Executive.")
The Commons disagreed to this amendment for the following reason--
5A

Because the members of the Monetary Policy Committee of the Bank of England are appointed solely for their monetary policy expertise. It is for the Committee to collect from across the whole of the United Kingdom the information it needs for monetary policy purposes, and for the court of directors of the Bank to ensure that it does.

Lord Haskel: My Lords, I beg to move that the House do not insist on their Amendment No. 5 to which the Commons have disagreed for their Reason numbered 5A.

The Bank of England Bill sets up the Monetary Policy Committee whose job it is to set interest rates in order to meet the Government's inflation target. The effect of the amendment we are discussing today is that one of the four members of the Monetary Policy Committee appointed by the Chancellor of the Exchequer should be appointed only after receiving the advice of the First Minister of the Scottish Parliament.

As your Lordships know, there will only be four outside members of the MPC. To introduce regionality as a criterion for appointment is just not practical. People would then call for representation from the different sectors of the economy as well as from

23 Apr 1998 : Column 1252

different parts of the country. To accommodate all those different interests would require a committee of dozens. I repeat that that is not a sensible or practical solution.

When the Government expressed their intention to set up the Monetary Policy Committee, we said that the members of that committee would be chosen because of their skill, their reputation and their ability to reach decisions as to the appropriate levels of interest rates for the whole of the United Kingdom. And that will now be firmly on the statute book in Clause 13(4) of the Bill.

We recognised the anxiety, expressed by your Lordships, that the Monetary Policy Committee should have regard to the sometimes varying economic conditions in different parts of the United Kingdom. With that in mind we have drawn the Bill in such a way as to ensure that the court of the Bank of England has a specific duty to monitor the way in which the Monetary Policy Committee discharges that duty. In making our most recent group of appointments to the court, we have been sensitive to many of the concerns reflected by the noble Lord, Lord Mackay, and others who, at an earlier stage, spoke in support of his amendment.

The scheme of devolution that we have proposed and that will result in a Scottish parliament proceeds on the principle that power will be devolved unless it can be more effectively discharged by the United Kingdom Parliament. Monetary policy is not devolved for the simple reason that there is only one currency in the United Kingdom, and it is difficult to see how monetary policy could be conducted on anything other than a UK-wide basis. Although there are undoubted regional variations in economic performance and inflationary pressures may well be different in different parts of the United Kingdom, it is necessary to take an overall view in operating monetary policy. We believe that the Monetary Policy Committee must reach its policy decisions having regard to what is good for the whole of the United Kingdom economy. Indeed, it would be very difficult to do otherwise.

The amendment raises a concern that the Monetary Policy Committee should have regard to the differing economic conditions in different parts of the country. But in drafting the Bill we had anticipated that concern. Under the old system, the Bank of England was sometimes criticised for giving the impression that it did not acknowledge the problems experienced by different parts of the United Kingdom. That is why the Bill makes it clear, in Clause 16, that one of the duties of the reformed court of the Bank of England will be to keep under review the way in which the Monetary Policy Committee reaches its decisions, and in particular whether it has collected the regional, sectoral and other information on which it is necessary to base its decisions. This amendment is not necessary because of the safeguard that we have inserted in the Bill.

We said before the election that we thought that the court ought to reflect better the differing interests of the whole of the United Kingdom. We made the latest group of appointments in February. Your Lordships will be aware that, for the first time, there are now individuals on the court representing interests in Scotland, Wales and Northern Ireland. As we make further appointments

23 Apr 1998 : Column 1253

over the next few years we shall ensure that the court has a wide base throughout the whole country. Its supervision will help ensure that the Monetary Policy Committee reaches decisions that will be good for the whole of the United Kingdom.

Members of the Monetary Policy Committee will be appointed on the basis of what is best for the whole of the country, not just one part of it. The reforms that we have made to the court, and the people whom we have put on it, will ensure that the interests of Scotland and other parts of the United Kingdom are taken into account so that the amendment is not necessary. Therefore, I urge your Lordships' House not to insist on the amendment.

Moved, That the House do not insist on their Amendment No. 5 to which the Commons have disagreed for their Reason numbered 5A.--(Lord Haskel.)

3.45 p.m.

Lord Mackay of Ardbrecknish: My Lords, it will not come as any surprise to your Lordships that I am deeply disappointed that the Government have decided to overturn the amendment. Your Lordships made a number of amendments to the Bank of England Bill and this is the only one the Government have chosen to overturn. I really must have a discussion with the noble Lords, Lord Barnett and Lord Peston, to see what particular magic they have--and clearly I do not have--in getting amendments accepted by the Government both in this House and in the other place.

However, the more I listened the other day to the Chief Secretary to the Treasury in the Commons and the more I listened to the noble Lord, Lord Haskel, today, the more convinced I have become that the Government have not read their own Bill. The basis of the most important of the noble Lord's arguments is the one expressed by the Chief Secretary to the Treasury, interestingly enough, a Scottish Member of Parliament, for refusing to have a Scottish person on the Monetary Policy Committee. Every Scottish Labour MP trotted into the Lobby in order to make sure that the new Scottish government that will come about should have absolutely no say over even one of these appointments.

I was not surprised because, since the election, the Labour Party has been peculiarly inept in Scotland. It is almost as if it has decided, "We have a Scotland Bill. That is Scotland dealt with. We have ticked the Scotland column. We will not bother anywhere else." It is not bothering about Scotland on the Monetary Policy Committee; it is not bothering about Scotland when it comes to student fees. Another amendment of your Lordships on Scottish universities and the fees charged to English, Welsh and Northern Irish students was overturned earlier this week.

When the Chief Secretary, the right honourable Member for one of the Edinburgh constituencies, was discussing the amendment, he said, exactly as the noble Lord has said, that,


    "the court of the Bank of England has a specific duty to monitor the way in which the Monetary Policy Committee discharges that duty".--[Official Report, Commons, 20/4/98; col. 508.]

23 Apr 1998 : Column 1254

The Bill makes it clear that one of the duties of the reformed court of the Bank of England will be to keep under review the way in which the Monetary Policy Committee reaches its decisions. Clause 2(1) states:


    "The court of directors of the Bank shall manage the Bank's affairs, other than the formulation of monetary policy".
Clause 10, where the Monetary Policy Committee is introduced, makes it perfectly clear that in Section 4(1) of the Bank of England Act 1946 (power of the Treasury to give directions to the Bank) there shall be inserted,


    "except in relation to monetary policy".

The whole point of the Bill is to give the Monetary Policy Committee independence--independence of the Chancellor of the Exchequer and independence of the court. I would suggest to the Minister that he asks his friends at the Treasury to look carefully at their own Bill before they trot out the argument that the court will look after the regional aspects. Of course, as I acknowledged when I introduced the amendment to your Lordships, the court has indeed a number of nominations from other parts of the United Kingdom. I warmly welcome that.

Lord Randall of St. Budeaux: My Lords, I am grateful for the courtesy of the noble Lord in giving way. He makes a strong and powerful case for Scottish influence in policy making here. Is he aware how many of the Ministers in the Treasury are Scottish?

Lord Mackay of Ardbrecknish: My Lords, one of my noble friends said "too many", but I would not subscribe to that myself. I think three of them are, a point I drew to your Lordships' attention. I expressed even greater surprise that they did not understand the politics and the economics behind the amendment I successfully argued in your Lordships' House.

The fact of the matter is that the court of the Bank of England, worthy body as it will be, with lots of excellent people on it--I do not deny that for a minute--has no say over monetary policy. Clause 2(1) makes that abundantly clear. So the noble Lord's argument, and that of his right honourable friend the Chief Secretary, is a non-argument. Their own Bill negates that argument.

I suppose that their second argument is that the Chancellor picks people for those four jobs who know about the economy of the country and in that way the whole country is catered for. As I explained to your Lordships earlier, I would have a little more confidence in that argument were it not for the fact that all four members inhabit a huge geographical triangle in the United Kingdom which has Oxford, Cambridge and London at its three corners. That is not exactly a wide geographical spread. I do not believe for a minute that the first minister of the Scottish parliament--frankly, I would prefer to call him prime minister since it seems to be an easier way to describe him--will not be able to find in one of the Scottish universities an academic economist who is the equal of--not better than--any of the four current members of the board. After all, the country which gave birth to Adam Smith surely contains at least one decent economist with some knowledge of monetary policy who can bring expertise to the Monetary Policy Committee. I do not accept that

23 Apr 1998 : Column 1255

argument either. Of course, there can be only one monetary policy and I have never suggested otherwise. That is exactly why I want someone from Scotland on that committee.

The other argument is this: why Scotland? There are different sectors with different interests. But I sometimes believe that this Government have not understood the consequences of their own constitutional changes. They have made a huge change in the government of Scotland, which is far bigger than what has been done in Ireland or in Wales. The government of Scotland will be a very significant player in the Scottish economy. There is no doubt that from time to time the economic cycle in Scotland has differed from that in the rest of the country. If, because of an overheated economy, let us say, in the south east of England, interest rates are set at a level which has an adverse effect on the Scottish economy, then future members of a Scottish government, of whatever hue, will complain that one of the reasons for that happening is that no one on the Monetary Policy Committee understands what is happening in Scotland. I have given the noble Lord a way out of that difficulty. I am deeply disappointed that the Government have not chosen to take it.

It is, as I say, part and parcel of a very serious problem. The Government do not understand what is going to happen in two to three years when the new Scottish parliament is set up and running. It will be a much more powerful and influential body than the Government seem to realise. It will debate economic and monetary policy. It is allowed to do that under the Scotland Bill. These issues will be debated and the Scottish parliament will become very exercised if it believes that the interests of the Scottish economy are not being properly looked after.

I know it is not in the nature of your Lordships' House to play ping-pong with the other place, as it is elegantly described. I would never have given any thought to being tempted to do that except for one thing. When I advanced this amendment in your Lordships' House I discovered, to my amusement and surprise when I called a Division, which, thanks to the wisdom of some noble Lords I managed to win, that the Liberal Democrats voted against me. I thought that was quite surprising given the fact that they tried to pretend that they are great advocates of the Scottish interest. But, clearly, someone realised what had happened in the few minutes in the Division Lobby because I discovered that when this matter reached the Commons last Monday the Liberal Democrats there voted for my amendment and against the Government. Is that not amazing? In your Lordships' House they voted with their friends in the Government and in the other place they voted against their enemies, the Government. That is quite surprising. In my view, that appears to be one all.

I am tempted to see if we can have a replay, or decider, to allow the Liberal Democrats to come down on one side or the other. It was a brilliant exposition of the position of the Liberal Democrats. I have no doubt that in Scotland the Liberal Democrats are telling the Scots that the position they hold was the one they

23 Apr 1998 : Column 1256

adopted down the corridor and that they are trying to keep as quiet as possible the fact that the Liberal Democrat position in this House, when this issue first arose, was that they were as opposed to a Scot being on the Monetary Policy Committee as are the Government. To be honest, the Liberal Democrats should be ashamed of themselves, but I suppose they have no shame in this particular regard because sitting on a barbed wire fence, and arguing on the one hand and on the other, is part of the principle of being a Liberal Democrat. We should not be too surprised at that.

I see the noble Lord, Lord Newby, the Liberal Democrat spokesman, is in his place. He argued vehemently against me in your Lordships' House. I hope that he is going to explain why he is now doing a sort of "Father William" act and standing on his head on this issue at the instruction of his colleagues down the corridor. I look forward to hearing from him on that.

I am greatly disappointed. I believe that, in Scottish terms, the Government will genuinely regret this. They are already regretting the view that is gaining ground in Scotland that the Government are anti-Scottish. Their opinion poll lead was enormous this time last year, but it has been whittled away to nothing by the Scottish National Party, which is playing heavily on the fact that the Government do not seem to be bothered about Scottish interests. Their actions on this Bill show that the Government are not bothered about Scottish interests and, worst of all, that Scottish Members in the Treasury are prepared to make sure that the first minister of the Scottish parliament will not have any say over even one of the appointments to the Monetary Policy Committee. I hope that one of the Liberal Democrats is going to explain their present position; otherwise I may be tempted to find out if there is a third Division Lobby in your Lordships' House.


Next Section Back to Table of Contents Lords Hansard Home Page