||Bank of England Response
||Further Government or Bank Action
|1. Committee on Modernisation to consider how it can enable more Committee reports to be debated in the House in Government time and annual debate on Treasury Committee reports on the Bank of England.
|| ||Still under review.
|2. Bank of England to reply directly to any reports which touch on its activities within two months of publication of the report.
||The Government agrees that it is entirely appropriate for the Bank to reply directly to the Committee's recommendations which touch on monetary policy activities.
||Bank responded on 25 November 1997.||
|3. Treasury Committee to hold MPC accountable both ex post and ex ante.
||Committee has held ten hearings with the Governor and members of the MPC to date and has published two reports assessing their performance.
|4. Bank to clarify the key assumptions which the MPC makes in its economic forecasts.
|| ||Detailed list of assumptions used outlined in the Bank's response to the Report.
|| ||Assumptions used by MPC in assessment of economic outlook are clearly detailed in the Inflation Reports.
|5. MPC required to produce a statement of its view of the transmission mechanism.
|| ||Bank propose to provide the Committee in due course with a paper which would describe the MPC's view of the transmission mechanism.
|| ||Paper on transmission mechanism published in May 1999.
|6. Treasury Committee to take evidence from Chancellor and the Governor on the inflation target, around the time of the next Budget.
||The Government agrees that it would be appropriate for the Committee to take evidence on the inflation report from both the Chancellor and the Governor and that the appropriate time would be following the Budget.
||The Bank stand ready to give evidence to the Committee whenever invited to do so.
||Chancellor answered questions on the inflation target as part of 1998 Budget hearings and in evidence to Committee on "MPC 2 years on" in June 1999. The Governor has answered questions on the inflation target on a number of occasions during hearings held following the publication of the Bank's Inflation Reports.
|7. Treasury Committee to be given power under the new Bank of England Act to confirm nominations of the Governor, Deputy Governors and all other members of the MPC.
||Government has an open mind on the matter and will keep it under review. Such hearings would raise important constitutional issues which go far wider than the Bank of England. The Government does not therefore think it would be appropriate to include such provisions within the Bank of England Bill without the House having an opportunity to consider the broader implications.
|| ||Committee reiterated recommendation in its 7th Report of 1997-98 session and its 8th Report of the 1998-99 session.
|8. Treasury Committee to hold such confirmation hearings, testing the candidates competence and personal independence and make reports to Parliament (even in absence of statutory provision).
||The Government notes with interest the Committee's intention to instigate hearings for newly appointed members of the MPC.
||Issue is a matter for Parliament and the Government. In event of such hearings being held, the focus should be on assessing the professional competence of the nominated candidates as it relates to monetary policy and their objectivity in this respect.
||Treasury Committee held confirmation hearings for all the members of the MPC, assessing professional competence and personal independence from Government, following the Bank of England Act coming into force in June 1998. Hearings also conducted in 1999 and 2000 (four confirmation and one re-confirmation).
||In evidence to the Committee on the confirmation hearings the Chancellor noted that the Committee were "asking the right questions ... the fact that people have come before you preparing in great detail for their appearances shows the extent to which those people who have been ... appointed to the Monetary Policy Committee take this hearing very seriously ... we all benefit from this open exchange of views."
|9. Duration of the terms of appointment of external members of MPC be increased.
||The Government believes that a period of appointment of three years strikes the right balance between accountability and independence in the appointment of members. As each member is eligible for re-appointment the Government's proposals do not rule out individuals serving as members of the MPC for extended periods of time.
||The issue is a matter for Parliament and the Government. Bank would see an advantage whatever the length of term in serving more than one three year term to ensure at all times that members have considerable experience of policy making process. A longer tenure would also allow members on the MPC greater insight into the consequences of their actions.
|| ||Government reply re-iterated in Appendix 1, p 1. The terms of office of two members of the MPC came up for renewal at the end of May 1999. One member (Sir Alan Budd) stood down; a second member (Mr Ian Plenderleith) had his contract renewed for 3 years. Both MPC members whose terms expired in May 2000 were replaced with new appointments.
|10. Re-establishment of four year appointment terms for members of the Court.
||The Government remains of the view that three years is the appropriate term of office for non-executive Court members.
||Issue is a matter for Parliament and the Government. Members of the Court up to now serve generally served two terms which has the advantage of allowing members time to learn the job and then have a number of years on Court when they are most effective.
|| ||Government reply reiterated in Appendix 1, p 1.
|11. Treasury Committee to monitor evolution of Court's role, taking account of the assessment of the non-Executive members.
||The Government welcomes the Committee's decision to take evidence from the non-executive members of the Court, since they will play an important role in monitoring the procedures if the MPC and reviewing the Bank's performance more generally.
|| ||Treasury Committee held a hearing with non-executive members of the Court in June 1999, and analysed their role in the Bank and their report on the performance of the MPC in its 8th Report, "The MPC2 years on" of the 1998-99 session. Second such hearing held December 2000.